Retainer management software: what it should do

Retainer management software tracks what each retainer client has bought, what they have used, and what to invoice them, so the agency does not lose money quietly. Tool or spreadsheet, the work is the same: structure the retainer clearly, price it from cost, track use against the limit, and bill on the same day every month.

What a retainer is

A retainer is a fixed fee a client pays every month, in advance, for an agreed amount of work or availability. The client gets predictable cost and a team that knows their business. The agency gets predictable revenue. That trade only works if both sides know what the fee buys, which is where most retainers go wrong.

Three ways to structure a retainer

Hours-based. The client buys a number of hours a month. Flexible, easy to explain, and the easiest to lose money on, because hours have to be logged and compared to the limit every month. Say what happens to unused hours: they expire, or a portion rolls over for one month.

Deliverables-based. The client buys a fixed output: four articles, two campaigns, one report. Easy to track and to invoice. The risk is that each deliverable takes longer than the estimate, so the estimates need checking every quarter.

Access-based. The client pays for availability: a strategy call a week, a response within a day, a seat at their planning meeting. Common for advisory work. Define the access precisely, or it becomes unlimited.

Use one model per service line. Mixing models inside one retainer makes it hard to tell whether it is profitable.

How to price a retainer

Price from cost, then check against value.

1. Estimate the hours a normal month takes, per person.
2. Multiply by each person's loaded cost per hour: salary, taxes, benefits and a share of overhead, divided by available hours. The billable hours calculator works this out.
3. Add the margin you need. Fifty percent gross margin on retainer work is a common target.
4. Add ten to fifteen percent for the small requests every retainer attracts.
5. Compare the result with what the client would pay for the same work as separate projects. A retainer is usually priced a little below that, in return for the commitment.
6. Write a re-pricing date into the agreement. Once a year is normal. Costs rise; a retainer that has not been re-priced in two years is usually losing money.

If you price a retainer from the client's budget instead of your cost, you are giving a discount without knowing how big it is.

How to track a retainer

Tracking is what separates a profitable retainer from a slow leak.

• Hours sold and hours used, per retainer, updated weekly. Everyone who works on the account logs time against it, including calls and email.
• A threshold. When use reaches eighty or ninety percent, the account lead tells the client, and the rest of the month's requests are either prioritised within the limit or quoted as extra.
• A rollover rule, if you have one, applied the same way every month.
• A monthly summary sent to the client: what was delivered, hours used against hours sold, what is planned next. This one email prevents most retainer disputes.
• A quarterly look at the margin. Fee minus hours used times cost per hour. Three months below target means a re-scope or a re-price. The client profitability guide covers the numbers.

The scope creep guide covers what to say when the hours run out.

How to bill a retainer

Bill in advance, on the same date every month, with the same line items. The invoice should go out without anyone remembering to send it, because the month it is forgotten is the month cash runs short.

Spodus raises recurring invoices on a schedule: set the amount and the day, and the invoice is drafted each month; you check it and send it. Put the included hours on the client's contract and logged hours count against them, so you see what is left this period and the overage is ready to bill.

If a client has used more than the retainer, bill the extra as a separate line or a separate invoice, referencing the approval. Do not fold it into next month's retainer invoice, where it will be questioned.

What retainer management software should do

Whatever tool you use, the list is short. It should:

1. Hold the retainer terms: fee, hours or deliverables, rollover rule, re-pricing date.
2. Show hours or deliverables used against the limit, this month, per client.
3. Warn someone when a client is near the limit.
4. Raise and send the monthly invoice on schedule.
5. Show the margin per retainer over time.
6. Produce the monthly client summary from the data it already has.

Few tools do all six. The common split is a time tracking tool for items 2 and 3, an invoicing tool for item 4, and a spreadsheet for 1, 5 and 6. That works if one person owns the spreadsheet. Before buying retainer management software, decide which items you need automated and check the tool does those, not the ones on its home page.

Monthly retainer agreement template

A retainer agreement template does not need to be long. Copy this, fill in the brackets, and have a lawyer check it for your country.

Monthly retainer agreement between [agency] and [client]

1. Services. [Agency] will provide [service description] to [client] each month.
2. Included each month. [Number] hours of work, or [list of deliverables], or [description of access].
3. Fee. [Amount] per month, invoiced in advance on the [day] of each month, payable within [number] days.
4. Unused allocation. Unused hours [expire at month end / up to [number] hours roll over for one month].
5. Additional work. Work beyond the monthly allocation is quoted in advance and approved in writing before it starts.
6. Communication. [Named contact] on each side. Requests are made through [channel]. [Agency] responds within [time].
7. Reporting. [Agency] sends a summary of work done and allocation used by the [day] of each month.
8. Term. Starts on [date] and continues month to month.
9. Ending the agreement. Either party may end it with [number] days' written notice. Fees paid for the notice period are not refunded.
10. Price change. The fee will be re-priced on [date] and any change notified [number] days in advance.
11. Signatures. [Agency representative], [date]. [Client representative], [date].

Clauses 4, 5 and 7 are the ones most retainer agreements leave out, and they are the three that decide whether the retainer makes money.