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Clients on Retainer: How Good Business Can Go Bad

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Most service businesses use projects as their main path to client work. The problem with projects, however, is that they are often lumpy: You work hard to win a deal. You and your like crazy to deliver the work for . You get paid. And then the cycle continues -- feast and famine.

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The unpredictability of the revenue and the work itself makes it hard to balance staff costs and assignments with monies received: If you're not careful, you can easily go from profit to loss in just a couple of weeks.

The solution for many professionals is to transition to some sort of service contract or retainer. Your business benefits through more consistent work and revenue; and your clients benefit because they have the certainty of investment and the ability to make the most of the work they engaged you for in the first place.

But while service contracts and retainers have benefits, there are also serious downsides that must be carefully managed to avoid significant operational, financial and reputational harm to your business. Here are three risks you should avoid to ensure that the joy of ongoing client work doesn't become a nightmare.

Risk 1: Familiarity creating contempt

The first risk will be familiar to anyone whose long-term relationship hasn't worked out because the couple "drifted apart." Everything starts on a positive note, but then familiar habits and routines set in. Both parties start taking each other for granted. This is when special efforts and thoughtfulness (on both sides) give way to familiarity; the things that annoy or irritate become all you notice.

In a professional context, the same forces are at play. While the work relationship is more asynchronous than the human one -- the service provider is clearly there to serve the client -- professional agreements still involve humans. This means that the way people feel is still of critical importance. As a commercial relationship progresses, the service provider must continue to make special efforts with the client and focus on and sharing, if for no other reason than to ensure the client doesn't feel taken for granted.

One solution is to install built-in alerts that remind account managers to review their ongoing accounts and send clients a special note of congratulations or a comment on an insight. Just as with romantic relationships, showing you care and you're thinking about someone (even if it was a reminder in your calendar for an upcoming anniversary) makes all the difference.

Risk 2: Lack of quality communication

The second risk is related to the first in that you may have allowed the relationship to decay. This time, however, the reason was a lack of quality communication. With any professional relationship, communication with clients is critical, but quality communication is even more so. Automated emails telling a client you've opened or closed a ticket can do more harm than saying nothing at all (given how common overload is). In contrast, regular monthly summaries of work undertaken -- while often ignored -- can give clients peace of mind. The same is true even if those clients never read through the detail.

Related: 10 Ways to Say 'No' That Won't Damage Business or Relationships

The key to strong client communication is to make it as effortless as possible, for staff members on both ends. Often that will be via email; phone calls with status updates tend to disrupt clients' schedules. So, make sure that the way you track the work being done against retainers (as well as how you manage them) connects directly with your inbox.

That way, emails sent to clients can automatically link back to the system you use to manage the service contract or retainer. Another key lesson is to use reminders to let you know you haven't communicated with an important client for more than a set amount of time. We all get busy; but make sure you don't forget the people who pay your bills.

Risk 3: Doing too little or too much

The third risk relates to the work you do for clients as part of your ongoing service offering. You have to keep a close eye on it to make sure you're not doing too little or too much work for ongoing service clients.

When you do too much, you're either costing clients (which they'll resent if it comes as a surprise) or costing yourself money (because you "eat" the cost of extra work internally). Having this happen deliberately and occasionally isn't the end of the world; perhaps the client had a lot of work to get done ahead of the holidays. Or, perhaps you and your team are finalizing setup items when you're not as busy. These situations occur. But it's important to highlight any major problem with accidental over- or under- servicing.

Ongoing over-servicing creates an expectation that you're either doing more for the included (fixed) price of your retainer or you're treating the client like a cash machine (variable price). And expectations can be difficult to break.

Similarly, under-servicing a client runs the risk of either the client losing trust in you (fixed price with little work done) or your business being seen as lazy (variable price but not doing much for the client), making client pushback more likely when it comes time to renew your service agreement.

Given the amount of activity going on in businesses these days, it is critical that service contracts be managed and tracked closely. Thankfully, software makes it easier to get alerts and alarms about pending over-servicing; the same platforms should provide easy access to reports to identify cases of under-servicing too.

The clients you engage with on an ongoing basis, as opposed to the project folks, are the most important clients for your future business success. Be it the revenue, the references or the example-work, what these high-value clients give you is important enough that you must strive to avoid the three risks described.

Otherwise, you might turn a committed, long-term partnership into a scorned relationship and a fading memory.

Related: Keeping Clients Happy: How to Ensure a Project Doesn't Go Over Budget

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