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Working on Retainer: The Ideal Situation for a Home-based Business
04/ 15/ 2002

When you began your home-based business, you were probably eager to take any work that came along, no matter how small, just to get started in your field. The trouble was, having a lot of little jobs meant that as one ended, you had to go out and find the next.

To some degree at least, self-employment may always entail having to chase work from month to month. But working with a client on a retainer basis can make your work-flow (and resulting income) a lot more regular. In ways, it's almost like having the security of a steady paycheck. In today's Workshop, contributor Jeff Moses offers a few tips on how to structure a retainer-based relationship.

If you have one or more clients for whom you work regularly, suggest to them that they could make use of your service on a more economical basis by putting you on retainer. Being on retainer means that you're "on-call" for a specified number of hours each week or month. The client agrees to pay you for these hours, whether he gives you work or not.

Usually, service providers offer clients a reduced hourly rate for the security offered by being on retainer. This reduced rate can be anywhere from 10 percent to 20 percent off what you normally charge. This is a clear benefit for the client.

You, the service provider, benefit as well, because what you lose in the reduced hourly rate you make up in steadiness of work and income.

An intangible benefit to the client (which should be clearly defined by you when mentioning a retainer-relationship) is that since the client is paying you regularly, he will be encouraged to make full use of your services. This should be presented as a positive benefit, because the excellence of service you provide will help the client’s business.

When structuring a retainer-relationship, certain aspects should be put in writing:

1) The fee and number of work hours expected for the fee should be clearly defined. You don't want to get caught with a client who expects you to put in hours beyond what your monthly fee covers.

2) The payment period should be clearly stated in the written agreement. Retainers work best when payment is made regularly every two weeks or month. Longer periods between payments may disrupt a small business' cash flow.

3) If your allotted time is used up during any specific payment period, the client can hire you on a per-project basis but at your regular, non-discounted rate. Don't get caught working additional hours at your pre-negotiated, discounted hourly rate.

4) If expenses will be required for special supplies, education or travel, it should be determined at the start of the relationship who will pay these expenses.

5) Make sure your client understands that if he uses your services less than anticipated during a specific payment period, you will still be paid the full agreed-upon amount. Also make it clear that this will not affect the amount to be paid during the next payment period. Whether your client uses your maximum time or not should never affect the amount of payment or the payment schedule.

Never get so complacent while on retainer that you stop looking for new work. Remember: many clients think of a retainer-relationships as somewhat temporary, although I have had such relationships that lasted for several years or longer.

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