How to Leverage Monthly Consulting Retainers for Predictable Income
Are you struggling to create a stable income in your consulting business? The feast-or-famine cycle, also known as the consulting roller-coaster, can be all too familiar in the early and mid stages of your journey. One month, your schedule is full, and you know exactly when your next payment will arrive. The next month, you’re scrambling to find your next client and praying for some steady work. It’s time to break free from this cycle and create a predictable, recurring income through consulting retainers.
What Is A Retainer Fee?
A retainer fee is a monthly payment that you bill your client. There are two types of consulting retainers: Pay for Work and Pay for Access. Pay for Work retainers are based on the hours you work for your client, while Pay for Access retainers grant your client access to your expertise. Consulting retainers are not only beneficial for you, but also for your clients. By setting up retainers, you can focus on delivering your best work without constantly searching for new projects, and your clients can feel confident knowing they have your ongoing support.
According to our How To Start A Consulting Business Study, only 13% of consultants currently use the monthly retainer model. This number should be much higher. Consulting Success® has extensive experience with consulting retainers and strongly recommends their use to our coaching clients. However, successfully selling retainers to your clients requires the right strategy and mindset.
The Two Types of Consulting Retainers
There are two types of consulting retainers that you can offer your clients: Pay for Work and Pay for Access. The best option for you depends on your relationship with your client and their level of trust in your expertise. Pay for Work retainers involve providing ongoing work and getting paid accordingly. The Pay for Access model, on the other hand, focuses on granting your client access to your knowledge, experience, and expertise. This model works best when you already have an existing relationship with your client and they understand the value you bring.
Access to Your Expertise
Clients opt for Pay for Access retainers because they know that having access to you and your expertise brings them value and peace of mind. By having you on retainer, they can reach out to you whenever they need your assistance without having to wait in line. Your strong relationship and their trust in you make this model effective. With Pay for Access, you’re not trading time for dollars anymore. You’re being paid for the value and support you provide, which can manifest itself in months of no contact followed by urgent calls for help.
The Perfect Time to Offer a Consulting Retainer
Naturally, you wouldn’t propose marriage on the first date. Similarly, you wouldn’t offer a consulting retainer on the first project. The perfect time to introduce a consulting retainer is after successfully completing a project and establishing a positive working relationship with your client. You’ve proven your ability to solve their problems and generate value. By offering a retainer at this “sweet spot,” you increase your chances of success.
Successfully Selling Your Consulting Retainer
Selling a consulting retainer is similar to selling your first consulting project. The major difference is that you focus on providing ongoing value to your client. You want them to believe that their monthly investment will be well worth it. To achieve this, you need to deliver outstanding results in your first project and gently introduce the idea of how you can continue supporting and counseling them. Depending on whether you’re selling a Pay for Work or Pay for Access retainer, you’ll need to present a clear plan for the monthly work or emphasize the value of ongoing access to your expertise.
Pricing Your Retainers
When pricing your retainers, especially for Pay for Access, the key is to base it on the value you provide. Your client should clearly see that their investment will bring them significantly more value than they pay in return. Think of it in terms of a return on investment (ROI) for your client. The general rule of thumb is that you aim to create 5x the value through your retainer. For example, if you charge $1.5K per month, the value you deliver should help your client generate at least $7.5K in new or saved revenue.
Retainers vs Equity vs Performance Deals
Consulting retainers are often compared to other compensation models like equity and performance deals. Performance deals are based on a variable linked to the project you’re working on, while equity deals involve receiving shares in a company instead of a paycheck. Both options come with their own risks and rewards. While equity and performance deals can offer potentially high returns, they also carry significant risk and uncertainty. Consulting retainers, on the other hand, provide stability, predictability, and ongoing income.
Consulting Retainer Agreement
A consulting retainer agreement is similar to a typical consulting agreement. It outlines the overview of the situation, goals for the project, success metrics, service description, ROI, investment, responsibilities, terms, and signatures of both parties. It serves as a formal agreement to ensure a smooth and successful engagement.
Want 1-on-1 Guidance For Your Consulting Retainers?
At Consulting Success®, we highly recommend retainers as a pricing model. They provide predictability, scalability, and more free time. However, setting up successful retainers requires the right approach. If you’re serious about implementing high-value, high-profit consulting retainers in your business, we can help. Check out our coaching program for consultants to receive personalized, 1-on-1 guidance in winning consulting retainers and bringing in more predictable revenue for your business. Learn more here.
