How to set an agency retainer fee

How do you set an agency retainer fee?

Work out what a normal month costs you to deliver, add your margin, and then fix a term and a review date. These steps take you from the work to the fee:

1. List what a normal month holds. Write down each task the client gets, such as pages, posts, emails, reports and calls. Leave out one-off projects. They get a price of their own.
2. Find the hours in your time records. Look back over a few recent months for this client, or for a client like them. A guess is hard to check later, and it's the number every other step rests on.
3. Put a cost on each hour. Use what you pay for an hour of each person's time. Count your own hours too, at what you'd pay someone else to do that work.
4. Add the costs that aren't hours. That means software seats, stock photos, a share of rent, and anything you buy only for this client.
5. Add your margin. It's the profit you keep after every cost. Choose it on purpose and write it down, so you can check it at the review.
6. Round it to one monthly number. A single fee is easy for the client to read and easy for you to bill.
7. Set a minimum term. If the first month holds setup work, a short stay can leave that work unpaid.
8. Set a review date. Pick the day you'll look at the hours again and reset the fee if the work has grown.

Before the work starts, write down what's in scope, what it costs and when each piece is due. Add a short list of what the fee covers and what it doesn't. For what a retainer covers and how the deal is laid out, see how an agency retainer works.

Time records also show you when a client starts to need more than the fee holds. For tracking hours, see agency time tracking.

At the review, put the logged hours next to the hours you priced. If they match, keep the fee. If the work has grown, show the client the new list and the new number together. If it has shrunk, you can lower the fee or trim the list, and say which one you chose.

How do advertising agencies set a retainer?

An advertising agency sets a retainer with the same steps: hours, cost, margin, term and review date. What changes is the work inside the month, so the questions you settle before you price it are different.

Settle these before you put a number on an ad agency retainer:

• What does a normal month hold? Count the campaigns, the ad sets, the rounds of new creative and the reports.
• Who writes the copy and makes the images, and how many rounds of changes does the fee include?
• Does the fee cover running the ads day to day, or only building them? The two take different amounts of time.
• What happens when the client adds a channel, a product launch or a sale partway through a month?
• How does a change in the work get asked for, priced and agreed to?
• When will you look at the hours again and reset the fee?

Write each answer into the agreement, next to the price and the due dates. When the client asks for more, the list shows whether the request is inside the fee or a new piece of work. That saves a hard talk later, because you both agreed to the list before the work began.

We don't give legal or tax advice, so check your own case with a lawyer or an accountant.