Most creative and marketing agencies welcome retainer clients who agree to a monthly fee in return for a specified amount of design work, SEO support, PR, social media updates etc. It’s a great way of working. The client knows they can outsource all their creative needs, whereas the agency is able to manage cashflow more efficiently and have a predictable source of revenue.
However, this seemingly perfect relationship is only as good as the systems and processes it is built on.
Some creative and marketing agencies find that they’re actually losing money on their retainer clients; and often the ones that are costing them the most are the ones that are paying the least.
Does this sound familiar?
How to work out whether your retainer clients are profitable
Many creative agencies I work with will come to me because they have no idea whether their retainer clients are profitable or not. Sometimes they treat them as a bit of a job lot, grateful to be able to invoice a regular amount every month. However when we dig down, while some relationships are profitable, other clients are exceeding the billable hours agreed to.
Often agencies have a view that it will ‘all come out in the wash’. For instance, that client may have had extra hours this month but next month they won’t be as demanding and so the agency will be able to claw back those hours. How often do you think this actually happens? Probably not very often, and in many cases the agency really doesn’t know exactly how many hours that client has actually had.
Retainer clients are already on a good deal – they’ll be getting your services at a special rate compared to one-off jobs, in return for the security that a fixed monthly fee provides. So if a creative agency routinely spends more time on them than agreed, that client really is getting something for nothing.
So how can you work out whether your retainer clients are profitable, and how can you ensure that in future you don’t exceed billable hours?
Workflow tools for retainer clients
First you need to implement a workflow system that all employees within the agency can use and update.
I work with WorkflowMax, although there are other options available, including Excel spreadsheets! The advantages of using a cloud-based solution is that you’ll be able to track hours in real time, minimising the chances of exceeding the agreed fixed retainer. As stated by the Time Doctor, one of the 12 ways Agencies can be more productive is to stop over servicing and gain real insight into your projects through a project management tool.
Then you must set the amount of time for each retainer job – for example, six hours for website updates p/m – and allocate them to the relevant team member. Now it is their responsibility to ensure they manage their time within the agreed retainer.
Software solutions like WorkflowMax also allow you to set up notifications when you reach the agreed billable hours – or in advance. You can then speak to the client and agree a price for any additional hours. Many agencies end up either not charging for these, or their clients get a shock when they receive an invoice. This makes the whole process a lot more transparent and will also help both you and your clients budget and quote for work much more efficiently.
With a robust system in place you will also have all the data you need to measure the profitability of your retainer clients, and those services you provide. You may find that certain services are regularly exceeding billable hours and therefore you need to review your pricing structure and retainers.
This will also highlight issues with productivity within your agency, and of course weed out those demanding clients who are getting a lot more value from their package than you anticipated!