Over the years, I’ve been surprised by some new client reactions when it came time to pay for the marketing services they request from my company, 68 Advisors. You see, we don't bill our clients after the work is done. Instead, we outline the work to be done in a proposal along with a retainer agreement, and then at the end of the billing cycle, send a statement summarizing the work done and how much of the retainer was used for the work done. Yes, I said a retainer.
To most professional service providers, this is not a surprise. If you're surprised by retainer agreements for marketing or consulting services, this post is for you.
In a retainer agreement, the client or customer pays in advance for professional work to be completed later. The purpose of a retainer is to ensure payment for future services or work to be rendered. Most people are familiar with retainer agreements for legal services. Lawyers are not alone to collect payment in advance. For professional services, it is difficult to take back intangible services provided if the client does not pay for services rendered. This is why payment is usually collected in advance.
If you're consulting with a lawyer, they usually have a retainer. A doctor will collect your insurance information and/or copay up front. A spa will secure your appointment with a credit card. And so on. If you don't pay for the car you just drove off the lot, it will be repossessed. However, if you don't pay for consulting services you benefited from, it's difficult for the consultant to take the intellectual property back.
The good news about retainers, is that we structure them to give the client control over their project spending. As the client, you retain control over your budget by knowing in advance how much you're spending and what you're getting. Typically, we assign an hourly rate for specific tasks, in the event the project goes over the monthly retainer. If the project ends before the retainer period, the balance is typically refunded to the client. There is transparency throughout the process.
In summary, retainers are a great way to maintain transparency and budget control. They should not be awkward negotiations. Unless, of course, you don't plan on paying for the work you have requested.