Consulting retainers: are they worth it?
Rhonda's first client after leaving her corporate job was her former boss, at $10,000 a month. She quickly landed a second client at the same rate and worked with the two of them for over a year. "This owning a business thing is easy!" she said to herself. "What's everyone complaining about?"
Then her old boss gave her 30 days' notice. That same month, the second client ended their engagement too. Within 60 days she went from collecting $20,000 a month to having no clients and no income.
So are consulting retainers worth it? Usually not, if you sell your expertise. A retainer feels like security, and for most of the experts I work with it turns out to be a part-time job with no benefits. There are three conditions under which I'm in full support of one, and they're below.
Why we want them so badly
When I ask entrepreneurs how much they want to make, they almost always respond with a monthly number. I did too, for a long time. Our world has taught us to think in months.
We pay our rent or mortgage monthly, our credit card bills are due monthly, our utilities and internet and insurance premiums are paid monthly. So when we go out on our own, it's natural to bring that desire for "steady" with us.
This is why many small businesses covet the retainer model. The dream of having one or multiple clients guaranteed to pay a monthly fee feels like it alleviates some of that stress; you're no longer starting your month at zero, hustling to make your nut every 30 days.
This fantasy, however, can be short-lived, and it's often a farce.
Rhonda
Rhonda's name is changed to protect her privacy, but her story is one I've heard dozens of times.
When those two clients left, Rhonda started to panic, because you know what she was doing to build her business while working for those two clients for over a year?
Nothing.
Nothing to market herself, nothing to build her pipeline, nothing to position herself as an authority in the marketplace.
She mistook what she had, two part-time jobs, for owning a business.
A business without marketing and sales is just a job
When you have a job, part-time or full-time, someone else pays you to work for them. That's it.
When you have a business, delivering the goods for your clients is only half your job. The other half is servicing your most important client: your business. That means marketing, sales, and product development. It's the reason I developed and teach the 50/25/25 Rule.
When your time is filled with one or multiple retainer clients, and you're not investing at least 25% to 50% of your time in marketing, sales, and product development, you have a part- or full-time job. Except without any benefits. And with even less safety, since it's easier to be let go by a retainer client than by a boss. After all, if you're fired as an employee, you can generally collect severance and/or unemployment.
Three more problems
Most retainers are unprofitable. When negotiating, most businesses aren't charging a premium for their time, and most clients are looking for a deal as the trade-off for paying on an ongoing basis. I've seen hundreds of students join our program with at least a few retainer contracts. When they pop those numbers into our Freedom Calculator, the retainer clients are never profitable enough to support their financial goals.
Scope creep is hard to avoid. You depend on your retainer clients, so you don't want to lose them. And when they inevitably ask for extra stuff here and there, or just reach out regularly, you naturally act quickly to help. The threat of disappointing them, and possibly losing this income stream, makes it hard to maintain boundaries.
You lose your efficiency. With multiple retainers, most people are jumping from client to client all day, losing a lot of efficiency with context switching.
When a retainer is worth it
I'm in full support of any retainer client that isn't guilty of the above sins. If you have a retainer relationship:
that's profitable enough to support your financial and freedom goals,
whose scope is managed and boundaries are clear, and
where you're dedicated to minding your business as your most important client,
go for it.
One way to do that is to run the retainer as Intensives: monthly or quarterly Intensives to deliver the ongoing work, instead of being on call all month.
But do not fall prey to chasing the false security of retainer clients and then confusing full-time work for them with owning a business.
Start here
Run your retainers through the same math as everything else. How many hours a month does each one really take, including the "quick" requests? What does that make your rate? And how much of your week is left for your most important client?
The math is on the Freedom Number page.
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