Advice on retainer fee

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Sam_957
Posts: 164
Joined: Tue Oct 27, 2020 7:04 pm
Location: USA

Advice on retainer fee

Post by Sam_957 »

My Wife has been working freelance projects for an employer the last month or two. She has completed two projects and has prepared an additional ~5 proposals. The employer is getting leads and PMing, while she does the implementation. Dream job/employer and great timing as kids are starting school now.

They have just proposed a retainer for 20 hours of work per month and are asking for a rate. Considering the 20 hour level - what adjustment would be made to her standard hourly fee for the retainer? Let’s say her standard rate is $100/hr. Should she just open with $100 as an offer for 20h and lower rates for 30-40 hour retainers? What else would you consider when negotiating?

It is a private company with ~1000 employees and 3B valuation. She would likely accept a full time job with them if offered. The work is related to a new program, onboarding clients to their platform, and she is the first contractor as far as she knows. They proposed 20h but also said they could do more if she could.

Thanks for your help all!
Last edited by Sam_957 on Fri Jul 16, 2021 12:02 am, edited 1 time in total.
My other vehicle is an index fund.
User avatar
mrspock
Posts: 2158
Joined: Tue Feb 13, 2018 1:49 am
Location: Vulcan

Re: Advice on retainer fee

Post by mrspock »

Traditionally, retainer fees are not like buying in bulk at Costco -- there is no discount. It's to secure the services of somebody who is exceptionally good at what they do, and they are willing to guarantee themselves access to a minimum number of hours of their services per week/month. Without the retainer, it's a crap shoot if they will gain access to their services as they may already be booked up. The benefit to the buyer is access.

I'd quote them full cost, and if they balk suggest they purchase a lower number of hours if they are worried they won't use them all, or cap them out and they can then use them up as needed. If you really want to go the discount route or they insist, I'd not go beyond 10-15% discount IMO.
Topic Author
Sam_957
Posts: 164
Joined: Tue Oct 27, 2020 7:04 pm
Location: USA

Re: Advice on retainer fee

Post by Sam_957 »

mrspock wrote: Thu Jul 15, 2021 11:56 pm Traditionally, retainer fees are not like buying in bulk at Costco -- there is no discount.
Thanks! One book I found indicated that retainers are priced at a discount, increasing as hours increase.

They proposed 20 or more, so it seems they will use the hours. Her rates are in the lower middle of the competition and they are happy with the work completed.
My other vehicle is an index fund.
Cruise
Posts: 2750
Joined: Mon Nov 21, 2016 6:17 pm

Re: Advice on retainer fee

Post by Cruise »

I’d advise against offering a discounted rate. Your spouse is a highly-skilled and prized asset, and those don’t discount their worth.

That being said, one can provide a discount by offering not to bill for small increments of time ( say, phone calls less than 5 minutes). On my invoices to good clients, I’d often subtract a minimal “courtesy “ amount. My CPA does the same, calling it “I like Mr. and Ms. Cruise Discount” Seriously—it takes a bite out of those large bills.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Advice on retainer fee

Post by JoeRetire »

Sam_957 wrote: Thu Jul 15, 2021 11:50 pm They have just proposed a retainer for 20 hours of work per month and are asking for a rate. Considering the 20 hour level - what adjustment would be made to her standard hourly fee for the retainer? Let’s say her standard rate is $100/hr. Should she just open with $100 as an offer for 20h and lower rates for 30-40 hour retainers? What else would you consider when negotiating?
In any negotiation, try to look at things from their point of view, understanding what they are hoping to accomplish, and guess what they would be willing to settle for. Then layer in whatever you wish to accomplish. Consider what their other options are. Consider what your other options are.

If you think they simply want to ensure that 20 hours of work is available to them every month, then charge full price.
If you think they want more hours than they are currently getting, but at a lower hourly price, then charge somewhat less.

If you have other clients that would pay you more, then charge more.
This isn't just my wallet. It's an organizer, a memory and an old friend.
traveling_salesman
Posts: 168
Joined: Mon Apr 26, 2010 12:13 am

Re: Advice on retainer fee

Post by traveling_salesman »

Above advice of looking from their end is good. That’s what I would do.

Personally, my retainer fees go UP with more hours. I only have so many hours I can dedicate to the work, and more hours from one client means I am taking on more risk, but they are getting bigger benefits (i.e. I know context more etc). I also learn more when I have more clients etc. But this comes from a position of inexplicable good fortune: having more client demand than hours. And it is likely my luck will run out someday. I only bring it up to say “look at it from their side” and that there is no one right answer.
Topic Author
Sam_957
Posts: 164
Joined: Tue Oct 27, 2020 7:04 pm
Location: USA

Re: Advice on retainer fee

Post by Sam_957 »

Thanks everyone for the advice! Truly appreciate it.
My other vehicle is an index fund.
RoadRat
Posts: 99
Joined: Mon Jan 13, 2014 7:12 pm

Re: Advice on retainer fee

Post by RoadRat »

I've been a consultant for over 25 years. I require a retainer on almost all projects including repeat clients. I do not discount my hourly rate based on retainers.

As someone said,.this is not Costco
Topic Author
Sam_957
Posts: 164
Joined: Tue Oct 27, 2020 7:04 pm
Location: USA

Re: Advice on retainer fee

Post by Sam_957 »

Made an initial offer that was too high on the advice of two other people we know, but ended up with a 10% increase over hourly rate that was shared at beginning of relationship.

:sharebeer
My other vehicle is an index fund.
Post Reply