Getting paid as a consultant can sometimes be a daunting task, especially when you have to wait for multiple clients to settle their invoices. Delayed payments can significantly impact your cash flow from month to month. However, there is a solution to address this issue – the retainer pricing model. But what exactly are retainers, and is this billing method suitable for you? Read on to find out.
Understanding Consulting Retainers
A consulting retainer is an upfront fee that clients pay to secure the services of a consultant for a specific project or a predetermined period. Unlike billing on an hourly or daily basis, retainers offer greater stability because you don’t have to wait for invoices to be paid.
Two Retainer Models for Consultants
There are two common types of consulting retainer models to choose from, depending on your professional focus and experience.
1. Pay for Work
The pay-for-work model is often used by professionals establishing long-term relationships with their clients. Under this model, you set a recurring fee for a set period, and the client pays upfront. Throughout this period, you are expected to work and deliver specific outcomes. If the client is satisfied with your work, they will continue renewing the contract, paying upfront for each subsequent period.
2. Pay for Access
The pay-for-access model is generally preferred by experienced consultants. With this type of contract, you won’t be working on specific projects or deliverables. Instead, you will be available to offer professional advice upon request during the contractual period. The client pays for your authority, knowledge, and expertise, which you have gained through years of experience in the industry.
Determining Retainer Fees
The retainer contract you enter into will be influenced by your experience level, which also affects pricing. Retainer fees typically reflect the hourly or daily rate you would charge under a traditional pricing model. In the case of pay-for-access contracts, you will base your rate on the added market value you bring to your client’s business. Think about the return on investment your services can generate for them.
When building a relationship with a new client, offering a discounted rate can help showcase your value. Some clients may be hesitant to pay full-time rates for a week or month without knowing whether it will be worthwhile. That’s why many consultants provide discounts for new contracts.
Elements of a Consultant Retainer Contract
If you decide to work as a consultant on a retainer basis, it is crucial to have a clear contract that outlines expectations for both parties. The contract should include details such as:
- Project scope, goals, and desired outcomes
- Key financial metrics used to determine success
- Description of the services you will provide
- Whether you are using a pay-for-work or pay-for-access model
- Expected return on investment (ROI)
- Responsibilities of both parties
- Financial terms and conditions
- Signatures and dates
Is Working on a Retainer Basis Right for You?
Charging retainer fees has its pros and cons. For consultants starting out, it provides a more stable income without the need to chase unpaid invoices. However, offering a discount for retainer contracts may be necessary while you build a reliable client base.
If you determine that the retainer pricing model suits your needs, Zenith City News recommends using GoCardless for streamlined payment collections. GoCardless offers automatic invoicing, allowing consultants to receive payments automatically on the due date. This service is perfect for handling all your retainer billing needs.
Zenith City News can provide more information on how GoCardless can assist you with both ad hoc and recurring payments, helping you focus more on your consulting work and less on administrative tasks.
So, if you’re tired of waiting for invoices to be paid and want a more stable cash flow, consider using retainers as a consultant. It’s a proven method that offers financial stability while allowing you to focus on delivering excellent service to your clients.
