Hourly vs. Retainer
Thursday December 23, 2004
Many service professionals -- everyone from accountants to virtual assistants -- give clients the option to work on a retainer basis, i.e., the client pays a fixed monthly fee to cover a certain level of service. Sometimes this equates into an exact number of hours (usually at a discount, in exchange for the prepayment and commitment). Other times, it's to cover certain work, without having to track it hourly. This is attractive to the client because they get a discount and have some idea what they're going to spend every month. It's attractive to the consultant because it locks in a guaranteed number of hours. A small number of clients on retainer, and you know you're "covered" financially for the month.
On one of the discussion lists I'm on, a PR consultant asked this question:
I have a new prospective client that wants to buy hourly rates instead of a retainer. What reasons would you give a client why a retainer is better for them and why hourly services are not a good option for them?
Branding guru Rob Frankel, in his imitable style, came back with the perfect answer -- humorous and accurate:
What's the problem? Give him your hourly rate along with the minimum number or hours he has to purchase -- in advance -- every month.
Comments
Using a retainer rather than an hourly is definitely the correct way to do business. However, when starting out on my business venture I lost money because I was putting in too many hours for the amount my clients were paying. Now I always quote on a six month basis and re-evaluate the quote after six months. If I am putting more hours in than I thought I will increase my monthly rate. Obviously you don’t want to aggravate your client so a reasonable amount of transparency is needed as well as fore warning if you going to increase the monthly amount.