Can Retainer Clients be Bad For Business?
We’re always being told that we should pursue retainer arrangements with our clients – a commitment on both sides for ‘x hours’ of usage each month, pre-booked in exchange for a set monthly fee.
The arrangement is mutually beneficial. The client gets consistency, reliability and the peace of mind that they have reserved a set amount of your time to service their needs as agreed. You get a predictable income and can work more efficiently, maximising your billable hours, investing more of your time and energy into a committed client.
But what if the dynamic changes? What if your retainer client starts to undervalue, or under-use, your services?
I’ve come across this a number of times recently, where clients of mine are finding that their retainer clients are being hard to reach or pin down, and so making it much harder for them to fulfil their side of the retainer deal.
So what do you do? Do you wait and rely on them to pick up on the issue? After all, you’re within your contractual obligations; they have a responsibility to engage you and supply work for you to complete. In fact this is surely a wonderful arrangement isn’t it? You’re getting paid not for working, but for merely for reserving the unused hours!
Well, maybe it’s not quite so rosy…
For a start, you do what you do because you love doing it; you wouldn’t be in business if you didn’t. So you’re committed; you enjoy working with clients, solving their problems and delivering solutions. You are driven, like most entrepreneurs, by positive client outcomes. It fills you up and gives you purpose. If you wanted to get paid for just sitting around, you’d go back to having a regular job!
But beyond the lack of fulfilment, there are some more practical implications of having disengaged retainer clients, which can lead to bigger issues down the line:
- There is the risk your client will, with little warning, want to carve huge chunks from your diary to allow them to catch up. It may state in the contract that there is no rollover of unused hours, but if they’ve been paying you for a full day each month and only using an hour for the past six, is it unreasonable to expect some flexibility from you if they need three days intensive work?
- Worse still, your client could look at the results they’ve achieved with the financial outlay you represent and conclude the arrangement isn’t viable. It doesn’t matter that they failed to fulfil their side of the execution. They’ll be looking at the ROI of their investment in you, and it won’t look good! They’ll overlook their role as the reason for the poor results and make a cost saving instead, and hey presto, you’ll have lost a client. Worse still, they start telling others that they spent a fortune with you and gained nothing!
- And of course, while you’re spending time nudging along your under-performing client, you are missing out on other things. By not delivering for your client, you’re not adding to your portfolio, client case studies and testimonials or adding to your experience or collateral, PR or brand reputation.
It is a frustrating situation. The whole point of scheduling hours in advance is to smooth things out and avoid headaches like these. Sometimes an inactive client can be more toxic to your business and its growth than having no client at all.
So, what should you do?
First of all, check whether this is a blip or an ongoing theme. Is it just a seasonal (e.g. summer doldrums) thing, or has the activity been tailing off for a while?
If it is something deeper then a good place to start is to:
- Change your language: Rather than talk about £x for x hours, say ‘up to.’ It is a small change, but it clarifies that they can gain value without having to use all the hours available. After all, no one goes to an all-you-can-eat buffet and expects to literally eat all the food, only to resent the restaurant when they can’t (do they?!)
- Reassess the arrangement: Tackle the issue head-on and have a heart-to-heart discussion with your client. Call it an account review. Explain the difficulties – they’re not giving you enough input, authority, content – and how this restricts what you can do for them. Ask them how can you make your services easier for them to access and use?
- Get back to their ‘Why?’: Remind them of why they originally engaged your services. They must have had a vision and goals for the arrangement. Can you reconnect them with these?
- Present options: Discuss different solutions. Or perhaps you could reduce the retainer to reflect the workload? But use with caution – while this may help to strengthen your relationship, it won’t resolve the underlying issue of under-utilisation. To address this, work with them as per points two and three and look for ways to add value.
Inevitably though, there will be times when there’s only really one course of action:
- Manage them away: It’s a tough decision to make, especially given all the time you have invested in securing and onboarding the client in the first place, and of course the regular income promised. However, it may be best for you both to wind down the arrangement so you (and they) can access the value they need in a different way. Check my ‘It’s not me, it’s you’ post for some approaches for making this happen. It helps to focus on the opportunity opened up by the client exit, rather than on the loss. Picture yourself in x months’ time with a new client, thrilled with the great results you’re achieving, and feeding you new experiences and stories to share.
It can feel awkward to broach the subject of your retainer fee, especially if your relationship with the client has cooled and they have not upheld their side of the arrangement. But it is always better to be open and professional, and let your client know you have their best interests at heart, than just let months of under-use tick by hoping they haven’t noticed.
Your client will respect you for spotting the issue and for helping take control of the situation. And if they don’t, then perhaps you’re not a good fit for each other. It happens.