There are several challenges during the project process that can block your cash flow worse than an all-meat diet:
- The sales cycle can take months to close a new project contract.
- When you finally close the deal you only get paid a deposit.
- You perform the work and depending on the size of the project, you may not get paid again for another month or two.
- Projects sometimes go dormant for chunks of time because clients don’t get back to you with feedback or content.
- Depending on the client’s pay cycle, you sometimes have to wait weeks/months to get paid, not to mention the fact that some clients need to be chased down or they push back on paying because they don’t “feel” the project is finished (surprise!).
Needless to say, this is a nightmare for your cash-flow. You may have thousands of dollars in unpaid receivables that you haven’t been able to collect but your fixed monthly expenses still need to be paid regardless. What you need is a way to regulate your cash-flow and the best way to do that is with a monthly retainer.
Many agencies struggle with selling retainers because a) they’re afraid to ask their clients for a monthly commitment, or b) they aren’t able to communicate the value to clients, so the clients say no.
Here’s a good process to follow:
Get your foot in the door first
When a relationship is new, it’s unlikely that anyone is going to agree to pay a fixed monthly fee for a set amount of months without first getting a taste at what they’re buying. It’s like dating before you put a ring on it.
This is why subscription businesses always give away a taste of their product at the beginning in the hopes that it will hook the customer into paying long term. A cell phone company may give away a phone in exchange for a fixed contract or a SaaS business will offer trial periods to use their software in the hopes that the user will be compelled at the end to upgrade to a paid plan.
There are products we use every day where a subscription makes sense, like an internet connection or cable television. Other products, like hamburgers and haircuts, we only want to pay for when we need them. You need to prove to the client that to get the most value from your services, they need to use them every month.
Let’s say a client comes to you for a re-designed website or they want you to build an iPhone app. In their minds, that’s a one-off project that they pay for once and when it’s done, it’s done. Freelancers and agencies tend to reward that mindset by offering a fixed agreement: ‘We’ll build you X for $Y’.
Here’s a better way to approach it:
Sell an upfront discovery or audit
When meeting with a new client you need to explain why no one just builds a website or application, and no one just buys online marketing once — all of these services are ongoing investments.
A good client will want to know that you don’t intend to just build them something without truly understanding their business first. Additionally, you can’t know the full scope of the project or how much it will cost until you dig in deep and understand their needs.
Many agencies give this away for free at the proposal stage but it’s actually better to sell a discovery as a paid service. Selling an upfront engagement that costs $500-$3,000 is a lot easier than selling a project build that costs $5,000-$100,000. Clients don’t even know you yet so how can they trust you with their project?
And the reverse is true: you don’t even know the client yet so how can you know what they need? This way clients ease into the water slowly with you before making a big commitment and the price point means it doesn’t require a lot of decision making power. Plus the discovery/audit process will make it easier for you to develop a more accurate project estimate because you’ll know exactly what they need.
It’s important to emphasize the fact that the discovery phase is a critical component of the process, not an optional one, and that at the end of the discovery phase the client is not committed to work with you - they can take this audit/strategy document to any other company.
Perform the discovery and build trust
Once a client agrees to a paid discovery project, this is your time to shine!
Let’s say that you are putting together an online marketing strategy. You now get the opportunity to sit down face-to-face with your client and learn about their organization, goals, target customers, competitors, and so forth. You may be analyzing their existing website and SEO, researching their users, and putting together a list of recommendations. All of this work gets you very familiar with your client and enables you to start building trust with them.
The important thing to remember during this phase is to never appear as if you are trying to sell the client. Instead, take a few opportunities to show them what they don’t need in order to save them money. When clients realize you are trying to solve their problem and not milk them for billables, they’ll be more inclined to trust the recommendations you do offer.
At the end of this discovery phase you should have built a strong rapport with the client, you understand her needs and you’re excited about the opportunity to execute the strategy.
Next comes the hard sell; asking for a monthly retainer.
Sell value, not hours
The problem with selling hours in a retainer is that you punish yourself for being efficient and thus limit your profitability. What I mean is that the first time you do something it always takes the longest but each time after that you get faster and better at it. If you’re paid by the hour, the better you get at your job the less you get paid. That ain’t right.
Instead, sell your client on what you will do for them every month and demonstrate why it will bring them value in the long term.
For example, a website maintenance retainer might include these services:
- Technical support and bug fixes.
- Phone/email based help on using CMS (e.g.: Wordpress) and email management tool (e.g.: Mailchimp).
- Keep Wordpress CMS and plugins up-to-date.
- Communicate with hosting provider regarding email/server issues.
- Minor updates and enhancements to the design/content based on user feedback and testing.
- Monthly analytics reports and recommendations.
Here’s another example for inbound marketing services:
- Hubspot integration and support
- 1 blog post/week
- 2 landing pages/CTAs per month
- 1 email campaign/month
- 1 top of funnel offer (e.g.: e-book) per quarter
- 1 Facebook/Twitter/Google+ post per day
Always include the end goal in your proposal; what you’re delivering to the client in results by agreeing to a monthly retainer. “By the end of the 12 month contract our goal is to generate 500 leads every month through your website.”
This tangibly demonstrates to your clients how they’ll see a return on their investment.
Make your contracts clear and tight
What if your client asks for too much? It can happen, especially if your service descriptions are vague. What exactly is a “minor update”? Is adding a calendar plugin considered minor? What if the client wants to meet in person every week just to make sure they are getting bang for their buck?
Make sure that you are clear about what is included in the retainer and what isn’t. If you use slippery words like “minor” then define what minor means (e.g.: takes less than 3 hours). Or if you use the word “bug fixes” then outline the difference between a bug and a feature (Bug means when the system is designed to perform a function and it doesn’t work vs. a function being desired, or even needed but wasn’t designed to work that way).
It’s not the end of the world if something your client asks for falls outside the scope of your retainer, you can simply outline the process so your client knows what to expect. You could pull back on other services that month or include a separate work order for the request.
Prove every month why you’re worth it
One of the hardest parts of working long-term with clients is maintaining your enthusiasm. New projects are full of wonder and excitement but after a while there may be disagreements with a client or you could simply start getting bored of the work. Even if none of that happens, you might start taking their business for granted and deliver the bare minimum.
It’s so important to keep the enthusiasm going for the length of the contract. If you go above and beyond every month (while still maintaining profitability, of course), work to deliver clients value, and show them how much peace of mind you bring, they’ll be more likely to renew their contract at the end of the term.
If you can manage to secure a handful of monthly retainers you can say hello to cash-flow and gain some breathing room for your business. What other ideas do you have when it comes to selling retainers?
It’s not enough to survive. You want to THRIVE.
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