What Is a Retainer Agreement?

Let’s find out what retainer contracts actually are, and for whom, when, and why they deliver stellar results.

Some Contractors Love Retainers. Here’s How They Work

By definition, a retainer is a “fee paid to a person or firm to secure the privilege of obtaining its services as and when required”. But, the important difference here is that retainers reserve agencies for a certain amount of time.

Unlike projects, which usually last up to six months, retainers imply long-term commitment between a client and an agency. For a fixed (and lower) rate, you’re getting not one, but a number of different projects and ongoing activities, depending on the scope of work that needs to be done.

How Retainer Agreements Work

While agencies reap a lot of benefits from retainer-based work, there are some scenarios in which clients can come off short. For example, you might pre-pay ongoing services of a financial consultant, but end up needing their advice only twice a year. For the rest of the time, you’d basically be donating your money for no real output in return.

There are 4 types of the retainer agreement models, of which at least 3 address this concern. By emphasizing value instead of time, they guarantee that none of the money you pay goes to waste. You should always choose the retainer agreement model in accordance with the nature of services you’ll be obtaining, but that still doesn’t mean that you shouldn’t insist on having your needs answered, too.

Retained contracting/consultancy services

With this one, you’ll be obliged to pay a set monthly fee for a certain amount of the agency’s time. In case you don’t use up that time, it will be transferred to the following month.

Classic retainer agreement

This model might as well be called “what you pay is what you get” since no surplus of time is being transferred to the next billable period. However, the same goes for the agency’s delivery. In case you need them to do some extra work, you won’t have to pay an additional fee.

Retainer agreement where the deliverable is value

Instead of a set amount of the agency’s time, this retainer model defines an end value that the contractor has paid for and has to provide.

A retainer to gain access to sought-after services

Finally, with this type of retainer contract, the thing you’ll be buying is the privilege of being a contractor’s client - even if you seek the expertise and services the agency provides only once or twice a year, you’ll be paying for them on a monthly basis all the same.

Benefits of Retainer Agreements

There are quite a few benefits of a retainer agreement actually - here are the ones you should take into considerations first:

Retainer agreement makes perfect sense when your needs are continual and unclear in terms of scope

If you’ve determined that your business needs a one-time improvement, and you know exactly what has to be done, then project-based work is probably better for you. But, in case you need to make continual improvements and are unable to define exactly what you have to do in order to reach the ultimate goal, go for a retainer contract.

With projects, everything has to be worked out to the last detail. Under the retainer agreement, however, the only two things that are set in stone are the budget and the objective. Not only does this give the agency the freedom to maneuver and employ different strategies, but it also guarantees superb results without much pre-planning.

After all, not everything in business is predictable. Sometimes, the scope of work is unclear, and so is the path you need to head in order to accomplish what you want. Such scenarios ask for an ongoing process, several different projects, deliverables, services, and skills, all of which can be obtained with a single retainer.

Retainer agreement will help you save money in the long run

Another benefit of retainers is steady pay. Projects are pricey, especially if they take a lot of effort and time to finish. In comparison to budgeting one project at a time, the retainer contract is a true money-saver. Booking time in advance always pays off, not to mention that this type of deal usually assures multiple projects and services for the price of one (or, slightly higher).

Retainer agreement allow you to build long-lasting relationships

The biggest advantage of working with an agency for a longer period of time is that it allows you to build a relationship that’s truly valuable for both parties. It’s not only that you get to know each other’s work dynamic, though. It also allows the contractor to understand your needs and pain points without you having to explicitly explain what they are.

It goes without saying that this level of familiarity yields better results in less time. As always, there’ll be some twists and turns in the beginning, but you’ll have months to smooth that out.

After the initial period, the agency will know exactly what you like and what you don’t like, just as well as what works for your specific market or niche. They’ll be able to predict and meet your demands on their own, thus saving you plenty of valuable time.

Drawbacks of Retainer Agreements

Ultimately, no one can say that retainer-based work produces better results than one-off project agreements. It is only as good as it is suitable for your specific needs, the ones we’ve previously discussed. In any other situation, the retainer will bring you the same benefit as a project would, but for a bigger cost.

If you need deliverables that are already clearly defined and must be completed within a certain timeframe, signing a retainer doesn’t make much sense. The project will eventually end as planned, but you’ll have to continue to pay the monthly fee until the contract expires.

This perfectly sums up why retainer contracts are bad for one-time needs as well. For instance, since re-branding campaigns are usually launched once every 5 years and last for a couple of months, there’s no need for signing a long-term contract. Compare it to marketing – which rarely ever stops – and you get the idea of why project-based work is better for one-time needs, while retainers win when it comes to catering to continual ones.

FAQ