In lots of — if not most — instances, consultants cost on an hourly, day by day, or project-based foundation. However these standard avenues aren’t essentially the be-all, end-all of potential consultative pricing fashions. Although these choices could be significantly profitable and provide some extent of flexibility, they’re typically not as secure as some consultants would love.

Working on a short-term or project-to-project foundation can typically be unpredictable, unreliable, and exhausting. Retainers provide a component of safety to consultants’ monetary wellbeing. And with the ability to cost shoppers upfront in trade for work generally is a extra even, much less anxious various to dealing with points as they come up and charging as you go.

Guide retainers will probably be considered one of two sorts: 

1. Pay for Work

Pay for work is the extra standard of the 2 consulting retainer fashions. It is the construction that most individuals consider once they hear the phrase “retainer.” It is the strategy sometimes employed by novice to mid-level consultants, and usually, it offers step one towards constructing an extended, productive relationship with a shopper.

The idea is comparatively easy. Shockingly sufficient, the pay for work mannequin is strictly based mostly on being paid for the work you do. The method sometimes entails setting a recurring retainer payment for allotted stretches of time and dealing to earn these fees on an ongoing foundation — typically via making good on particular deliverables.

In the event you construct rapport along with your shoppers and constantly earn their enterprise, the pay for work mannequin winds up being one thing like an indefinite string of contracts that shoppers pay for in trade in your effort and help.

2. Pay for Entry

Pay for Entry is a consulting retainer sometimes leveraged by extra skilled consultants. This mannequin is rooted much less in precise work and extra in perception and experience.

With this mannequin, you are typically not anticipated to work on deliverables or end particular initiatives. As an alternative, you are paid a retainer to supply your recommendation on a particular matter on an ongoing foundation. In all probability, you will not be capable of use a pay for entry mannequin as a comparatively new advisor.

Usually, consultants who can leverage the pay for entry methodology are both authorities of their industries or have beforehand labored with the shoppers they’re serving. As I alluded to earlier, the pay for work mannequin offers one thing of a place to begin for charging consulting retainers.

When you’re extra established — both as a outstanding voice in your discipline or a dependable, diligent employee for a particular buyer — you will have the required clout to cost a retainer in your experience.

What to Embody in a Consulting Retainer Contract

Earlier than you begin charging for providers, you’ll wish to create a contract. This protects each you and the shopper because it outlines what’s anticipated of each events. 

Consulting Retainer Settlement 

Listed below are a couple of objects that needs to be included in your retainer settlement with the shopper. 

1. Scope of Work

Clearly outline the mission scope and the precise providers that you’ll present. Chat with the shopper beforehand to get a really feel for his or her ache factors and what you’ll be tasked with fixing. From there you’ll be able to create a scope of labor that outlines precisely what the mission is got down to accomplish and the metrics used to find out success. The earlier you may get specifics from the shopper, the higher. 

2. Cost Phrases

This part ought to define how a lot you’ll be paid and the frequency. This will embody fee schedules, invoicing particulars, and late fee charges. Right here, you’ll define the fee mannequin agreed upon — whether or not it is pay for work or pay for entry. If you’re providing a reduction, it needs to be included on this part as nicely. 

3. Contract Length

Specifying the size of the contract helps to make sure that each events perceive the timeline of the engagement. Just like the scope of labor, setting the contact length outlines precisely how lengthy you’ll be working with the shopper on a particular mission or offering providers. 

4. Termination

This part explains what occurs if both celebration desires to terminate the settlement earlier than it’s accomplished. It might embody the explanations for termination, how discover have to be given, and any penalties concerned.

5. Confidentiality

If you’ll be coping with delicate data or working with proprietary firm data, a confidentiality clause needs to be included within the contract to guard each events.

6. Mental Property

If you’re creating any mental property or work product throughout the engagement, this part outlines who retains possession of these supplies.

7. Disclaimer

A disclaimer helps to guard you from any unexpected liabilities, akin to adjustments in legal guidelines or laws that will have an effect on the mission. 

Advantages of Consulting Retainers

Predictability: A consulting retainer offers a predictable supply of revenue for the advisor and a predictable value for the shopper. The advisor is aware of how a lot work she or he will probably be doing over a specified time frame, and the shopper is aware of how a lot the advisor will probably be paid for that work.

• Flexibility: A retainer association permits for extra flexibility than conventional project-based consulting work. The shopper can request work as wanted, and the advisor can regulate the scope of labor because the shopper’s wants change.
• Relationship Constructing: A consulting retainer may also help to construct a stronger relationship between the advisor and the shopper. Ongoing work offers the chance to construct belief and rapport with the shopper.
• Availability: With a retainer settlement, the advisor is usually obtainable to the shopper as wanted all through the retainer interval, which may present higher responsiveness and quicker turnaround occasions.

Although the steadiness of a retainer mannequin is enticing in its personal proper, the pricing construction comes with its share of drawbacks.

The Dangers of Charging Retainer Charges

One of many major pitfalls of charging retainer charges has to do with approachability. Paying a lump sum upfront for a consulting retainer could be imposing to prospects — significantly in the event that they’ve by no means labored with you earlier than.

The concept of paying a nonrefundable deposit in trade for what could be mediocre consulting would possibly undermine your potential to constantly land gigs with new shoppers.

That pure apprehension in direction of paying a large advance additionally lends itself to a different considered one of consulting retainers’ most typical pitfalls: reductions. It is lots to ask potential shoppers to place sufficient religion in your providers to pay in full earlier than you’ve got even began working with them.

That is why many consultants who cost retainer charges provide their providers at a reduction. Ideally, that form of deal quantities to a mutually useful association — clients get a discount, and consultants get a secure supply of revenue.

Your expertise, esteem, and familiarity with shoppers will normally dictate the diploma to which these drawbacks influence your corporation. These qualities may also sometimes information the kind of consulting retainer you provide.

Now that you recognize in regards to the totally different pricing fashions and dangers of retainers, let’s check out tips on how to set the suitable charges. 

Learn how to Set Retainer Charges

Retainer charges are sometimes based mostly on the charges you’ll cost below different fee fashions. For example, in the event you cost $100 per hour in your providers and sometimes work 40 hours per week for shoppers, you’ll probably look to cost a $4,000 month-to-month retainer.