A monthly retainer is the gold standard for any consultant. When work is otherwise light (like during holidays), monthly retainers give contractors the peace of mind that next month's revenue will be enough to cover the bills. Calculate how much you can charge on a retainer model.
Calculator Your Monthly Retainer
The Inputs
The monthly retainer is based on knowing your market rate on an hourly basis. Here are the three inputs:
- Hourly Rate: This hourly rate should ideally be based on what you are currently charging customers. If you're not sure your rate is fair for the value you bring, consider trying out our hourly consulting rate calculator, which creates a fully loaded rate accounting for overhead costs and unbillable time.
- Percent Discount: Your clients may not be open to moving from an hourly compensation model to a monthly retainer since it requires the client to have the funds to make that payment. One reason to switch to a retainer model for clients is if they get a slightly better deal on a retainer model than hourly pay. This is usually because on a retainer model a contractor may end up putting in a few more hours or build in a discount. Building a modest discount such as a 10-15% can make a retainer model more reasonable to clients.
- Monthly Hours: Even though you are on a monthly retainer, you will end up providing a certain number of hours of service. Create an estimate for the monthly number of hours you plan to work under the retainer contract.
The Outputs
Understanding what the outputs mean so you can apply to real-life cilent situations.
- Monthly Retainer Amount: This is the estimated monthly retainer to bill with clients, based on the assumptions provided.
- Minimum Hours to Work: There is no minimum hours required to work unless it's contractually or verbally agreed upon. We provide here a lower bound of the number of hours to work based in the calculator input of your fully loaded rate. The reason we provide this lower bound is because having worked with contractors ourselves, clients will know if not immediately, but eventually the drop in quality of work driven by less time dedicated. This lower bound is to ensure as a consultant, you are still providing the same quality of work to clients.
- Hourly Rate on Minimum Hours Worked: This is estimated hourly rate on the retainer if you're working the minimum number of hours.
- Maximum Hours to Work: Similarly, there is no maximum number of hours to work either. However, setting a maximum number of hours helps to protect you as a contractor from working too many hours for clients. This will cause you to be underpaid on a retainer model.
- Hourly Rate on Maximum Hours Worked:This is estimated hourly rate on the retainer if you're working the ma number of hours.
Iterate on Pricing
Like every business, it's important to iterate on your pricing, especially as you are starting out to build your business. We too are tweaking and iterating on how we approach our pricing of our services as we build our firm. We find that there is always more to learn and as our expertise and services evolve, so will our pricing. This we believe is true for any and every business. Iterating on pricing of products, packages, and services is a core part of the business.
