Consulting retainers are one of the most effective pricing models you can use. In this video I share the 2 types of consulting retainers and how to use them effectively with clients.
What you’ll learn in this video:
- The two types of retainers consultants use
- Why retainers are one of the most effective way to model your consulting fees
- Why ONE of the two retainers is far superior to the other
- How to structure consulting retainers with clients
Today, I want to talk to you about the two types of consulting retainers. Before we actually get into the retainers and what they mean and how to use them, let’s actually explore what consulting retainers are.
A lot of people have this idea that when you get into consulting that the business is unstable. That when you work a 9 to 5 job and you’re in ‘general employment’ that that is real stability.
As we’ve all seen, that is not stability. You can lose your job at any time.
Really, the control of your destiny in terms of your job is left up to others and is not in your own hands. When you start and run your own business, you really have control.
Consulting retainers are one of the most effective ways to create stability in terms of your income because you get paid month in month out on an ongoing recurring basis. And that can often be for months if not years when you’re creating great value for your clients and really building those trusting and powerful relationships.
Consulting retainers can really help you to achieve consistent income, and that is great because as you’re landing additional projects you know they’re always having that base of recurring revenue through the consulting retainer model.
Pay for Work
Now, in terms of the two types of consulting retainers, the first one is called Pay for Work. This is what a lot of people think about when they think about retainers and when they consider the concept of receiving ongoing payment on a monthly basis from their clients.
The Pay for Work model is really where you provide ongoing work for your clients and you get paid for it. Whether you’re receiving a $1000 a month or $3000 a month or $10,000 a month, the work that you’re doing on that monthly basis is what you’re getting paid for. That’s why that model and that approach is called Pay for Work.
Really, it’s almost exactly the same as a contract or a project. The only difference is that you’re providing and delivering that work on an ongoing basis. If you’re using this model, you want to set it up at the start with your client and show them what it looks like. From start to finish, month in month out, what are you going to be working on? What will you be covering? How will you be helping them? What value will you be creating as you work with them on that ongoing basis?
Pay for Access
The second approach to consulting retainers is called Pay for Access. Pay for Access is the model that I prefer. It’s the model that the most advanced and seasoned consultants use because it doesn’t rely on you actually providing work. With the Pay for Work model, really you’re still trading hours for dollars. When you spend half a day or you spend a few hours on a monthly basis for that client, you’re getting paid for that.
The time that you put in is directly connected to the money that you’re making. The Pay for Access model works in that you are getting paid on a monthly basis or maybe the client is paying up for a period of time, but they’re really paying you not for specific deliverables and work that you’re going to be providing them with. Rather, they’re paying to be able to access you.
This is why the Pay for Access model really only works but works best when you already have an existing relationship with that client. Meaning that you’ve already worked on at least one project with them so that they really feel that the trust is there. You both know that you enjoy working together. That’s the basis for the Pay for Access. It’s very uncommon and I wouldn’t recommend to get right into a Pay for Access type of model or situation with someone that you’ve never worked with before. It’s really hard to sell that to a client. It’s a beautiful and natural transition after you’ve done some initial work for that client, they’ve seen the results that you can generate for them and the value that you can bring, and they want to be able to access you.
So why would they do that? Why would they pay you on an ongoing basis where you’re not necessarily providing them with specific work and deliverables?
Access to Your Expertise
They’re doing that because they know that accessing you – accessing your knowledge, your expertise, maybe even your network – is of value to them, and it provides them with peace of mind. They do it because they know that – and this is the way that you position it – is that if they don’t lock you down, if they don’t have that retainer set up with you, then your schedule could get very busy working with other clients. When an issue comes up where they need or really want your assistance and help, they don’t want to have to get in line.
They want to be able to access you right away. By having you on retainer, they have that peace of mind that any time that something comes up they can give you a quick call, send you an email, and you’ll respond to them as quickly as possible within a couple of hours or whatever you set as being a reasonable amount of time, but they know that you are their adviser, that you’re on their side, that you’re there to consistently and constantly be there to support the growth of their business or to help them with any of the challenges that might come up.
The Pay for Access model is beautiful because you’re not trading time for dollars anymore. You might have one month or two months or sometimes even several months will go by where the client doesn’t call you up or doesn’t need your help, but then on month four or month five or whenever it happens, they give you a call and they know that you will be there to support them, that you will help them to find a solution to the problem or challenge that they’re having. That is worthwhile to them.
Pricing Your Retainers
In terms of pricing your retainers, especially if we’re talking about the Pay for Access, that is based on the value that you’re providing. If you’re charging $5000 a month $60,000 a year, as an example, then it needs to be clear to the buyer – to your client – that they access you and when they access you that you’re going to provide answers or solutions or recommendations to them that will be worth far more than $60,000 to them. You always want to make sure that the value level in terms of what you’re providing and the value that your client will receive, and the ROI is going to be there for them.
Those are the two different types of retainer models, the Pay for Work and the Pay for Access.
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