Retainers - When to do them
One of the biggest challenges for a company’s financials is reoccurring revenue. What’s even harder to do is get reoccurring revenue when your business doesn’t necessarily lend itself to that model.
In the case of web development, most people bill by the hour but provide quotes to clients that show the projects estimated time and total budget. Once that project is done, the paycheck’s stop - unless you start another project.
Retainers are nice because you’re able to fake reoccurring revenue. It’s not the best type of monthly revenue plan that’s out there (i.e. web hosting would be better) but it’s good in some cases.
I’ve noticed a lot of people throw out the word retainer within a meeting and think of it more as a quick way to get reoccurring revenue than it being a needed part of a project.
So I thought I would but together the 2 reasons why you’d want to bring up a retainer with a client (note: this is specifically for web developers but I’m sure if falls into other industries quite easily).
Sporadic Needs
This is the one I use quite often for Elevator Up projects. We have clients that often know they need us but don’t have a defined project or do have a project but need us only here and there. Sometimes this falls into the role of a consultant but other times it still fits nicely into web develop but not under the umbrella of an actual project.
So why would you do a retainer and not just bill for the hours they need you? Well, to be honest, you can do that but what I’ve found a retainer offers is certainty. If a client needs you a few times within a week/month but doesn’t know when, it’s hard to be responsive when they call because you have other paying clients to attend to that have hired you for projects (essentially you fill your week up). If you have a retainer (let’s say for $500/week), you know there are 5 hours you need to keep open and not fill with other work.
Lots of Management
Another scenario that calls for a retainer is when you’re managing a lot of resources and various projects for the same client. If you have 3+ large projects (usually over $30,000+/each), it can be difficult to keep everything within the 3 separate projects. At some point, you’ll need to have some overall project management and account management on top of the individual projects going on.
A retainer allows for that extra project/account management. It let’s you provide those extra details of where everything is and be able to answer higher level problems and strategic direction instead of having to mess around in the actual job.
Elevator Up hasn’t done many of these but I’ve personally done quite a few for organizations I’ve worked at. It’s makes things much easier on yourself as well as giving clients the detail and management needed to accomplish everything they’re looking to do.
That’s it?
There may be other cases within web development that call for a retainer but I feel the above outlines most cases.
Have you noticed this as well? How do you deal with retainers and when have you noticed yourself using them?
