I landed my first freelance engagement when I was 21, and it was – to put it kindly – a complete ripoff.
I was writing an article for one of those clients more focused on penny-pinching than quality (every freelancer’s favorite) and ended up getting paid around $50 for a piece that took me 8 – 10 hours to research and draft.
To be fair, I was a newbie, and there are two things almost every new freelancer has in common:
- They’re much slower at their craft than they will be after more experience, and
- They probably suck at pricing and negotiating.
I’ll be the first to raise my hand and admit to fitting in both of these buckets for longer than I’m proud of. That being said, we all move onward and upward, and I recently came across the holy grail of freelance agreements:
What is a retainer?
A retainer agreement is an agreement where one party – your client – retains accessibility to another party – you, the freelancer – on an ongoing basis.
For freelancers, this typically means selling future availability (perhaps at a discount) for a fixed monthly fee. Retainers are particularly great for:
- Non-newbie freelancers who have gotten more efficient at their service offerings and the administrative sides of their business
- People looking for somewhat predictable income – aka the freelancer’s version of “job security”
- Anyone looking to skip all the extra steps involved with quotes, purchase orders, invoicing, and other bureaucracy for each individual project
Here’s one of my favorite parts about retainer agreements: they’re also often excellent for your clients. From their perspective, you – the freelance expert – are their trusted advisor. Every leader is only as good as their trusted advisers, and a retainer aligns incentives for both you and the client to maintain that relationship.
Think about it like this: if you were a full-time employee, you’d be your client’s direct report. You’d own a domain, and the more you deliver, the more responsibility you’d get.
Being a freelancer is no different – but since you work on a project basis, the risk is that when the client needs you, you’ll be busy.
A retainer is how to tell the client, “I appreciate you as a client and I want to ensure I can always put you as a top priority, so I’m willing to commit X hours a month to make sure you can come first.”
Mutually beneficial payment structures are the best, and it’s quite likely your client will appreciate 1) ongoing access to you when needed and 2) easier invoicing and predictable monthly costs.
Retainers aren’t the right fit for every freelancer/client relationship, but when used properly, they can save you tons of time and help you rapidly scale your business. Here are some best practices to keep in mind when setting up a win-win retainer agreement.
1. Invest time in properly estimating work volume.
The point of a retainer is to streamline the process of working together, so you’ll want to spend time thinking about how much work will be needed on average (usually per month). This could mean a certain number of deliverables, a productized service (e.g. ongoing maintenance to a website), or hours worked.
If I may play devil’s advocate for a moment: I am a recent convert to non-hourly freelancer pricing. After several years of pricing by hour, I finally came to recognize why this is something to steer clear of when possible.
Time = money, which is exactly why you should move away from your hours worked dictating your income as a freelancer. It’s difficult to scale if you’re continually working on an hourly basis, and using hours in a retainer agreement somewhat negates the benefits we discussed above.
All that being said, how you set up your retainer will depend on the type of work you do. For example, as a copywriter, I base mine on estimated # of articles needed per month. If you’re a social media manager, yours might be based on how many accounts you’ll run for your clients. The examples are endless.
(Pro tip: We have experienced freelancers from a huge range of industries currently beta testing Venture L. You can sign up to join the community here and tap into the peer mentorship vibe we’ve got going on!)
2. Choose a win-win pricing method.
There are several approaches to pricing retainer agreements:
Value pricing – With this method, experts recommend that freelancers charge 10% of the potential value of the service. For example, if I designed and wrote copy for an email campaign that would be sent to 10,000 subscribers, selling a $100 product, with a projected conversion rate of 1%, the value of the service would be $10,000. My copywriting retainer for that email would be $1,000, which I could multiply by the number of emails I’d be writing per month.
Anticipated labor pricing – This is a bit easier to estimate if calculating the potential value of a service is tricky for your business. With this method, freelancers work with the client to estimate how much work (deliverables, hours, etc) will be required each month. They then base the retainer fee on that estimate, with the understanding that some months will end up being more work and some will end up being less.
Baseline pricing – This doesn’t simplify invoicing at the end of the month as much as the other methods, but it’s a good approach to start out with if you’re just trying out retainers for the first time. For my first retainer, I chose a fee that would equate to approximately two articles per month, but chose to still charge per individual article. Essentially, this meant I had a certain amount of money guaranteed at the beginning of the month (my retainer), then added any additional work I did onto the next month’s invoice. Here’s some example copy from my contract:
By entering into this contract, The Client agrees the retainer does not constitute full payment for any services rendered by The Freelancer during that month. Each individual article will be billed at $X.
The Freelancer agrees the retainer will go towards covering the fees for any individual project until the total for that month goes over the amount of the retainer. Beyond that point, the regular fee of $X applies.
If the retainer covers the entire amount of work ordered by The Client during the month, The Client agrees the difference will not roll over into the next calendar month.
All fees in excess of the retainer will be added to the invoice for the next month.
3. Protect yourself with a ‘kill fee’ clause, renegotiation & termination terms, and very specific scoping.
It’s important to protect yourself and your time in writing as a freelancer. This means thinking through every scenario and ensuring your retainer agreement is as specific as possible.
We all change our minds, but it’s beyond frustrating when a client does so mid-project. Protect yourself from losing out on compensation you’ve already earned by including a ‘kill fee.’ Example clause:
If The Client decides to terminate or change any project already underway, The Client will submit to The Freelancer a written change order request. Upon termination of any work given by the The Freelancer:
The Client will agree to pay The Freelancer for all services performed prior to the change or termination before The Freelancer begins work on the new project. The fees for any partially completed, terminated project will be added to the next month’s invoice and will count toward the retainer.
Renegotiation & Termination
This doesn’t have to be as intimidating as it sounds. Sure, sometimes contracts need to be renegotiated because one side harmed the other or didn’t hold up their end of the bargain. However, it’s also very common with freelance retainer agreements to reevaluate the pricing, scope, and other aspects of the contract after a few months.
The whole point of the retainer is to benefit both sides, so if you’re working more or less than originally anticipated, adjust accordingly.
On the other side, ensure that both sides are also protected with terms for termination and notice periods. This is in line with the “job security” side of retainers. For example:
This Agreement may be terminated by either party upon 60 days written notice to the other party.
What services are included within your retainer fee? Even if it seems obvious that something is (or is not), write it down. Also include pricing for “out-of-retainer” work – aka anytime something goes beyond the scope of your original agreement.
To Retainer or Not to Retainer?
Whether a retainer agreement is right for your freelance business is a choice only you can make. For myself, having transitioned from hourly pricing to project-based pricing to a hybrid of project-based and retainer, I can attest that the consistency it brings is hugely beneficial to both my monthly budgeting and my capacity planning.
Retainer agreements can be an optimal vehicle for moving away from transactional freelancing to relational freelancing. All that’s left to do is pitch it to your client!
About Venture L
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