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Video: Why do Retainer-Based Businesses Thrive? (4:49)

By offering clients a retainer model, your services are clearly spelled-out. The resulting predictability means fewer ups and downs for both you and your client. So, with all of that in mind, why is adopting a retainer-based business model vital to your agency’s growth?

Time to talk about pricing and packaging agency retainers.

A retainer is your agency’s ongoing service agreement with a client. Retainers clearly lay out your services and deliverables, including details on cost of delivery for your agency and projected ROI. They help you ensure your clients are achieving their business growth goals—typically, that’s more traffic, leads, and sales.

By offering clients a retainer model, your services are clearly spelled-out. The resulting predictability means fewer ups and downs for both you and your client.

So, with all of that in mind, why is adopting a retainer-based business model vital to your agency’s growth?

Because inbound retainers provide STABILITY that project work doesn’t—stability in services and stability in price.

Whether a given month is thick or thin with project work, you’ll still be paying your entire staff. And it’s tough to know where you need to hire or outsource talent because workloads can be so varied and seasonal.

A retainer-based model helps businesses thrive in several ways:

First, inbound retainers create consistent work. To reiterate, a refined retainer allows you to pivot your tangled work hours away from unscalable, unsustainable one-off jobs. Inbound marketing is designed to align separate tasks into consistent work.

Alignment and consistency mean less guesswork when choosing your clients!

Furthermore, your retainer’s consistency makes revenue forecasting simpler. Each retainer you create will be based on your agency’s measurable services with predictable ROI. You’ll have the vision to look down the road and judge just how much your agency will grow in the coming weeks and months.

You’ll know how much your services are worth on a per-retainer and even a PER-HOUR basis. This measurement and structure are tougher to scale on a per-PROJECT basis.

Structure your services in a retainer now and you’ll be better positioned to chart future growth.

Second, when you know what you need to do to grow, you’ll know when to say “no” to certain client requests outside of your scope. When you have a retainer in place, you’ve clearly defined your services. This prevents scope creep—things like a tacked-on, after-the-fact website updates that weren’t part of the initial client agreement. Your retainer aligns your agency’s talents with what you’re capable of offering. This keeps you from over-promising while setting expectations for the client.

You don’t simply want to have the authority to say “no,” you want the transparency and trust with your client to be able to say, “that wouldn’t be a good idea at this time, and here’s why.”

The retainer will also play a part in balancing your own workforce’s ROI, and that’s the third point. Say you create a retainer. Knowing your team’s true scope and abilities, that retainer will inform how both your sales team hunts prospects and how your services team manages accounts.

A retainer echoes up and down your marketing and sales funnel. Your employees know what’ll be asked of them because it’s written down and defined. And that fosters internal consistency and predictability.

A well-crafted inbound retainer can tell you whether it’s even worth your salesperson’s time to chase a certain lead type. It’ll be obvious if a prospect is perhaps an under- or over-sized lead that may not ever fit within the scope of your services. It saves everyone time and stress.

Here’s the last point: A well-established retainer-creation process will simplify your prospect-vetting steps.

Each retainer you create will be unique to the prospect. You won’t modify a boilerplate retainer for each prospect, but you will maintain a boilerplate retainer-creation process, customized to each potential client. With practice, this becomes as normal as completing your monthly performance reviews.

Running qualified prospects through your reliable, comfortable retainer-creation process will help you measure just how qualified a fit they are for the services you can effectively offer.

You don’t want to work with every prospect, and a retainer will tell you who’s who. Not everyone is a good fit for inbound at the exact moment you speak with them.

An agency with a strong inbound retainer recognizes which particular services they’re capable of offering today and which particular clients those services can benefit.

And that’s why you need this retainer!

Quiz

Quiz: Why do Retainer-Based Businesses Thrive?

This is a quick quiz to test what you’ve learned in the video: “WHY DO RETAINER-BASED BUSINESSES THRIVE?” This quiz includes two questions and is not timed. Good luck!

User Guide

Quick Answer: Your HubSpot Points of Contact

Review your agency's main points of contact at HubSpot, as well as their roles and responsibilities while you package and price your agency's retainer.

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Video: How Do You Select Services for an Inbound Retainer? (3:27)

This video explains how to compose an agency retainer from your current services while adding new inbound complements, too.

An inbound services retainer is a holistic creation. It contains everything your agency offers to a paying client. This video explains how to compose an agency retainer from your current services while adding new inbound complements, too.

Packaging is a four-step process. These steps are: (1) identifying and packaging your services, (2) determining your existing services, (3) determining new complementary inbound services, and (4) determining the frequency and hours required for each service.

The first step in building your retainer is to identify and package your services. Begin with a few questions:

Can you determine where your agency’s primary services fit into the inbound methodology?

Once you know that, can you identify and package more services to compliment your established offering?

Can you calculate the time and cost required to implement the two points above?

A strong retainer tracks the hours spent, what they were spent on, and the resulting value produced, for both you and your client.

This information needs to be spelled out. Your team needs to know what’s being asked of them, and your clients want to know where their money is going.

The second step in building your retainer is determining your existing services.

Start with your primary marketing services from days past, from before you started with HubSpot. What’s your expertise? Content? Design? SEO? Lead nurturing with automated email? Review your prior successes and experiences to decide your agency’s bedrock offerings. You’ll want to carry these forward into your agency retainer.

Not only are these services foundational to how your agency works today, you excel at them. Perhaps you even enjoy doing them more than any other service and you have a real spark for them! Write them down. They’ll create a starting point for your retainer.

The third step in building your retainer is determining new complementary inbound services.

Knowing your existing services gets you part way there. You also need to know where they’ll factor into a wider holistic inbound offering. You need to add new, complementary inbound services to the mix.

As you consider the new services to add, consider two things:

How much do these services COST to implement?

. . . and how long the services may take YOUR AGENCY implement?

This is the difference between an inbound retainer and a list of services you can deliver. You’ve recognized what pre-existing services you’ll continue offering while adding complementary work to strengthen the inbound retainer.

Choose those complementary services by aligning them with your existing services. For example, if you have prior experience in content creation, and you’re planning to include it in your retainer, your retainer’s complementary services should revolve around that familiar deliverable. In this case, you may feel comfortable complementing your existing content creation service with:

Buyer Persona Development, Keyword Research, Blogging, Campaign Creation & Management, Social Discovery & Prospecting, and Email Marketing.

These are all considered complementary to content creation. Write down which complementary services you’ll be adding to go along with your established services. You’ll be elaborating on them soon.

Quiz

Quiz: How Do You Select Services for an Inbound Retainer?

This is a quick quiz to test what you’ve learned in the video: “HOW DO YOU SELECT NEW AND CURRENT SERVICES FOR AN INBOUND RETAINER?” and the “HubSpot Points of Contact” resource page. This quiz includes three questions and is not timed. Good luck!

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Video: How Do You Determine Agency Labor Cost for Selected Services? (3:03)

If you want to offer a retainer that makes your agency money, you’ll begin with finding at least what’s required to break even. This task begins with finding your agency’s cost of labor.

Your agency is going to use HubSpot’s software tools to deliver the greatest possible ROI to clients every hour, day, week, and month.

To be blunt, how often do you want to perform—or do you honestly believe you’re capable of performing—a particular service on a revenue-generating level? How long will it take you to perform that task you’ve decided to include in your retainer? If it isn’t a good fit in your agency’s structure, or if you don’t have the staff for it, it might not be an effective use of your time.

And that’s alright. You’ll not only weed out the inefficient services, you’ll make up the ground for the client in another, more cost-effective way.

Confirm your agency can deliver the services you’ve selected for your retainer at a cost-effective rate by finding the Minimum Retainer Pricing—this is your break-even point. If you want to offer a retainer that makes your agency money, you’ll begin with finding at least what’s required to break even.

This task begins with finding your agency’s cost of labor. Your agency pays employees to deliver your services, right? To discover how much money you require to continue operating, you’ll need to calculate your effective hourly cost.

A few points factor into this calculation—time to dig into them:

First, figure your AVERAGE employee salary. This factors in all employees, from the new hire making thirty-thousand dollars to the manager making ninety-thousand dollars.

This will also help you find your estimated hourly cost.

Next, make sure this average is weighed against the employee’s average utilization rate, meaning what percentage of an employee’s time is spent on billable, client-facing work? This is usually 75%, but it can vary. Be specific.

Here’s how your employee’s monthly workload might loo

You can adjust the estimated employee hourly cost, now that you know your utilization rate. This figure will be higher, considering the employee may only be executing revenue-generating actions 75% of their 160 hour work-month.

Last, factor in your agency’s estimated overhead. These are the day-to-day costs incurred while running your business. It doesn’t include salaries, but it does include electric bills. While it can vary, this is generally 25% of your total average employee salary cost.

Add the overhead to your adjusted hourly cost and you’ll have your final effective hourly cost number.

This is how much it costs your agency to deliver an hour of any service to a client.

The hourly cost required for your agency to perform a service, multiplied by the total service hours you’re capable of devoting, produces your Minimum Retainer Pricing. This is the break-even cost for your agency to deliver your assembled retainer.

It goes without saying, but—never charge less than this number.

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Video: How Do You Determine Service Hours and Frequency? (2:41)

If you want to offer your retainer’s particular set of services at a consistent profit, you need to make sure you’re performing the services often enough, and for the right amount of time. You want that time allocation to be sustainable, while suiting the your client’s needs.

If you want to offer your retainer’s particular set of services at a consistent profit, you need to make sure you’re performing the services often enough, and for the right amount of time. You want that time allocation to be sustainable, while suiting the your client’s needs.

Time to determine the hours and frequency required for each service.

Before you confirm that these are your primary service offerings and those inbound complements are the new services you intend to offer, you must calculate the hours it takes to perform those services.

A word of caution: you may initially struggle if you decide to add services where you lack experience. For instance, including blogging and social media in your retainer when your agency may not be set up to perform those services efficiently could mean burning precious workday hours. It’s time to honestly figure which services you can capably offer for the best ROI.

Even if it means you have to double-down on a service you consider to be an old standby, you’ll be staying honest with your prospect or client.

If you’re only just learning inbound, continue learning, and lean instead on your prior expertise. The rest will come in time.

How long should each service take to deliver?

Return to the earlier question about your experience with a given service to figure out how many hours to devote to that activity.

If you have experience in writing blog posts for a client, and you usually devote eight hours per week to the task, feel free to keep doing what you’re doing.

If you’ve found you usually promise eight hours of blogging to a client, but you find that number tends to creep down as time goes by, add MORE TIME to the number. You can scale it back later, but you need to begin better habits.

If you’ve never offered a certain service that’s going to be a new part of your retainer, and you aren’t sure how many hours to invest, use HubSpot’s suggested hours.

How frequently do you offer a service?

A retainer’s services are typically divided into one-time services, quarterly services, and weekly services.

Buyer persona creation and keyword research are examples of one-time services.

Quarterly services revolve around campaigns, their requisite content creation, and conversion paths.

Last, weekly services are promotional actions like blogging and social publishing.

It’s critical to know which services to pack into your retainer for superior ROI. Once you know where your new service fits alongside your existing offerings, you can begin factoring in the dollar amount for your agency to carry those services.

Customer Examples
  • Example Company

Example Company

This sheet compares two example agency retainers for the early creation steps including service-selection, cost calculation, and delivery frequency to clients.

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Video: How Do You Find the Best Profit Margin for Cost-Based and Value-Based Pricing Retainers? (4:08)

Cost-based pricing is derived from what it costs you to deliver the services, whereas value-based pricing is derived from the total value you generate for the client, in the form of customers. Time to learn how to figure these two pricing styles.

There are two advisable strategies for pricing your agency’s retainer to clients: cost-based pricing and value-based pricing.

Cost-based pricing is derived from what it costs you to deliver the services, whereas value-based pricing is derived from the total value you generate for the client, in the form of customers. Time to learn how to figure these two pricing styles.

Always begin with a cost-based pricing strategy. And always start your cost-based pricing by finding your retainer’s profit margin.

You calculated your Minimum Retainer Pricing when you multiplied your total service hours by your agency’s hourly cost.

Multiply that number by a percentage, traditionally 30%. That’s your magin. That’ll determine the number you’re going to charge for your services.

Imagine you can produce a bottle of water for $1. But you want to make money when you sell it. Add a 30% margin. Now you’re selling a bottle of water for $1.30 and you’re making money for your work.

Examine the number you discovered, once the margins are factored in: is it more or less than it was before your retainer was built? Take a moment to make sure you remembered all the services, factors, and variables involved. You can adjust the margin a little if need be.

With that, you’ve completed your cost-based retainer. Most agencies use this number for their retainers.

Running an exercise to figure out your value-based number remains worthwhile. It’s a slightly more complicated sell, especially if your agency or your client is new to inbound.

A value-based retainer is closer to what the client SHOULD be paying you, based on the business you generate for them.

Discovering value-based pricing requires knowledge of your client’s CUSTOMER'S’ lifetime-value. It factors in not only how much that customer spends PER-PURCHASE, but how often they buy in a lifetime.

For example, let’s say your client knows a single customer spends ninety-six hundred dollars per purchase on gutters. In their lifetime, a customer buys gutters twice. Gutters ain’t cheap, but they’re sturdy.

This means each gutter-buying customer you bring the client per month isn’t worth ninety-six hundred dollars. The single customer is, in fact, worth nineteen-thousand, two-hundred dollars.

That nineteen-thousand, two-hundred is the true lifetime-value of a single customer that your services, your retainer, and your agency generates each month. If your agreed-upon goal is to bring your client 2 net-new customers per month, it turns out you’re generating them thirty-eight-thousand, four-hundred dollars in lifetime-value per month.

This means you can accurately recommend a greater marketing spend from your client, based on the percentage of lifetime value you bring in month-to-month. Think of this as an additional margin multiplier, often another 15%.

In this example, the extra 15% of thirty-eight thousand, four-hundred dollars is an additional five-thousand, seven hundred sixty in true value you’re entitled to, based on the lifetime revenue per customer.

Take a final look at the numbers.

The initial Minimum Retainer Pricing cost was four-thousand, two-hundred fifty. That’s your break-even—what you need to keep the lights on. Adding the 30% margin, you’re charging the client five-thousand, five-hundred twenty-five, which is your cost-based price and what makes you money. Including the further 15% for each customer’s true lifetime-value, it turns out your services are worth five-thousand, seven hundred sixty per month.

If you run this exercise and discover you can’t make your value-based price meet with your agency cost (meaning your agency’s electric bill and everything else), drop the prospect. You need to make money to keep your agency running. You need dependable revenue to deliver your promised services.

Good luck!

Customer Examples
  • Example Company

Example Company

Quiz

Quiz: Agency Retainers

This is a quick three-question quiz will test you on what you’ve learned in the videos: "How Do You Determine Agency Labor Cost for Selected Services?", "How Do You Determine Service Hours and Frequency?", and "How Do you Find The Best Profit Margin for Cost-Based and Value-Based Pricing Retainers?".

Project Template

Project Template: Drafting a Winning Client-Facing Retainer Proposal

This Project Template is designed to help you draft a winning proposal to present to your prospect. Proposals are vital for combining all your prospecting, sales, and retainer-building work into a functioning client relationship.

Customer Examples
  • Salted Stone
  • Rigamorale

Salted Stone

Review HubSpot Agency Partner Salted Stone's exmplary retainer proposal. 

Rigamorale

Review HubSpot Agency Partner Rigamorale's exemplary retainer proposal. 

Quiz

Quiz: Drafting a Winning Client-Facing Retainer Proposal

This is a two-question quiz will test you on what you’ve learned in the prior videos and the project template “Drafting a Winning Client-Facing Retainer Proposal."