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by Andrew Lam-Po-Tang
The other day a member contacted me to discuss a retainer fee relationship
with a client of theirs. The situation was that the client had suggested
that form of payment & relationship, and our member wanted to think
through what were the issues involved in such a system.
A retainer is a negotiated flat fee paid on a regular basis. What it
is typically intended to cover is:
- the right of the client to get a certain amount work done on a regular
basis by the retainee - think of this as a payment to guarantee that
the studio is on 'stand-by' to service the client. Note that this doesn't
actually cover the cost of getting any work done, it just means that the
client knows that the studio won't turn down the work.
- it can also cover a specified amount of work - this is simply a
form of prepayment. What's important here is that what needs to be specified
not only how much work but also the type of work. For example, if the client
typically rings often to get the designer's thoughts on how to tackle a
marketing or communication problem, then the designer is doing 'real' work
for the client. You could specify that the retainer covers this type of
work, as well as some amount of 'regular' design work.
One of things we spoke about was how to deal with the situation where
the client has booked more work than their retainer covers. Here the best
policy is honesty (assuming that there is a written contract in place to
cover the retainer itself). Simply inform the client that by commissioning
the project they will exceed what they have prepaid and ask them whether
that is okay. Is there the risk they might reconsider the project? Of course,
but it would be reasonable to assume that they still need to the project
done and will go ahead anyway. The worst thing to do is to not mention anything.
Nobody likes 'nasty' surprises. By advising your client straight away, you
are being professional and respecting their right and responsibility as
a client to make this sort of decision.
Which brings us to the underlying concept of a retainer. It is a form
of 'insurance' or risk management for both the client and the designer.
These contracts are put into place to to ensure that the work gets done.
Because they are a form of prepayment, there may also be an expectation
of getting some form of 'discount' against the normal value of the work.
While this may sound unreasonable, we as individuals engage in this type
of deal all the time.
For example, your mobile phone account probably involves some
sort of 'minimum monthly payment' - in exchange for agreeing to this minimum
payment, you usually get a discount on the handset. The consumer 'makes
a bet' that they will spend that minimum amount anyway and the phone company
is happy to give you a discount on the handset because they know that you
will definitely pay the a certain amount for the period of the contract.
Bringing the analogy back to our member's situation, he is the phone
company and his client is the consumer.
So what are the specifics of a retainer contract? Like all contracts,
there are no specifics, only what is negotiated. I often get asked by members,
"what is the standard terms and conditions of engagement?" The
answer to this question is that there are none. While there may be 'common
practice' this is not the same thing. There is no law which says, "these
clauses must be in your terms and conditions."
AGDA provides a 'Template Proposal' which contains Terms & Conditions
(note: it doesn't cover a retainer-type relationship) but urges members
to consult a lawyer when they go through the exercise of setting up their
proforma contracts, because you need to work out how you work and what
you are prepared to sell before you can sit down with a client and negotiate
the exact terms and conditions that suit both of you.
Some day I will get around to writing a short article on negotiation
for designers, but for the moment, those of you who are genuinely interested
should read, "Getting to Yes" by Roger Fisher & William Ury.
This is the standard textbook for the negotiation skills courses taught
in many MBA programs. You should be able to find it in the management section
of most large bookstores.
| Feedback by Angeline Aw | Friday, 18 January 2008 |
"Very informative. I need to create a retainer proposal for a client from
concept, design, to media buy and didn't manage to find one. Any suggestions?"
| Feedback by Jeanette | Thursday, 3 May 2007 |
"Very helpful - you are covering a few aspects I didn;t notice on other articles. Thanks!"
| Feedback by James Sandefer | Thursday, 20 October 2005 |
"Good info.
I need to create a freelance writing retainer contract and haven't found anything that fits the bill-any suggestions?
Thanks-"
| Feedback by Sonia Mehta-Hosie | Wednesday, 26 November 2003 |
"I found this very useful as I am in a similar situation."
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AGDA Members: Discuss this article in AGDA's Business Forum.
The views expressed this article are not necessarily those of AGDA. Please note that the information in this article is the opinion of the author only. I can therefore accept no responsibility for actions taken on the basis of this information. Copyright Andrew Lam-Po-Tang (andrew@lam-po-tang com), 1998-2008. Permission is granted to freely copy this document in electronic form, or to print, for personal use. Reprinting for non-personal use will require the express permission of the author (which I will generally be very happy to give).
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