Why to Give Every Retainer Contract an End Date

Agency Leadership

An exciting update we're in the process of rolling out across new retainer contracts (and eventually, existing ones) is giving them an end date. Yes, it's a small change, but we're optimistic about the impact it will have.

Over the years, we've managed retainers in various ways — cadence, pricing, etc. A shared challenge has been finding consistent opportunities to revisit the terms and make any needed adjustments. We've tried various tactics to prompt the conversation, but nothing sticks. Instead, simply adding a contract end date forces us to check in and say, "Hey Client, let's align on how to continue forward." One might say that we designed a system that was working against us.

Now, you might be thinking a never-ending contract is a good problem to have. In theory, a contract for X dollars per month that goes on forever sounds like a dream. Maybe for Planet Fitness gym memberships, but not in the agency business. Nothing is forever.

Another challenge with never-ending contracts is that we cast them as monthly recurring revenue (MRR) into the future with no set period. If anything changes (attrition, change in hours, etc.), our projections immediately look different - sometimes, this significantly impacts our outlook for better or worse.

A few months ago, we discovered that one of our clients was on a contract signed three years prior. Unfortunately, we learned that the number of hours they were paying for was... anecdotal. Not only were we under-invoicing, but we were also consistently over-budget. (Talk about an uncomfortable client conversation). A contract end date wouldn't have solved all of these issues, but at the least, we would have checked in to make sure we had alignment on terms!

Of course, much of this is a hypothesis. We won't know until we try, but I'm excited to try. So far, our approach is to start most retainers with a three month period with the option to renew for another three months or until EOY.

At the end of the three months, some other advantages we see are to:

  • Discuss any opportunities for add-on services
  • Adjust hours (up or down) based on how we're currently burning
  • Gather feedback about ways of working

In hindsight, I think we were partially afraid to prompt these conversations, thinking that staying quiet would keep contracts going. For one, that just didn't happen. Second, if a client is going to reduce budget (or hours), a conversation can only help bring it to our attention sooner. It will show we are proactive and want the client to get the most value from our collaboration.

This post originally appeared in Edition No. 091 of my newsletter. Subscribe here.

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