There are a variety of pricing strategies available for freelancers to choose from, and one popular method is a retainer agreement. But what is a freelance retainer agreement, and is it the right pricing model for your business?
In this article, we will take a look at what freelance retainer agreements are, who should use them, and the advantages and disadvantages of this pricing strategy.
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What Is a Freelance Retainer Agreement?
Retainer agreements are a common pricing model in professions such as lawyers, consultants, and freelancers. Essentially, retainer agreements are contracts that span over a period of several months or a year that guarantees that a freelancer will be paid a certain flat rate for a pre-agreed number of hours or projects per month.
A retainer agreement also guarantees the client your time. In some instances, instead of having a pre-agreed number of hours worked every month, the client buys your availability whenever they may need it. This is best for professional relationships where your services are needed regularly but often without notice.
For instance, a retainer agreement for a freelance social media manager could be that a client pays a flat rate of $1500 per month for 20 hours of work per month. The retainer agreement guarantees the freelancer’s availability and services for the client, and the client has the security of knowing they will receive a certain number of hours of work each month without having to negotiate and agree on a new contract for each project. This arrangement is ideal for clients who require ongoing social media management services on a regular basis.
When Should You Opt for a Retainer Agreement?
For larger projects that extend over a longer period, a retainer agreement can provide financial security to you and a commitment from the client to utilize your services throughout the duration of the project. This can be useful if the project requires a significant upfront investment or if you need to allocate dedicated time and resources.
Retainer agreements can be useful when dealing with repeat clients, especially when they engage your services regularly. The retainer can secure your availability for that client, ensuring that you prioritize their work over other projects. It can be advantageous if the client needs your expertise at short notice or expects you to be readily available during specific times or for urgent requests.
To Guarantee Availability
Some clients may require immediate attention at extremely short notice; in their case, a retainer agreement is ideal. Retainers will guarantee your availability whenever the client needs you, which can benefit you and the client.
Advantages of Freelance Retainer Agreements
Having clients on retainer guarantees a source of income every month, which can be a relief for a freelancer. Having a reliable source of income, even during slower periods or between projects, can allow freelancers to plan their finances better.
Long-Term Client Relationships
Working with a specific client for an extended period can help you to build and foster a better professional relationship with them, which can result in improved communication, better trust, and a better understanding of the client’s needs and preferences, making it easier and more intuitive to complete work for them.
Although 68% of participants say they would not go back to traditional employment, 77% of freelancers stated they are less financially stable since freelancing. Thankfully, retainer agreements provide some stability to independent professionals. Having a guaranteed income from a client that you have a solid professional relationship with can provide much-needed stability to freelancers, who often deal with uncertainty with their finances and work schedule month-to-month.
Disadvantages of Freelance Retainer Agreements
Being at the beck and call of your retainer clients can make it difficult to take on other projects or pursue new opportunities. It can also disrupt your work for other clients, as you will need to prioritize the retained client’s projects above any other work.
Unclear Scope of Work
Working on a retainer can make it difficult to plan your schedule, as you may not know when the client will need your services and how urgent that work may be. If you have other work, and a retainer client decides they require your services, you may need to forgo doing the other work you had planned to accommodate the retainer client.
Fixed Income Regardless of Workload
Retainer agreements typically involve a fixed payment, regardless of the actual workload or hours worked. If the client’s demands decrease or the agreed-upon work is completed more quickly than expected, the freelancer may find themselves earning less per hour than they would with hourly or project-based rates. It’s essential to carefully consider the terms and pricing structure of the retainer agreement to ensure it aligns with the expected workload.
Limited Project Variety
Retainer clients often require repetitive tasks to be done, or the projects that they give you may be similar to one another. This can take away the novelty of freelancing, as a big benefit of the career path is being able to choose projects based on your preferences.
Retainer agreements usually involve a binding contract with specific terms and conditions. While this can provide clarity and protection for both parties, it can also mean dealing with additional administrative burdens or legal difficulties.
A freelance retainer agreement is a pricing model that guarantees a freelancer a certain amount of work or availability for a client over a specified period. Retainer agreements can be advantageous for long-term projects, repeat clients, or situations where a client needs immediate attention.
Freelancers benefit from guaranteed income and increased stability; however, there are also disadvantages to ponder when considering this pricing strategy. Ultimately, freelancers should carefully consider the pros and cons of a retainer agreement and assess whether it aligns with their business goals and financial needs.