Setting Up a Retainer Payment System

If you have clients who use your services on a regular basis, find out more about the benefits of having them pay by retainer.

By Paul and Sarah Edwards • Oct 13, 2003

Opinions expressed by Entrepreneur contributors are their own.

Q: Recently one of my good clients trimmed my consulting work to a minimum but is still expecting me to charge the same rate. I'd like to establish a retainer or non-refundable fee instead. Do you have any suggestions about how to go about doing this?

A: Working on retainer with clients offers homebased business owners something close to duplicating the regularity and security of a paycheck. With a retainer, you agree to be on call for a specified number of hours for an agreed-upon monthly fee. Normally the retainer is paid in full, in advance or periodically on a payment schedule, such as monthly, quarterly or annually, but is generally made in advance of your work. Think of the retainer as operating like a "draw": If the client doesn't use all the time you've allotted, they lose it.

Since your client will have prepaid you for your time up to a certain amount, you need to make provision in your retainer agreement for periods when your client uses more than the time you've sold them in advance. Then you want to negotiate to bill them for the extra time you've spent rather than carrying it over to another period.

Usually the retainer involves a quantity discount that's offset by the security of knowing you'll have a steady income. This is the carrot to the client, but some consultants whose time is in high demand take an opposite position: Committing their time in advance commands a premium above their normal rate. Obviously, this involves your impressing the client with your unique abilities, how well you know your client's special needs, the competitiveness of the market and the prestige you have.

Since your situation involves a client who's been cutting back your time, you need to think of how you can "incentivize" this client. Maybe it's with a price break or perhaps you can add some special service, such as providing content your client will value, such as current information from your field that's relevant to the client or special insights you provide in the form of a client newsletter or bulletin.

Client attrition is something that's particularly important for consultants to think about because clients usually think of consulting services as a temporary expenditure, not an ongoing commitment. So even with retainer business, you need to continue marketing for new business.

Paul and Sarah Edwards are the authors of several homebased business books, including Working From Home. Their latest book is Why Aren't You Your Own Boss?

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