Client Retainer

[Mark Suszko]

Working on retainer generally means the client is expecting to throw you a lot more business than they are letting on, in exchange for a discount, hoping in that way to get a better deal… and for priority access to your services. It also can mean they just want all the billing and admin totally streamlined, one price, anything you need, done. So if I’m them, the retainer rate is one price for “anything and everything”, so that means you have to pre-figure your other services and subs into that number, and not bill them out separately. And yes, this entails risk for you, since you will eat whatever expenses the retainer didn’t cover. So you don’t dare low-ball the retainer. And that makes the retainer less attractive to the customer. Maybe, the retainer has to be highly restricted in scope, not” one price for anything and everything, any time”, but, “one price for as many powerpoint slide montage videos as you need”. And any services above that minimum package are separately billed out.

What if they put you on retainer and then not give you any work for weeks or months? At first blush, it seems like you should rebate or prorate, since you did nothing. However, the whole point of a retainer is, you are on full-time alert to answer their emergent needs; like Batman, you come-a-running if the signal goes up. That represents opportunity cost; maybe you can’t take on certain other jobs that could interfere with the retainer client, you can’t do vacation trips out of town, you cannot tear down the edit bays for a planned rebuild/upgrade… or, you may have to cancel such jobs at the last minute, damaging the cash flow and potentially your reputation and other client relationships. So, for those reasons, maybe you don’t rebate or offset anything, because at the heart of it, you’re being paid to be available, whether or not you are actually used. In union labor law, there’s the idea of “waiting to be engaged” vs. “engaged to be waiting”. Firemen on duty at the firehouse are engaged to be waiting, and get paid for being on their shifts, if there’s a fire or not. You are the fireman here.

If you get the retainer, you probably need to put your subs on one with you, for any work coming out of that client. It won’t do to get the call for urgent service and then turn to find your contractors can’t do it. It may chafe you to pay the staff camera op or editor for work not done, but, again, opportunity cost, and “engaged to be waiting” applies all the way down the line. And you’re now a bank, extending credit for services not yet performed by your staff and subs. Do you really want to get into all that? I don’t think I would. The potential profit would have to be substantial…

After reading what I wrote, I don’t think I’d personally go for a retainer arrangement. Too much risk. Instead, I might offer a repeat client a simple discount or a “coupon” good for “x” off for a limited, expiration period of a month. The idea there is to keep them ordering services, even minimal ones, every month. Idling the engine, so to speak. But without any up-front availability commitments from you.

[Greg Ball]

Hi Mark,

As always thanks for the detailed response. So far the “urgent service” is something I can handle. What’s difficult is being at their beck and call for last minute editing jobs.

Right now, for each job, I send them an agreement and they sign the agreement and pay for the job. With rush jobs I’m adding in 25% rush fees. This becomes a pain for both parties as I need to wait for their senior management to sign the agreement. They’ve been known to bail on a project from time to time.

This retainer can’t be for “anything and everything” because editing a 2-minute video using their footage and photos is significantly less that shooting and editing a 5-minute video.

Since all of my crew works as independent freelance contractors, shoot rates are dependent on the needs for each shoot. Maybe I can add in the cost for one talking head shoot a month at our going rate for a up to a 5-minute video?

Offering a repeat client simple discount or a “coupon” good for “x” off for a limited, expiration period of a month may be a good idea, but that doesn’t take care of the repeated agreements and rush jobs. Plus even the smallest job has several rounds of revisions. Having those revisions apply towards the monthly fees may be helpful for me.

Without an availability commitment from me, and a financial commitment from them. Thoughts?

[Mark Suszko]

I dunno. It still carries an odor of investment banking to me. But you know your customer and I don’t. Are we addressing the wrong problem, maybe? The sign-offs seem to jump out at me as the real problem; this client pays you when they are supposed to, but the approval step seems to be the hitch you think a retainer fixes. Maybe I got that wrong, but that’s how it looks from here… and the retainer doesn’t actually fix the approval delay/bump.

It’s an interesting puzzle, shortening the approval cycle. I’d ask myself, and anybody at the client company with insight, what is it that makes the check-signing guy or gal occasionally delay pulling the trigger? Is it because of internal finance/accounting cycles, and they delay because accounting needs things to happen on a particular timetable? Certainly it’s not a trust issue? Their repeat business with you suggests that’s not it. The guy/gal’s just a control freak? Are they shopping around and comparing prices against rivals you don’t know about, either internally or externally? Is there an internal media person lobbying to hold on to the project internally? Is the particular project something different or sensitive, needing extra eyes on it from legal or something? What else could it be, and is there a way to fix that? I’m sensing the retainer idea is a way to put the job ordering on “auto-pilot”, so this check-signing guy in the way is out of the loop. If that’s the theory, then I don’t think it will actually work, because they’ll still ultimately have the veto anyway. S/he’s got some reason. When you know what it is, maybe you can solve it. Until you know the motives, the right move to make is a mystery.

[Greg Ball]

Hi Mark,

None of the above. The person signing off is just too busy to deal with day to day $600-$900 projects. They do want final approval which is understandable.

My feeling is retainers are a good thing. Why else do other service providers offer that?

A video retainer is an agreement between a business and Ball Media that allows them access to our billable hours for a set period of time at a discounted rate. In simple terms, they pay us to act as their in-house creative video department for a set period of time and for pre-determined hours.

A video retainer gives them first rights to the video services we offer without the overhead associated with a permanent employee on their end. Our goal with a retainer is to have an agreement that’s good for both parties and if it’s not good for both, it’s not good for either.

Maybe I’m not explaining things well to you. Thanks for trying.

[Ricardo Romello]

Hi Greg, seems to me like they want to make you their jo-boy. I had a similar issue many years back, only this guy wanted me to abandon all my other clients and work exclusively for him. He said he would book me for the entire year, but there was no guarantee on the exact amount of work he would be able to give me. And in the meantime I would have lost all my existing customers.

Even though it might not start that way, it would only be a matter of time when they would consider that they own you, and would start demanding preferential treatment over your other customers. I would politely decline their retainer offer, just explain you have other clients who also need your attention. If they really like your work they’ll continue to hire you anyway. If they drop you that just proves that they’re really just looking for a slave. Hope this post helps, Adios Amigo

[David Aretsky]

Don’t low ball yourself. Don’t offer a discount. Do not roll over hours. (One day there will be a thousand built up hours and you will be an indentured servant.)

Make sure the terms of the contract are always in your favor. The client will always try to take advantage of you.

Don’t make the mistake of screwing yourself.

[Greg Ball]

Ricardo,

Actually I suggested it, not them.

[Greg Ball]

I’m not low balling myself. I never do that. I’m just trying to be their go to guy for everything, and make it worth their while.

[Scott Hancock]

Hi Greg,

I understand where you’re coming from. We have a retainer agreement, but for wider variety of services. Would offer the following thoughts:

1. How would you set up an agreement? Would they pay in full at the beginning? Or would they pay monthly?

I would ask for 2 months advance at first and then month 3 at the beginning of month 2 , etc. So you always have a 2-month buffer. This correlates to the cancel notice.

2. What happens if they don’t use the 30 hours? Do they lose them? Or do I roll them over? IMHO rolling them over would be a headache to keep track of. How do I handle rush jobs? Do the rush fees go away?

Maybe roll over for 1 month, but not more. In any case, you should provide a running account of what hours have been used and for what projects. And what hours are left. Even better if you can get them to sign-off or confirm week by week or something so you don’t get to the end of a month with a “I didn’t know we used that many hours.” conversation.

Part of the contract should include some minimum advance notice for using hours. You can’t afford to keep on stand-by 24/7 waiting for their requests. You wouldn’t be able to take any other work. I would say the rush fees go away with this. It sounded like that was one of their goals in accepting the deal.

3. How do I add our other services to this agreement? Crew for shoots, animations, etc.? Are these a separate agreement? A change order? Are these discounted?

Suggest you make a menu of what’s included in the retainer and what services are not included and how they would be charged if requested. It’s the best starting place for corporate clients whose procurement people want to know such numbers, and also as a first defense against the direct client’s “can’t you package this up into one number?” bit.

Also beware and put a condition that “value of hours retained is NOT transferrable to other services”.

I don’t think you’d want to discount them if you are subbing them out. Don’t fall into subsidizing such discount.

Think about whether those hours are available 24/7 or only certain hours with premium for OT. Try to avoid setting yourself up to work 24/7, even though we too often end up doing. Clients will surely try to use their 30 hours in the month on the last day.

I think it’s possible to set it up as workable, but agree with the others’ warnings about becoming retained in chains.

Good luck!

[Greg Ball]

Thanks Scott. I really appreciate your advice.