In America, the freelance base is 53 million and growing. This accounts for nearly 35% of the US workforce.
In the UK, 1.4 million workers freelance some or all of the time.
This trend is becoming a popular pick for both the young and the old. Nearly 90% of UK students with first or second class degrees have already chosen to enter the workforce as a freelancer.
When it comes to the economy, freelancers are giving a major boost in both countries. In the US, freelancers contribute $715 billion and in the UK, the freelance market is worth £21 billion.
About half of the freelancers in America are working 30 to 50 hours per week and 80% of freelancers are working on one to three projects at once.
Needless to say, the freelancer market is a hard working one. Yet, many of them struggle with getting on-time payments.
In the freelance world, ensuring a monthly income isn’t always so simple. This is why we find more and more of them turning to a new practice—charging clients retainers.
Yes, the freelance retainer is much like the lawyer retainer. And it’s gaining traction. If you’re considering doing the same but would first like to learn more, then continue reading.
Let’s review what a freelance retainer is and how you can charge one to your clients.
What is a Freelance Retainer?
A freelance retainer is a contractual agreement entered between a freelancer and a company. This agreement states the freelancer will work a certain number of hours per month in exchange for a flat fee payment.
However, there are some agreements you’ll find that are set for longer periods of time, such as several months or even a year.
This is another option for freelancers who may normally charge an hourly or project rate. Some look at this as the best alternative to working as a salaried employee for a company.
What Are the Pros of Freelance Retainers?
Receiving recurring payments is a freelancer’s dream. Guaranteed income is an issue every freelancer faces.
With retainers, freelancers are able to create a recurring income stream from reliable sources. The income stability it offers makes life and work less stressful.
You’re also able to spend less time chasing down projects and more time completing work and enjoying the rest of your day with family.
The consistent work schedule also makes it easier to manage your work-life balance. The retainer agreement guarantees you’ll have a certain number of hours of work per month or whatever period of time you agree to.
You can set up the retainer either by time, project rate, or project type.
Retainers are paid upfront, which gives you the assurance your bills will be paid on time. It sure beats waiting around for clients to pay you after doing all of your hard work.
At the end of the day, retainer agreements are a win-win situation. You get consistent payments and the client receives access to high-quality freelance services.
The Cons of Freelance Retainers
For some freelancers, there are no cons associated with freelance retainers. But this all comes down to their client base and ability to accurately estimate their retainer fee.
When you fail to have quality clients and a good fee set up, it can become a burden rather than a blessing. For example, if you have clients that work with you one month and not the next, it can mess up your whole financial schedule.
This is why some freelancers try to lock in contracts for at least several months. And it doesn’t hurt to have a provision that says you still get paid for three months in the event the agreement’s canceled before the end of the contract.
Then there’s the risk of either over-delivering as a freelancer. What this means is that you could end up doing more than what you were paid for.
If this happens often, you may want to renegotiate your retainer fee. It’s recommended that you keep track of the hours worked throughout the month so you can calculate if you’re being fairly compensated for the amount of work you put in.
On the other hand, you also run the risk of under-delivering. This can happen if you’re not meeting deadlines or the client’s expectations.
If this occurs, this can lead to you losing your contract and maybe even the client.
It’s also important to note that you’re on-call, which means you have to be available 24/7 for emergency projects with sometimes tight deadlines. When you’re working on a retainer, expect some clients to try and get the most they can out of you.
However, if you’re able to outline what you’re willing to do for your monthly or multi-monthly retainer fee, then you can prevent some of these issues. Also, be sure you’re not overbooking yourself with too many retainer-paying clients.
Manage your hours accordingly so you don’t end up with two or three emergency projects at once.
Next, let’s review how you can create a freelance retainer agreement that works for everyone.
Identify the Services You’ll Offer
It’s easy for some clients to ask you to perform tasks you don’t normally perform. For example, if you’re a blogger, they may ask you to write a proposal to send to one of their prospects.
Now, this is alright if you don’t mind doing it—but to prevent becoming overworked by your client, you should include in your agreement which services you’re willing to provide.
For example, you may want to offer:
- Video editing and publishing
- Press release writing and distribution
- Social media management
- Virtual assistant tasks
- Graphic design
Outlining this will help to prevent the client from abusing the agreement by asking you to do tasks that are outside of your scope.
Setting Your Freelance Retainer Rate
Here’s where things can get a little tricky. You don’t want to price too high or you’ll scare away clients. But you also don’t want to price too low to where you’re struggling each month.
You’ll need to do a bit of research on yourself before setting your rate. For instance, you should time yourself on the different tasks you perform.
You can use time-tracking features used in software like invoicely to help you figure this out. The idea is to monitor your hours worked per project type or task and then use that to determine your monthly rate for each.
So if you’re offering daily social media monitoring and blog writing services, you’d combine them together to come up with a monthly retainer rate.
For example, if it takes you an hour to write a 1,000-word blog post and a half hour to do your daily social media posts, then you can multiply that by the number of days per month you offer these services.
This will allow you to ensure you’re getting paid an hourly rate you’re comfortable with. Plus, it’ll enable you to justify your retainer cost.
Some clients think they should be getting a discount because you’re charging them upfront and for an entire month (or several months). But this wouldn’t be fair to the freelancer.
So don’t fall for this notion.
An example agreement could be:
Agreement to provide up to six blog posts and 30 days of social media management for two accounts at a rate of $6,000/mo for a minimum of six months.
This guarantees you a fair hourly rate and at least $36,000 per six months. Now, if you’re in an industry where tasks and projects fluctuate in complexity and size, then it’s good to make your fee based on hours of availability.
For instance, instead of offering a set amount of blog posts, you can offer 70 hours of services. Then you can use a time-tracking tool to measure the time spent.
At the end of the contract, you can make adjustments as needed to ensure you’re fairly compensated.
Also, be sure to get your agreement in writing. This can be a formal contract or a short agreement that you and your client signs.
You’ll also find that retainer fees aren’t for every client. Ideally, you should aim to target these for clients with ongoing work.
Setting Your Freelance Retainer Fee
Does using a freelance retainer sound like a good idea for your business? Then it’s time to start organizing.
Use the tips above to help determine the services and rate you’ll charge clients interested in this payment structure. Then draw up a contract yourself or with the assistance of an attorney.
Be sure to have a backup plan in the event contracts are canceled. This can happen due to a business shutting down or a variety of other reasons.
You can include a kill fee in the agreement that ensures you’re paid for a month or so after the cancellation so you can have time to replace the client. Be flexible with each client to come up with a contract that works for both of you.
Ready to get started? Let us know in the comments why you’re attracted to using freelance retainers.