Everything You Ever Wanted to Know About Design Retainers - Part 1
I love being a resource for other designers, and I get a lot of questions every day in the form of emails and DMs about the ins and outs of running a design business. With the exception of “how do you get clients,” questions about retainers are one of the most common things that I seem to advise people on. I personally love retainers, ran my business on them for several years, and they are the only reason that I was able to quit my full-time job. I’m a huge fan, and I would love to provide a little insight by covering some of the frequently asked questions that I get so you can determine if retainers are right for your business as well. The way I use retainers today is dramatically different from the way I used them in 2015, so I will also show you how retainers can evolve and suit different business needs.
A little backstory
I quit my full-time job (I was working as a Marketing and Communications Manager doing 50% design work and 50% marketing) in 2015 and prior to leaving I secured two 40 hour/month retainer contracts that covered my salary and made it possible for me to not have a lapse in my financial contribution to my family. Some people are super free-spirited when leaving jobs and can just trust that the universe will look out for them and provide. I was pretty much the opposite of that – I wanted structure, formal agreements, and guarantees. That’s where retainers came in.
What exactly is a retainer?
A design retainer is an agreement in which a client purchases, for a specific duration of time, the ability to retain and utilize an agreed upon number of the designer’s available hours each month.
There’s probably a more eloquent description of a retainer somewhere out there but the basic idea is that a design retainer gives your client a guarantee that you will be able to provide design work for them, typically at a reduced hourly rate, for a specific period of time each month.
Let’s talk pros and cons
Value: Retainers are easy to pitch because they provide incredible value to clients. With that being said, at the center of the retainer pitch has to be a strong value proposition for the client, which is typically a reduced hourly rate with a signed contract for an extended period of time.
Consistency: Knowing that you are going to have a specific dollar amount coming in each month is a great comfort, especially if you are just starting out or are looking for a quieter season of life where you aren’t managing a lot of inquiries and chasing after potential business.
Connection: One neat byproduct of a design retainer is that it often allows you to get to know your clients on a very deep level – you are typically interacting with them daily and it’s almost like you have pseudo-colleagues and are part of their team. This can feel really nice in the sometimes isolating world of running your own business.
To an extent you are limiting your earning potential when you utilize retainers because you have committed to X number of hours at a specific dollar amount. This makes the hourly rate a fixed rate (you can’t work faster and make more money). This is often considered the major downside of retainers.
If your business is relying on multiple retainers, it can be hard to know how far you can extend yourself because you need to keep your retainer clients top priority and be prepared to accommodate them if they go exceed their hours by a bit. So that can make it difficult to know how many additional projects you can take on per month. Typically this is something that you figure out and get comfortable with within 1–2 months of running a retainer agreement.
Prioritizing retainer clients
A lot of the questions that I get about retainers involve designers who are frustrated by something happening with their clients that isn’t going the way they want it to for whatever reason.
I want to emphasize that what you are promising a client when you sign a retainer contract is that you are going to prioritize them because they have made a long-term financial commitment to you. This is VERY important to remember and honor. And if you are uncomfortable with this it’s probably time to come to terms with the fact that retainer clients are not a good fit for you. You can’t tell a retainer client that you need to push back a deadline because you had a new quick turn project come up. They are paying to be a priority and it’s often a large financial commitment. My philosophy was basically – you are investing in me for a long period of time. I am yours and I am here to serve you.
How do you feel okay about this? Get your pricing on point. If you feel you are being compensated fairly it is a lot easier to give yourself freely to your clients.
Okay so let’s get down to the nitty gritty!
How to structure a retainer proposal
I am going to share with you an example of my ORIGINAL retainer structure from 2014. This is the exact proposal that I sent out that set off a chain reaction and allowed me to quit my job six months later. While my hourly rate has changed dramatically, I use the exact same hour/rate structure to lay out retainers today as I did in 2014. I will say that my proposals are a lot happier looking now. I guess I went through a bit of a moody phase!
Pricing: The basic idea here is that the more hours your client commits to, the better deal they get. It has to be appealing for the client when they type "$$$$ x 6 or 12 (months)" into their phone and look at how much they will be paying you for the retainer vs. just working with you on a per-project basis and doing less work with you. In terms of the pricing breakdown, you need to decide how badly you want them as a retainer client so that you can determine how you are going to structure your hourly rate. And you do need to give them an incentive to commit to working with you.
Hours: You get to decide how many retainer hours you want to make available each month. For example, in 2014 I offered a maximum of 40 hours for a term of 12 months. In 2019 when I do offer a retainer (which is pretty rare), I offer a maximum of ~10 hours for a term of 3 months.
Duration: There’s really no wrong length of time here, but I would say that your options are 3, 6, 9, or 12 months. When I first started offering retainers my contracts were all 12 months long. This gave me the consistency that I desired. I also required a 30 day notice to end the retainer contract so that if that did ever happen, I wasn’t left high and dry.
Frequently Asked Retainer Structure Questions
What happens if a client doesn’t use all of their hours?
You will need to decide what terms you want to put in place for each contract, but when I first started I allowed 20% of the booked hours to roll over to the next month. This gave clients a little bit of a buffer when they were committing to working with me for 12 months. You can also pick any fixed number depending on the terms of the contract. (Ex: 20 hour/month contract and you allow 3 hours to be carried over). There is also absolutely nothing wrong with not allowing ANY hours to roll over each month if your schedule just doesn’t allow it.
How to explain limited or no carry over if you get pushback from clients? It puts you in the best position to serve them each month because you don’t allow ANY of your clients to carry over hours. Imagine if Client A carried over a large number of hours and it compromised your ability to finish projects for Client B, who had used all of their hours the previous month. Not fair at all. Be sure to communicate that you have their best interests in mind when explaining your decision making.
If for some reason a client does not use a large portion of their hours, it’s a use it or lose it scenario and you still bill the full retainer amount. I do think that as designers we have a responsibility to try to avoid this, I would always check in at the beginning of every month and ask what was on the horizon and also make a few suggestions for projects I thought would benefit their business. It showed I cared and also that I WANTED them to use their hours. It will make both you and your client feel great. This is also a great way to take ownership and avoid the “end of the month rush” when a lot of last minute projects seem to materialize.
What happens if a client goes over their retainer hours?
Hours in excess of the retainer amount are charged at the retainer rate. You may have to set a limit on how many total hours are available, if you are balancing a large client load. So if you have a 40 hour/month client, you might tell them that you are available for up to 50 hours/month with overage. Or you might just see how it goes. I had several months where my clients came in at 80-90 hours/month. And while it was a lot of work, it was also great!
What types of projects are included in the retainer scope?
There are a lot of different ways to structure this, but I personally never discriminated in terms of the type of projects that were included in my retainers. This really comes back to my idea of client-centered strategy and wanting to create the most value for my clients. I tried to imagine investing in an expensive year-long contract with a copywriter, for example, and receiving a long list of the type of work that was not included in the contract. How would that make me feel? Not good. Nickel and dimed right out of the gates. I do think that there is a time to be more specific about what is included in your retainer, and that might be if you are offering a very short-term contract or a contract for a specific reason (ex: podcast or social graphics only). But if someone is making a large financial commitment to your business, you owe it to them to have their best interest in mind. And if you’re second guessing this, you may need to revisit your pricing to make sure you are charging a high enough rate.
That’s it for part one! Next up is the practical implications of operating retainers in your business: how to track time, minimum billing increments, how to document what you’re working on, how to invoice appropriately, as well as how to gather feedback from your clients each month to guarantee that you are serving them as well as possible.
What questions do you have about retainers? Feel free to leave a comment below or email me at firstname.lastname@example.org