Retainers and service contracts for web work

[jimr451]

Hi all,

I've been consulting for 11 years now, mostly programming, web updates, database work, etc, for a variety of clients. I do a mix of hourly billing and quoted work, as the job demands.

I'm considering shutting down the business and taking a full time job, for a variety of reasons, but most of all because I could probably make more money that way. I realized that even in the "good" years, the business doesn't produce enough income to offset the "bad" years. The last year or so has been rather slow, which emphasized this point to me.

Before I totally bail out, I was wondering if anyone here uses a "retainer" or "service contract" type model? I subcontract for a company that does this - any updates or maintenance to a client site / application requires an ongoing monthly fee. This typically includes X hours of work on the site, but whether any work is required, the monthly fee still applies.

I'm considering trying this out as a way to smooth out income, and weed out small clients, but haven't noticed this being used by individual consultants like me. I guess it comes down to the size of my clients, and how many I can get to make this committment.

Anyone have any experience with this?

-Jim

[Harold Mansfield]

Before I totally bail out, I was wondering if anyone here uses a "retainer" or "service contract" type model? I subcontract for a company that does this - any updates or maintenance to a client site / application requires an ongoing monthly fee. This typically includes X hours of work on the site, but whether any work is required, the monthly fee still applies.

I'm considering trying this out as a way to smooth out income, and weed out small clients, but haven't noticed this being used by individual consultants like me. I guess it comes down to the size of my clients, and how many I can get to make this committment.

Anyone have any experience with this?

-Jim

This is exactly how I run my business. Deposits, or I offer service service packages that are blocks of hours.

I used to only offer the packages by the month. It was a flat rate not to exceed a certain amount of hours, and that kept me on call when you needed me. Paid every month regardless. But feedback on that one wasn't great from most people. It wasn't flexible enough and too expensive for smaller businesses who may not need me every month, but would still like to have me on retainer.

Then I changed it to use the time as needed until it runs out. Instead of instant service, it get's scheduled with a guarantee of within 48 hours (unless it's an emergency).
That was much more attractive to small businesses and I noticed an increase in sales almost immediately.

No contracts because it's paid up front for a reduced rate. Month to month. Come and go as you please.

There's a few tweaks to it but for the most part it works out well for everyone, and most clients consider it a good deal.

[Brian Altenhofel]

I offer three main ways to do business with me - pay as you go, day rates, and prepaid blocks. The first is billed monthly and at full rates. Day rates require a deposit and have certain cancellation terms depending whether they are remote or on-site. Prepaid blocks are paid 100% upfront at a discounted rate, and I have a formula in place for determining how much time to deduct for travel if someone wants to use some of those hours on-site. Additionally, I have a separate on-call rate for those times that someone wants me to remain immediately available (such as during a major migration - I'd get paid the on-call rate for the time that I guaranteed availability, and then the full rate for any actual work that had to be performed).

I also have support and maintenance packages that come with service level agreements. Those packages include things like backup management, risk assessment (mostly consulting on the level of risk that an upgrade may break part of the site as well as recommending resolutions, such as a security fix that breaks an API that was being used), deployment, monitoring, and testing. Those packages are also open to folks who already have a site. They're aimed at the sort of business that is doing enough that they've considered having an in-house IT guy manage their site or otherwise make website management part of someone's job description, but see the value in hiring outside help for much less than what that employee would likely cost.

[jimr451]

Thanks for the responses - I have to chew on this. I like the idea of the "pay in advance" and use it up as you go. At least that would eliminate the "slow payers", and invoicing for small amounts of time.

-Jim

[Brian Altenhofel]

Thanks for the responses - I have to chew on this. I like the idea of the "pay in advance" and use it up as you go. At least that would eliminate the "slow payers", and invoicing for small amounts of time.

-Jim

Two tips: make sure they have an expiration, and make sure your scheduling terms are clear. You don't want someone coming back 5 years later for that 1 hour they didn't use, and you don't want clients to assume that because they paid in advance they get immediate before-we-get-off-the-phone service.

[Freelancier]

I'm wondering if the problem isn't your billing model, but it's your client/work mix and inability to land enough clients to ensure you have a backlog most of the time. I bill on a "whenever a timesheet fills up" basis using hourly rates, and my cash flow is never a real problem, because I have enough clients who are active at one time or another. The only problem I have is when I have more than 2 active clients, but that's a good problem to have.

Something else to think about. Maybe you're just attracting the wrong types of clients so that you're not working on projects that have a good mix of endpoints and demands.