You will end up with the same result we see in many other retainer-chasing agencies: unhappy teams, unhappy clients, and unhappy agency owners.
Retainers are not money spinners. They are the reason you are paying all your staff first... and yourself last. If you had to take a hard look at your retainer business model, you'll see that it is exhausting your staff and burning you out.
Retainers are distractions. They are killing your deadlines, forcing you to do work each month just to make up the hours (and to defend how they've been spent to a questioning client).
An hourly-based retainer model for agencies is not going to be a win-win for you, your team, your client, and most importantly, your bottom line.
We know this because we've been there!
We ran a very successful creative agency in the UK for over a decade. We had a 60% growth rate, and were selected for the Goldman Sachs 10KSB Program. We had clients ranging from blue-chip companies to SMEs. We beat the big agencies at pitches and competitors wanted to buy us out.
But, the stress of being a retainer-focused agency was beyond belief. The threat of losing a big client and not servicing the salary bill hung over us like a constant nightmare. So we studied, innovated, and changed our business model and started sharing that expertise with others.
Now that we're older, wiser, and have exited the agency, we offer our services as business coaches. We partner with agencies in different countries who want us to work with them to grow their business, their revenue and adopt a new way of thinking about revenue generation.
And now here we are with the facts. The wrong retainer clients will sink your business.
Here are five reasons why retainers are a bad idea
1. Retainers sell your hands... What about your brain?
Retainers attract clients who want the best executions, and your undivided attention for a cheaper price.
All they're interested in paying you for is your hours at a cheaper price, and at the same time discounting the immense value your creative adds to their brand.
What retainers don't pay for is the value you offer as an agency. Work that could create fantastic revenue for your client is evaluated by how many discounted hours you put in, not the impact you created. So is there any real drive to create value-driven work, when the KPI is hours on a timesheet?
Retainers (or restrainers as we like to call them) are like handcuffs and a ball and chain on value creation.
2. Support retainers are a sunk cost
Retainers are a fallacy. Bold statement, we know!
While most agencies chase retainers to attempt to get recurring monthly revenue into the bank account, they're coming at a cost that far outweighs the benefits.
There's opportunity cost.
You end up turning down that dream client who wants an execution that you know will rev your team's engines, but you have to turn it away because you've filled your hours.
Your key talent is churning away for one client who's paying discounted rates, and getting frustrated that they're being held ransom for hours and not doing what they love – creating fantastic marketing! Your retainers will eventually result in staff costs when your key talent moves on to more exciting ventures (or get poached by your retainer client!).
Time, resources, and energy invested into a retainer take focus away from your core business.
3. Retainer clients are a drain on you and your staffs' energy
We chatted to a top copywriter in an agency who was assigned to the company's biggest retainer client. It was the only account he was working on because he was the top creative, and this was the top client. You'd think he would have been flattered or delighted. Instead, he felt that he'd been assigned to the 'B Team'. He couldn't work on any reactive jobs or new client briefs and spent his days resentful. The retainer was a noose around his neck.
They're a noose around your neck too. It’s not fun selling retainers, never mind justifying your time to a client when they start asking what they’re getting for their money.
They become the client your staff complain about when they see another mail pop in from them in their inbox. "Oh, what now," they groan. Retainer clients become dull clients for your staff because the client expects the world from them and to drop everything else they are doing because they have a monthly contract with you.
Your perception of cash flow is your staffs’ perception of a pain-in-the-ass client.
4. You can't scale a retainer model
You want to devise a business model that will allow you to scale, and attract clients and work that you love doing. Retainers are not scalable.
The more retainers you get, the more staff you need, or else you just start piling more hours onto the team you have. This results in more staff costs or a burnt-out team who end up looking for work elsewhere.
Retainers are a band-aid for the real problem in your agency.
You need to look at what you're really needing for your business. Relying on a few retainers places too many eggs in one basket – the client cancelling the contract creates sleepless nights for you.
A nimble, agile agency draws new clients based on the excellence of the work they produce. Strategically planning for how you are going to consistently bring in new, fresh work is essential.
5. “I’d like to enquire about a retainer” (Said no client ever.)
You may not like hearing this, but retainers are a lazy sell! Even though you have to work damn hard to sell a retainer.
You should be selling based on the quality of work you produce so clients keep coming back, paying the rates they should be paying, and celebrating the value your partnership adds to their business. This may sound like hard work, but isn't this what we signed up for when we started an agency?
Retainers are a cop-out. Do you have full confidence in your ability to show and deliver value to clients?
Why demonstrate a lack of faith in your ability to deliver value by trying to sell retainers?
Before you rush off to resign your retainer clients, let’s talk about what’s holding your agency back. Email me hello@workwithsian.co.uk and I’ll do the rest!
Read more about Retainers in my Forbes Article 'Stop Selling Reatiners Start Solving Root Business Problems.'
