Selling Retainers
When you kick off a new month, do you know for certain that you’ll have a certain amount of income coming in?
For most of us, the answer is no. Our revenue model is transactional — we work an hour (or day, or week), and we get paid for our time. And we bill, which is a backward looking of getting paid (the product of time we’ve billed and our rate.)
A retainer allows your clients to retain your services on a monthly basis. Clients like retainers because it allows them to keep somebody around who knows their company and can perform small tasks without needing to draft up a new contract.
We like retainers because they give us predictability. If I have five clients on a $1,000 a month retainer, I know I’ll start next month with $5,000 of guaranteed revenue. This helps us sleep better at night, and allows us to create realistic budgets against our fixed expenses.
The Problem With Most Retainers
Most freelancers sell retainers that are discounted blocks of future availability.
If you bill $100 an hour, you might sell a ten hour a month retainer for $800 — reducing your rate by 20% in exchange for a little peace of mind and less need to constantly sell yourself to new clients.
I have some issues with this sort of retainer. My biggest gripe is that it’s divisible by the number of hours included. Your clients end up knowing you’re charging them effectively $80 an hour, and might try to use that reduced rate to help them negotiate future project costs. Or they might ask for a la carte work that falls outside of your retainer agreement, and might expect that to be billed at $80 an hour.
Your time is a non-renewable resource. If you were to end up with all of your monthly availability used up by a bunch of retainers, you’d be limiting your earning potential. I’d argue that investing in a refined business development strategy to earn more money on more new clients would be better than having future income defined by the sum of your monthly retainer earnings.
Create Retainers That Optimize, Insurance, or Educate
Your retainers should be impossible to divide. This means you need to offer features that aren’t directly reducible to an hourly figure.
We want to position our retainers not as discounted blocks of availability, but as products that continuously improve or strengthen the value you delivered before switching your client to a retainer.
Additionally, you’ll want to come up with a monthly deliverable that comes with your retainer. When you’re selling just your time, it’s sometimes hard for a business to justify a long running expense like a retainer. But if you can optimize, insure, or educate your client in a way that provides some form of incremental improvement, a report or end-of-month summary that explains why it’s good that they’re paying, and why they’re going to want to keep paying you.
By the end of this lesson, I hope that you’ll walk away with a few ideas that can not only provide ongoing and predictable income, but will also help you start to step away from strictly selling your time for money.
Optimization: No Product Is Ever Perfect
It doesn’t matter how experienced you are, the work you do for your clients will never be perfect. The first version of a website you design or write will always have holes. It isn’t until actual people start to use the website that you discover what these holes are. Maybe the front page headline that you thought followed every best practice for headline writing is weak. Or the structure of the site is causing people to get confused, and a bunch of people are falling out of the sales funnel before buying.
These things aren’t your fault. You can only make educated and informed guesses, and hope that they apply to the people who end up visiting the website.
But once you have actual data — analytics reports, funnel graphs, and more — you can start to improve upon your initial assumptions.
• A/B and multivariate testing: You’ll be in charge of managing a series of tests backed by tools like Optimizely or Visual Website Optimizer. You’ll analyze usage data and create experiments around why you think people might not be engaging the way you want them to (buying something, filling out a form, etc.)
• Optimizing lifecycle emails: If your client has email courses, trial email sequences, cart abandonment emails, or other forms of autoresponders you can look at how effective each is each month and test new variations.
• Content strategy: You could blog, write newsletters, and produce other forms of content for your client. Remember: your client is busy and you’re probably better at this than they are.
• Onboarding analysis: If you build software and users need to go through some sort of trial, you could conduct customer interviews and do analyze their engagement to figure out ways to both activate more trials and convert more people to paid.
• Mobile app optimization: Are people completing in-app purchases? Are they acting on in-app call to actions that entice them to upgrade to a premium version?
• Manage PPC campaigns: Clients don’t have the time to babysit their ad budgets. You could do this for them.
Insurance: Don’t Let Their Investment Go To Waste
Your clients have invested thousands of dollars in building a website or web application, so why not sell them on preventative maintenance? These strategies relate mostly to web developers, but could also apply to designers and other specialties.
• Monitored backups: For most websites that make use of a database of any sort, losing their database could be fatal. I’ve often created six-figure web applications where the founders didn’t even consider that it might make a lot of business sense to spend some money on making sure backups happen. As a consultant, it’s my job to make sure clients realize that spending a little money on automated backups is a must.
• Security and framework updates: I program using a framework called Ruby on Rails. Over the last year alone, a handful of serious security exploits have necessitated a “stop everything and patch ASAP” reaction from application maintainers worldwide. And remember Heartbleed, which made the news just a few months before the writing of this course? For many clients, especially those without full-time technical staff, there’s really no recourse for fixing these exploits. They’re often left to seek you out again, or to hire another developer, and go through the contract process all over again to get the issue resolved.
• Combat churn: Is your client losing money due to subscription failures from their customers or general purchase abandonment? You could reach out to their customers and attempt to reactivate them. (This is one of those things that’s prime for delegation, as we’ll discuss in a few lessons. I have a friend who hired his mother-in-law to do this.)
• API upkeep: Let’s say you build an application that interfaces with 3rd party APIs. Well, these external services change over time. I had one client in particular, who was film director in a previous life, who thought of web applications — like film — as being capable of being “done” or “not done”. I built his website, and a year or so later he called me in a panic to say that the Facebook authentication code wasn’t working. Facebook had deprecated the way I had originally written logins to work. Had I known better at the time, I would have set him up on a retainer where I’d proactively take care of any API updates for a fixed monthly fee — which would have saved him a lot of embarrassment, lost revenue, and stress.
Educate: Keep Your Clients “In The Know”
There’s typically a knowledge gap between us and our clients. We’re sought after because we know something that they don’t, and we have the time available to apply that knowledge to a client’s business problem.
Often, though, it’s advantageous for our clients to understand what’s going on in the world, especially as it relates to what they hired us to do for them. If you’re an SEO consultant, are your clients in-the-know about the implications of Google’s algorithm changes? Probably not. But does it impact them, even if you’re managing their SEO on a monthly basis? Absolutely!
By coaching or advising your clients on a long-term relationship, you’re able to provide personalized value to them by combining your knowledge of their domain and their business with industry and technical trends.
• “CXO For Rent”: Smaller clients don’t always have someone like you on staff. Many of my clients were small businesses that didn’t have an in-house development team or CTO. I’d come onboard as a part-time technical advisor, who can help influence and steer the client’s technical decisions.
• Private Newsletter: I have a friend who is a master at setting up Facebook ad campaigns. He stays on top of all the trends and updates that affect the tumultuous world of paid advertising on Facebook, and writes a monthly newsletter to the clients he has on retainer with updates that they should probably know about. It’s a way of not only delivering value to your retainer clients, but it also helps justify why they keep you around. Best of all, you can use this newsletter as a way to upsell additional services and engagements.
How To Sell Retainers
We’ll be covering productized consulting in the next lesson. Many of the examples I have are basically retainers that mix and match optimization, insurance, and education components. The difference, however, is that productized consulting is often sold as a standalone product; retainers, on the other hand, are sold to a current client after wrapping up an activate engagement.
Prior to an engagement kicking off, you probably have an idea of what sort of ongoing work a client might need. I try not to focus too much on retainers during the active engagement, but as the project winds down I’ll start dropping hints about ways in which I can provide ongoing value.
For many of us, we’ll do the work, deliver the goods, and then part ways with our clients. Try hosting “handoff meetings”, where you’ll sit down with the client and talk about what their next steps are and how they plan to support and grow whatever you did for them over the long haul.
At these handoff meetings, I’d talk with the client about ways that I could support them long-term. Having access to future availability is almost always on the table, but I present packages — just like I did with the first proposal — that mix in ways that I can formally offer ongoing optimization, insurance, and education, and not just sell blocks of time.
Remember the example I gave of the psychiatric care clinics in the first section of this course? If I designed a website for a clinic who has an average customer lifetime value of $30,000, I could see offering the following packages:
• Support: Hosting, daily backups, uptime monitoring, and up to 10 hours a month of availability. $1,500/month
• Optimize: Hosting, daily backups, uptime monitoring, and lead generation optimization. I’ll review your analytics data each month and create experiments aimed at generating more leads from your current traffic. Up to 10 hours a month of a la carte availability. $3,000/month
• Growth: Everything from the Optimize package, but I’ll also produce blog content, update your Facebook and Twitter feeds, and manage your newsletter with the aim of increasing the volume your website gets. Added volume plus higher conversions to lead will compound to create a substantial amount of new leads for you. $6,000/month
My CPA, Jason Blumer, used packaging to sell me on monthly accounting services. Instead of just offering an hourly rate for accounting services, he gave me three options: basic accounting, accounting plus bookkeeping and payroll, or accounting, bookkeeping, payroll, and business coaching. The baseline package would give me what I’m required by law to do (file my taxes), whereas the high end package would have given me that and hopefully more income to report. Regardless, by positioning a high price package that included personal coaching against the cost to get my returns filed, it made the cost of the latter option seem really cheap.
A lot of the services I offer in my retainer packages really don’t take much time to accomplish. And some if it can be outsourced to third parties. Because of this, I’m willing to offer a moneyback guarantee to some retainers — which is an amazingly effective way to counter the objections a client might have to paying you monthly.
The overhead for me to peek into Google Analytics and Visual Website Optimizer, review the last 30 days of data, and make a few content change experiments is negligible. I’m OK with backing these sort of retainers with a full moneyback guarantee (for the last month) should the client feel the service isn’t worth it. All I have to lose is a few hours of time, and what I have to gain is a high three figure or low four figure hourly rate for fulfilling these retainers. If your retainers are more time intensive (which, done right, they really shouldn’t be), then you might not want to offer a moneyback guarantee.
Offer A Written Deliverable
Lastly, your retainers should offer some form of tangible deliverable. The last thing you want is your client to be reviewing your monthly expenditures, and question why they’re paying you.
It’s one thing to deliver results for your clients, it’s a totally different thing to have them consciously recognize that.
Ideally, your monthly deliverable will reflect what sort of financial effect the service is having on their business. If I can determine that a new lead is worth $3,000 to a psychiatric clinic, then I know exactly how to calculate what sort of revenue I’m adding to their bottom line.
You want this report to be the product of your retainer. It should state clearly what the client is paying for. I might include how many leads the site generated this month, and how that compares to last month and three or six months ago — and charts always help.
What’s their sites uptime? How many visitors are they getting, and from where? How many sales, new users, or whatever else have they added this month? Can we infer any trends that we should maybe act on? A lot of this information can just be repackaged data taken wholesale from a tool like Google Analytics.