A creative agency retainer agreement is a contract stipulated between you, the agency, and a client for ongoing work based on a recurring fee, usually on a monthly or quarterly basis. You are selling the promise of future creative work for a competitive price.
In an industry dominated by one-off projects, a creative agency retainer offers a solution to the typical one time "buy and bye" agreement. An agency retainer agreement is one of several ways to lock in recurring revenue while also providing creative value to your clients.
The use of this type of agreement is widespread throughout a number of industries, with the marketing agency retainer being the most common example (creative agencies are just now catching up).
Marketing agencies often develop agreements that give the client access to a certain amount of their time based on a specific delivery expectation. This provides an excellent source of recurring revenue while providing the client access to their internal resources.
You can apply the same idea to purely creative agencies where projects can oftentimes take up a considerable amount of time. A creative agency retainer agreement can be an excellent way to build a consistent customer backlog by selling your labor and resources upfront.
What is a retainer agreement?
A retainer agreement is a work-for-hire contract that allows a client to purchase future time and services from you. Essentially, you are selling future services and labor to the customer in exchange for consistent payments. This can offer a lot of benefits to both you and your customers, but it also has its downsides.
Here are some important ones to consider:
4 Benefits of retainer agreements
1) Source of recurring revenue
Retainer agreements offer a solution to simple, one-off projects.
They provide a dependable stream of income in exchange for the promise of future work and accessibility.
This is the opposite of working on a gig basis which is hard to track, can lead to stress, and often kicks in the "feast-and-famine" cycle: you get a really good client and, because of that, you're fully-booked and can't take on anything else. Retainer agreements solve the problem through perceived value, not exact delivery.
2) Better client connection and customer service
Another problem with project-oriented work is that you can often lose touch with clients in between work. This can make it hard to keep your finger on the pulse for possible upcoming work or other projects heading your way.
A retainer agreement can help establish better communication and coordination between your agency and client, with time allotted for the client so any last minute projects won’t mess with your schedule.
3) Consistent and predictable workload
Being dependent on projects and variable work isn’t necessarily a bad thing, but it can make planning difficult. Whether you are trying to figure out your labor hours or future revenue, one-off projects can often be an unpredictable source. Using a retainer can give you a better idea of the incoming workload.
4) Unused time goes directly to the bottom line
Since a retainer agreement specifies the type of work being sold, completing projects efficiently means you are banking pure profits with no overhead. Additionally, some clients may not need your services for certain periods of time, meaning the contract amount can go straight to your bottom line. During these periods, keep in contact with the client and ensure you are meeting their needs (i.e. don't ghost them, that's never cool).
3 Downsides of retainer agreements
1) Dedicated labor hours
A retainer agreement typically sells future labor hours to the client at a lower rate than typical work. While this can provide a stable income, it can also limit your access to other more lucrative projects as your time slowly starts to get eaten up by multiple projects. One of the best ways to counter this is to keep increasing the efficiency of your internal processes while also increasing the productivity of employees and collaborators.
2) Scheduling and support issues
Unless you have specified a time table in the contract, clients may use the retainer agreement to demand work be done as quickly as possible. This can cause issues when trying to balance other projects as it can be seen as “cutting in line”.
With retainer agreements, customers also tend to use you as the "all-things [insert creative work]" agency, meaning they will start sending support requests left and right, sometimes totally unrelated to what you do. It's your job to let the customer know what your limits are.
3) Limited time and resources can backfire
You can look at unused time as potential profit. However, this can also go in the opposite direction if projects and works are consistently going over the allotted time. Unlike a time and material project, you are limited to a set contract amount. If costs go over the contract amount, you may have to eat the additional costs yourself.
This can happen for some projects so you have to balance the risk of running a retainer-based service by making sure that the profitable projects make up for the ones with low margins.
Designing a retainer agreement for your creative agency
There are two primary models when it comes to retainer agreements, and both come with different perks and benefits. It’s up to you to decide which type will work best for your situation while meeting clients' needs.
Here's how they work...
The pay-for-work retainer agreement
The pay-for-work retainer agreement is a contract that stipulates a certain rate or dollar amount for monthly work your agency performs with a baseline for the client to pay every month. You will then bill the client based on the extra hours worked or detract them from next month's allowance.
This model is good for clients you’re still building a relationship with. It allows to meet your needs for dependable income while giving the customer some "wiggle-room" with their budget.
The pay-for-work retainer agreement is a contract that stipulates a certain rate or dollar amount for monthly work performed by your agency with a baseline for the client to pay every month.
The downside to this type of work is that it doesn’t reward efficiency and the work is still a variable. It's a time-based agreement, so in the end you get paid based on fixed hours, not how quick and good of a job you did.
This is similar to selling your services based on an hourly rate but it allows you to lock in payment rates and terms, providing you with a better estimate on future payments and making it easier to forecast revenue.
The pay-for-access retainer agreement
In this model, the agreement is more "productized," making your service a standardized solution that fulfills your ideal clients' needs. For this to happen, the service results should be predictable and repeatable, similar to a physical product you’d purchase from a store.
This can be a great option when you’re familiar with a client's particular need and they trust in the value and quality you provide. However, it's a bit tricky to achieve from the get-go.
The pay-for-access retainer provides a way for you to bundle your services and sell them to your client for a monthly fee. It's a way to "productize" your services and sell them in the same fashion again, and again, and again.
The pay-for-access retainer provides a way for you to bundle your services and sell them to your client for a monthly fee. If you've heard of Fiverr, it's pretty similar, but with recurring subscriptions instead of one-off purchases, making your income predictable.
Crystal-clear stipulations are important in this kind of agreement as you are promising a set amount of work, so anything above and beyond the scope should incur additional costs.
While this type of retainer requires a good amount of trust between you and the client, it can offer considerable benefits to both. To sell this type of agreement, it’s important to show the value you can create for your client and how they can benefit from it upfront. (A landing page is enough for this!)
How to sell a creative agency retainer agreement
Using retainer contracts as a creative agency might sound all well and good, but how can you get a client to sign up for one? The agreement is only as good as the services you provide and the going rate at which you offer them, so you'll want to bundle several different services together and productize them.
Productizing the retainer contract
As a service provider, turning your labor into a product may seem like an impossible task.
But it’s important to turn the services you offer into a selling point that you can offer clients.
The services you can offer the client will depend on what they value most from you.
Take a look at the past projects they have done with you and look for recurring themes.
Is it anything like:
- Regular video editing?
- Monthly article creation?
- Consistent graphic design work?
Use your past experience to put together a package you feel the client would greatly benefit from (and that would be profitable for you in the long run). Here are a few examples of things to offer in your creative agency retainer:
- Allowance of up to X articles per month
- X hours of video or image editing
- Unlimited revisions on work
- X day delivery time for certain types of projects
- Monthly report on trending keywords/phrases
- Monthly SEO analysis of website content
These are just a few of the many things you can offer your clients.
Cater to your ideal client and craft a custom contract specifically to their needs.
The retainer scope and wording should make it apparent how they would benefit from your services.
Another way to incentivize clients to sign a retainer agreement is by providing better pricing.
If your project pricing is standardized, try lowering it to make the contract more appealing.
While the contract may seem like it’s booked at a lower profit margin, remember that you are securing a steady income stream. Not only that, but there may be times that not all of your services are requested, in which case things go straight to the bottom line. (And you can upsell customers to a higher plan!)
State an end goal and the customer’s return on investment (ROI)
There is no better way to convince a customer of their ROI than just stating it on the pricing itself.
When pitching the contract be sure to outline and specifically state how the customer benefits and what your goals are. Don't focus so much on the features of your process.
If you offer regular blog articles, then state that your goal is to generate X amount of organic traffic through your SEO content, not the other way around. Focus on things such as clickthrough rates, conversions, lead generation or any other metrics your client might find of value business-wise.
Not only does this make your contract more appealing, it also gives the client a good idea of what to expect. This provides them with information they can then use to outline their own goals and build you into their plan.
Defining creative expectations in your retainer agreement
Once you’ve got your client interested, it’s time to iron things out and settle on exactly what you are providing and at what price. Creating realistic expectations is a key part in crafting a retainer agreement. You want to make the right amount of money while ensuring the client feels they are receiving adequate value.
- Be clear and concise on what you are providing
State numbers and specifics such as “Providing 1 Google Adsense banner per working day”.
Go into detail and leave nothing up to interpretation.
The client knows what to expect and scope creep won’t cut into your profits.
- State the costs that apply beyond the scope of work
There are bound to be months that a client requests work beyond the scope outlined in the retainer contract. Stipulating the cost of additional work provides a clear guide on how things will be handled. This ensures the client is fully aware of what to expect while also protecting you from any legal issues.
- Track your time and labor dollars
Keep track of the time dedicated to specific retainer agreements to manage expectations and understand how well you are doing. If you are consistently over on time, then you may want to check to make sure you are only doing the work outlined in your contract. While providing extra work free of cost can score some brownie points with your client, it can set a precedent that can cut into your profit margin.
What to expect when productizing your creative services
It might feel unnatural to productize your services at first, but an increasing number of agencies have begun to swap over to this type of model. Turning your services into a product can make things more manageable by allowing the sales process to be more automated and hands-off.
It also helps manage expectations by stating exactly what your customer is going to get.
It can take some work when productizing and automating your workflow, so many agencies turn to project management tools like ManyRequests to help simplify the process. Ben Williams, the founder of an on-demand graphic design service swapped over to ManyRequests and quickly saw the results of switching:
“ManyRequests has enabled me to have someone come to my website, purchase directly, lodge a creative brief straight into the software, and I can have a designer assigned and working on that brief within minutes.”
Finding the right project management tool is the key to success when it comes to managing and scaling your creative agency. While productizing can help simplify the sales process, it does require a solid platform and infrastructure to be successful. ManyRequests offers an all-in-one solution that can help you manage your increasing workload while helping you automate the time-consuming aspects of the sales process.
Sign up for a free trial by clicking on the image below!
Originally published Mar 17 2021
Frequently asked questions
What is a creative agency retainer? A creative agency retainer is a contract stipulated by you, the service provider, and a customer for ongoing work. The agreement is done based on the promise of future work offered at a competitive rate when compared to hiring an employee or other methods.
How do you structure a creative retainer? Structuring a good creative retainer is all about setting the right expectations and understanding the scope of your services. The customer must not be able to "boss you around" in regards to what they want, they should know what is offered upfront.
How does a retainer agency contract work? There are two types of retainer agreement you can use as a creative agency: 1) the pay-for-work retainer, and; 2) the pay-for-access retainer. Both have their pros and cons and are extensively described in the article specifically for creative agencies to use (writing, video making, etc).
How much should you charge for a retainer? This depends entirely on what is included in the monthly package as well as many other factors like brand reputation, perceived value, customer budget, etc. There's no one-size-fits-all solution to this but we have some helpful guidelines in the article for you to follow.