In doing a bit of research, I’ve discovered a few interesting bits into how to set retainers up, the advantages to each party, and the different conditions that might change from situation to situation.
Recently, the issue of retainers arose, and how they can benefit both the designer and the client. In doing a bit of research, I’ve discovered a few interesting bits into how to set them up, the advantages to each party, and the different conditions that might change from situation to situation.
A retainer agreement establishes a set fee to be paid by the client to the agency or freelancer every month. The amount varies widely, but the client is paying for work in advance, so they can call on the designer for a project at any time. (Retainer-based clients often get preferential treatment.) There are several key advantages to both parties.
- There is no formal contract signing. The client delivers a new project and the designer provides an estimate; the client agrees, and the work begins. Faxes and letters aren’t being bounced back and forth, which saves everyone valuable time (especially the client’s legal department).
- Locks in an hourly rate. This offers the client peace of mind, and helps avoid invoice surprises and billing disputes.
- Establishes regular income for the designer and helps buffer against the effects of an assignment drought or the less than savory “design and run” clients.
The core goal of entering into a retainer agreement is to establish a long-lasting relationship, since retainer contracts typically extend for one year. If both parties are satisfied with the relationship at the time of expiration, the agreement is re-signed with little hesitation. There are, however, different kinds of arrangements.
- The standard contract specifies a set monthly rate. For example, $5,000. This covers all billable hours, and other expenses such as travel, supplies and postage are billed separately as needed, with appropriate markup. The contract must specify whether unused hours are either lost or rolled over into the next month.
- A monthly fee is sent to pay for all expenses not related to billable hours. If an agency has a particularly large account (for example, Target or Wendy’s), there is going to be a tremendous amount of expenses generated, from paper costs to postage and from photography expenses to business travel. Instead of having an accounting department deal with an unpredictable expense bill each month, the client pays for it in advance, and unused dollars are rolled over.
- The client pays a monthly fee to get a lower rate on projects. The actual retainer money goes toward nothing—it is just a guarantee that the client will receive a significant discount on all billable fees (like 50%). The thinking is that what is lost in the hourly rate is made up in volume of projects.