If you’re a consultant, freelancer, or any other service provider, you know how things work in your industry. One month, you’re earning thousands in recurring revenue. The next, your projects might dry up.
Nonetheless, just like every other professional, you dream to have a consistent and predictable income. After all, it helps you plan your business expenses and also gives you the work-life balance that we all strive for.
So, is there a way to achieve the stability and financial freedom you have been dreaming about? Yes! You can earn a recurring, consistent, and safe revenue using retainer agreements.
In this blog, we are going to walk you through the fundamentals of a retainer agreement. In the end, we will also tell you about a magical tool that will help you create this agreement in no time.
What’s a Retainer Agreement? (Definition)
A retainer agreement implies a long-term commitment between a client and the service provider. Unlike a one-time contract or project, it is a long-term work-for-hire contract used to retain ongoing services.
The agreement specifies what services will be provided by the professional, how they will be provided, when and at what cost – along with other obligations, expectations, principles, and ground rules.
A retainer agreement is usually followed by a retainer fee, which is a particular amount of money that a client pays in advance to the service provider in order to secure their services. This ensures that the service provider will be available for the client for a pre-decided number of hours.
More often than not, all these details are discussed before the agreement is finalized. Both the client and the service provider have the right to negotiate the terms and conditions of the agreement.
Even though retainer agreements are common among lawyers, they are now also being used by freelancers and many other professionals in order to secure a certain amount of business.
The Pros of a Retainer Agreement (Advantages)
Retainer agreements have gained a lot of popularity over the years in the service industry, and with good reason. Let’s take a quick look at what these reasons are.
1. Brings Stability: The primary benefit of a retainer agreement is the guaranteed income that it provides. This ultimately brings stability, which isn’t possible with a one-off contract.
2. Saves Time & Boosts Focus: As you’re paid on a continuous basis, you won’t have to spend time marketing yourself and looking for new clients. Instead, you can focus on delivering high-quality work to existing clients.
3. Improves Relationships: Working with someone for a long period of time allows you to build trust, credibility, accountability, and a relationship that’s truly valuable for both parties.
4. Predictable Cash Flow: Retainers make it easy for you to estimate and maintain cash flows, as there’s a set retainer fee for a long period of time. No surprises!
Read more: Client Brief: What is it and How to Write it? (Steps Included)
The Cons of a Retainer Agreement (Disadvantages)
Yes, a retainer agreement comes with many benefits. However, it has some drawbacks as well – for both the client and the service provider. Let’s explore them.
1. Time Restrictions: In the retainer agreement, the service provider commits a certain number of hours to the client. This means they get locked into a specific schedule.
2. Opportunity: As the professional gets locked into a specific schedule, they might have to pass on some exciting opportunities that come their way.
3. Risk: Even in the months where services aren’t needed, the client still needs to pay for the hours agreed upon. This is a drawback for the client, but definitely an advantage for the service provider.
The Two Common Types of Retainer Agreements
1. Pay-For-Work Retainers
This is the go-to retainer agreement for consultancies who’ve just started working for the client. Here, the client is required to give an ongoing payment to the consultancy or any other service provider – periodically.
In the pay-for-work retainer, the consultants get paid for the hours they work, which isn’t much different from a project or contract. The only difference is that they need to deliver their services continually for the client.
2. Pay-For-Access Retainers
More experienced/advanced consultants might prefer to be paid in exchange for their expertise and knowledge. That’s when the pay-for-access retainer comes into the picture.
Unlike the pay-for-work retainer, this retainer doesn’t consider ‘hours’ and ‘dollars’. Instead, it’s all about retaining a professional on an ongoing basis as the client believes that the value they provide is exceptional.
Basically, using a pay-for-access retainer, the client retains the accessibility of the consultants. So, whenever the client needs the consultants’ services, they will pay them for value.
Read more: Agency Agreement: What is it & How to Create it?
How to Write Retainer Agreements? (Structure & Format)
Step 1. Introduction
First things first, mention the names and details (address, state of business) of the parties involved i.e, the service provider and the client. Don’t forget to include the date when this agreement will be set as effective.
You can write something like, “This retainer agreement is made effective as of (date) by and between (details of the service provider) and (details of the client).”
Step 2. Brief About The Services
Now that you’ve introduced both the service provider and the client, you should give a brief description of what service the professional will supply.
Then, mention the time frame of this job/project. Don’t forget to declare a pre-determined time date when this agreement will automatically terminate.
In case you don’t specify a date of termination, report the number of days’ notice that is required for a party to terminate the retainer agreement.
Step 3. Pay Rate & Method of Compensation
Precisely mention what the professional/service provider will be paid for the work that is done. Also, clarify whether the professional will be paid hourly or he will be paid for every project individually.
The pay rate can also include a calculated commission. If that’s the case, mention the exact percentage of the commission that the professional will get.
Most importantly, give a definite account of when and how often the professional will receive a payment from the client. In short, define if the payments will be made weekly, monthly, or on a quarterly basis.
Step 4. Dispute Resolution
No matter how solid an agreement is, there’s always a chance of disputes and conflicts between the parties. This is why a dispute resolution clause needs to be included in your retainer agreement.
State where and how you will resolve any dispute that arises between the two parties. Aim to settle your contract disputes as amicably and quickly as possible.
Step 5. Signature
In order to formally agree with the terms that have been laid out above, both parties need to submit their signatures on the retainer agreement. Enter the current calendar date right after your signature.
Good job, you’ve done it! You’ve learned how to create a retainer agreement. However, creating a rock-solid retainer agreement can get a little tricky.
Fortunately, there’s a magical platform out there that will solve all your agreement creation woes – Bit.ai. Read on to learn more about it.
Read more: 9 Client Management Software You Must Check Out!
Bit.ai – Just What You Need To Create Agreements & Contracts
Bit.ai is a robust, new-age document collaboration platform that will help you create, edit, organize, manage, and share not just your retainer agreement, but every other document under one roof.
With its intuitive and integrated tools, Bit makes creating documents super easy. Want to know a few more reasons why you should use Bit for creating your agreements and contracts? Let’s find out!
1. Real-Time Collaboration
When you’re creating an agreement/contract, you need all the parties involved to review it and agree upon it. You might also need to get it verified by a legal counselor. After all, it is an important document, and you certainly can’t afford to miss out on any important clause.
Luckily, using Bit, you can collaborate with others on your documents in real-time. No matter where your partner or attorney is located, you can keep everyone on the same page by co-editing, making inline comments, chatting via document chat, @mentions, and much more.
2. Smart Workspaces
If you are collaborating with different partners on different projects, you need to create a different contract or agreement for each project. Organizing and handling all these documents and information can be a pain, but Bit.ai is here to take it away.
Using this nifty platform, you can create as many workspaces as you want around different projects and partners, invite attorneys into the workspace, and manage everything much more efficiently. The result? No more shoulder-tapping and wasting time finding things in different places.
3. Interactive Documents
What if you want to include the company policy handbook in your agreement? What if you want to insert an excel file about the fee breakdown? What if you want to add testimonials from your previous partners?
All of it is possible using Bit! Yes, Bit lets you add PDFs, social media files, surveys/polls, cloud files, charts, and almost every other rich media you can think of in your document. There are currently over 100+ rich media embed integrations on Bit!
4. Smart Editor
Creating agreements requires all your concentration and attention. Even a tiny mistake might end up in a huge legal battle, and that’s why Bit offers a minimalistic, powerful, and distraction-free editor. You can simply select any text to make it bold, italic, turn it into a heading, quote, hyperlink text, interlink docs, and more.
5. Share in Multiple Ways
Bit documents are fully responsive, and there are multiple ways to share a document you’ve created on Bit. You can create a shareable live link and share it with your client or attorney or invite them into the workspace.
That’s not it! You can even add lead capture forms, password protection, automatic destruction, and more. You can also share your documents via guest access, which brings us to the next feature of Bit.
6. Guest Access
You can use Bit’s Guest Access to invite an attorney to review your contracts and agreements and ensure that it meets your state and country standards. The ‘guests’, aka your attorney, can get two types of access to the documents: comment-only and read-only.
With the comment-only access, they can @mention people in the workspace and give their suggestions, while the read-only access only allows them to read the agreement you have shared with them.
7. Document Tracking
Bit.ai offers a document tracking feature using which you can get real-time insights on your shared docs. That means you can see how much time someone has spent reading your retainer agreement, how often they come back to read it, and a lot more!
Retainer agreements clarify the roles and expectations of both the service provider and the client. Moreover, this legally-binding document protects both parties financially and legally.
All these things ultimately lead to better cooperation and communication! So, as long as you choose a reliable partner and the right retainer model, you can expect outstanding results.
We know that there’s a lot of information to digest here, so if you have got any queries, suggestions, or concerns, hit us up on Twitter @bit_docs. We would be happy to hear from you! Cheers.
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