Expert: Peter Gabany - 11/11/2008

Question

I really like your Budget Control Report and the process you recommend for retainer billings. My question revolves around the retainer amount. How do you create a retainer contract if my client is unsure of their marketing plans?  We have been working on a project by project basis, but things get more involved and the projects seem like to be dragging on without completion. The client agrees that the billing process needs to be fixed and has asked me to give them a proposal.  However, do i just pull a number out of a hat?  $3,000 mnth? $4,000 mnth?  How do I know how much work is coming my way?

Answer
I already answered this question and then the browser crashed - ughhhhhh!

Every client has a budget even when they say they don't know. If you were in the market for an LCD TV and the price range is $300 - $30,000 (which includes hi end sound) do you automatically purchase the $30,000 unit? Not likely because you have a budget. It may be your wife's budget but there is a budget.

Your client is the same. You have the good fortune of knowing what your clients spend on projects have been. If you only have a 1/2 year of information then so be it it still gives you an idea of what their spend would be. 10 projects at $10,000 each for a year is $100,000. We would then break that down to 70% to arrive at a suitable retainer. We then would bill our client on the 15th of each month for $5,833 and expect to be paid on the the 1st of each month.

This is the least market-savvy way of setting a budget but it works. A forward-thinking client would look at the fact that they spent $100,000 last year but wanted to increase their sales by 15% - why then would they not increase their marketing spend by “up to” 15%?

Remember, the only reason to have retainers to demonstrate to your client that their business is always on your mind and that the retainer assists on leveling out their payments to your firm throughout the year instead of receiving large one-punch bills that can be crippling to cash flow.

I hope that this helps, let me know the result.

Pete