Setting a retainer

Start from hours, not from a round number

A retainer that begins as a comfortable-sounding monthly figure and works backwards to the hours is a retainer you will resent by month four. Start from the hours the client actually needs and multiply by what you charge.

Twenty hours at $95 is $1,900. That is the starting point, and every adjustment after it should be deliberate rather than accidental. The retainer calculator runs this arithmetic and shows the overage rate alongside it.

Decide what the commitment is worth to you

The discount is the price of something specific: guaranteed income you can plan around. There is no standard figure, so pick it deliberately: at 10%, twenty hours at $95 comes to $1,710 a month.

If the guarantee does not actually make your month more predictable, because the client is one of twenty or because they cancel freely, then it is worth nothing and zero is the right discount. There is no rule that says a retainer must be cheaper.

Set the overage rate at your full rate

This is where most retainers go wrong. The discount was for the hours the client guaranteed. Hours past the cap were never guaranteed, so they are worth your full rate.

Some people set it above their full rate to discourage going over; what it must never be is discounted. Discounting the overage rewards the client for going over, which is exactly backwards, and it is how an arrangement that looked like $85.50 an hour at twenty hours quietly becomes far less at thirty.

Say what happens past the cap, before it happens

The failure mode is always the same. The client uses more than the cap, nobody wants to raise it mid-month, and three months later there is a pile of unbilled hours to argue about.

Writing the overage rate into the agreement removes the conversation entirely. Going over becomes a normal, priced event rather than an awkward one.

Do not let hours roll over

Rollover turns a retainer into a prepaid block of hours and removes the predictability you gave a discount for. It also builds a liability: a client who has banked forty unused hours can call them in during your busiest month.

If you do allow it, cap how many months can accumulate and say so in writing.

Check what you are actually earning

The number that matters is the fee divided by the hours you actually work, overage included. A retainer priced on twenty hours that reliably takes twenty-eight is a discount you did not agree to.

The retainer calculator shows that figure directly, so the arrangement can be repriced at renewal from evidence rather than from a feeling.

Worked example

A marketing consultant includes 20 hours a month at her normal rate of $110. Full price for that many hours would be $2,200. She discounts the commitment by 10%, so the retainer is $1,980. The overage rate stays at $110, her full rate, never the discounted one.

In March the client only needs 16 hours. She still bills the full $1,980. That predictability is what the retainer is for, whether the hours are used or not.

In April the client needs 27 hours. She bills the $1,980 retainer plus 7 hours of overage at $110, an extra $770, for $2,750 that month on one invoice with the two amounts on separate lines.

At renewal she adds up what she actually worked over the last six months: 118 hours against 120 retainer hours available (20 hours × 6 months). Close enough that the 20-hour cap is right. If the real average had come out at 26 hours a month instead, the cap would be wrong, not the client, and the retainer would need repricing before the next term starts.

Mistakes that turn a good retainer bad

• Picking the fee first. A round number chosen before the hours makes the hours whatever they need to be to justify it, which is backwards.
• Discounting the overage rate. That rewards the client for going over the cap, which is the opposite of what the discount was paying for.
• Leaving the cap unspoken. If the overage rate is not written into the agreement before the client goes over, the first time it happens becomes a negotiation instead of a normal billing event.
• Letting hours roll over with no limit. Uncapped rollover turns the retainer into a prepaid block of hours that can all get called in during your busiest month.
• Never checking the effective rate. A retainer that quietly settles into more hours than it was priced for is a discount you never agreed to, and it only shows up if you check.

Questions people ask