Being in business can be like riding in a small boat on the open sea. There’s excitement, there’s beauty and there’s danger.
Ebbs and flows can be overcome, but you should do everything you can to protect your consulting business from the impact of major waves. Retainers are one method for establishing a more predictable tide of opportunities.
There are various pricing models you could choose for your consulting firm, and each has its merits. But the retainer model tends to be uniquely beneficial for financial health. Let’s look at three reasons why.
One of the most significant advantages of retainer agreements is the predictability they bring to your cash flow. Unlike project-based work, where revenue can fluctuate dramatically from month to month, retainers provide a steady stream of income. This financial stability allows you to plan your budgets, allocate resources and invest in business growth with confidence.
Clients value accessibility: They want to have an expert on call. Some types of retainer agreements offer them the assurance of priority access to your consulting services. They know they can reach out to you whenever they face a problem or have a pointed question. This sense of security can strengthen client relationships and increase your retention rate.
<10-profitability-essentials>
Retainers encourage ongoing engagement with your clients. Since they’ve committed to an extended relationship with your consulting firm, they’re more likely to stay engaged and seek your advice regularly. This continuous interaction gives you a deeper understanding of their evolving needs and challenges, allowing you to mold your services and responses to be more appealing to each type of client.
Retainer agreements aren’t one-size-fits-all. Here are some common types of consulting retainers.
These kinds of retainers involve clients paying for a set number of hours each month. It gives clients the ability to budget for your services without committing to a specific project. This model also provides flexibility for clients who require ongoing support but don’t have a continuous stream of work. Sometimes, this is also called an “amount-of-time” retainer.
The pay-for-access model is a different approach that grants clients priority access whenever they need assistance, regardless of the amount of time needed to complete their requests or generate their deliverables. Clients pay a fixed monthly fee, which can support your income predictability.
In a consulting contract retainer, clients commit to a long-term contract, typically spanning several months or even years. This type of retainer is ideal for those who are in the midst of a big business change or important period of growth and know they’ll need your partnership during that time.
Once you decide to offer retainer-based pricing, you’ll need to create a well-structured and clear consulting retainer agreement.
Don’t forget to consider each of the following key elements:
TIP: Templates can streamline the process of drafting retainer agreements. Include all of the above and decide which sections should be customizable. Consult with a legal expert to make sure your template is compliant with relevant laws and regulations and will protect you and your team.
Perhaps you’ve decided retainers could work for your business, but now there’s the matter of how to turn one-off clients into retainer clients. This doesn’t have to be an intimidating experience. Use the following steps to make the conversations productive and transition as much of your client base to a recurring pricing model as possible.
First, think from the client’s perspective. Assess each client’s needs and identify those who would truly benefit from ongoing consulting support. Look for businesses that have already come to you for multiple specific projects that align with your expertise. You don’t just want to blindly move every client to a retainer model without considering the impact on their results and satisfaction.
Propose the idea of a retainer. If you’ve already developed trusting relationships with your clients, bringing up a new pricing model shouldn’t be too uncomfortable. It can be part of a regularly scheduled conversation about their goals and success. Emphasize any immediate cost savings, as well as the long-term value they’ll derive from this shift. Frame this as a natural progression that aligns with their objectives. Most importantly, choose the right time for this conversation — not while your client is experiencing a stressful change or before they’ve seen the impact of your work.
Listen to their concerns. Openness and transparency aren’t just about what you say; they’re also about how you listen and consider your consulting clients’ concerns. They may have specific requirements or want to negotiate a rate. Address their apprehensions and be as flexible as you feel you can be without compromising on revenue.
Explain the transition. Will the scope of work change? Will the client receive a short-term credit? Help them understand the timeline and terms of this change so there’s no confusion about billing or worry that they may not be getting the value they’ve already paid for.
➡️ Consider offering referral incentives to clients who send you new clients for retainer agreements. You’ll expand your retainer client base and reward loyalty simultaneously.
It can be a big undertaking to move your existing clients over to retainers, but it’s just as important to set a retainer-based precedent with potential clients so you can start these new relationships off on a profitable foot.
Follow these guidelines for setting up retainers with new clients to drive more predictable income.
TIP: Hold strong to the retainer fees you’ve decided on. Too many service firms compromise on pricing and regret it later, especially if you’re stuck to a given time frame.
The cost of hiring a consultant on a monthly retainer can vary widely. Management consultants charge anywhere from $2,000 to $10,000 or more per month, a human resources consultant may charge $1,500 to $6,000 per month and an IT consultant up to $8,000 per month. These figures are just rough estimates and depend on the needs and size of the client’s business.
To maintain profitable, long-term client relationships and maximize the benefits of retainer agreements, you should evaluate and adjust your pricing strategy on an ongoing basis by monitoring key metrics such as client satisfaction, project timeline adherence, project profitability and project outcomes.
Consider offering additional value-added services that align with your clients’ objectives. Productize your services with options like workshops, training sessions or access to proprietary tools and resources.
In consulting work, there are a lot of unknowns. By using a retainer pricing model, you can create a lifeline of stability for your business and expand the value and attention you give your clients
Once you've decided on retainers and set them up, there’s the question of how you’ll manage them internally to stay efficient and avoid billing errors. Learn why managing retainers requires more than setting up recurring tasks.
