In view of recent inquiries from colleagues, today I’d like to point you to one of my classic posts that relates to setting and managing client expectations through the policies and procedures you institute in your practice, and working with clients in a way that honors your standards and boundaries around self-care, effective business management, and quality of work and client-care.
Archive for the ‘Retainers’ Category
I came across something utterly heartbreaking a few weeks ago.
I’ve been sitting on it for awhile, going back and forth about whether or not to have a conversation around it.
I never want to discourage anyone from this business or have anyone take things the wrong way. Because if you set things up right, it is an AMAZING business and lifestyle.
However, it’s a cold, hard truth that no one ever talks about in our industry.
And the problem with not talking about things that are uncomfortable, that aren’t all “rah, rah, kumbaya” all the time, is that you can’t fix what you don’t acknowledge.
What was this thing I came across? An ad for a “Virtual Assistant Business For Sale.”
And what is this cold, hard truth I speak of? It’s that most people in our industry are not profitable and not making the kind of money they can actually live on.
You see, the sad thing about this ad is that it isn’t an exception. It’s actually a very accurate example reflective of what most of the businesses in our industry look like.
Now, before I dissect this for you, I first want to make it absolutely clear: It is not that people can’t make more money in our kind of business; they absolutely can! YOU absolutely can!
It’s simply that they are being taught by the industry at large in all the worst possible ways to price, operate and market themselves (like calling yourself a “virtual assistant”). And it’s keeping them poor, overworked and overwhelmed.
The fortunate thing is that YOU always have the possibility to learn better so that your business can do better for you.
And that always benefits your clients because you can’t take good care of others if your needs aren’t taken care of first.
Here is the ad:
Let’s examine the problematic issues here:
- We see that the business has been around for 11 years. Great! After that amount of time, you’d expect them to be earning really well.
- Yet in the first bullet we see they are only making £1900/mo (British Pound) which is $2363.98/mo USD. After that many (11) years, why are they still making that little money? Those are poverty-level wages. Did they mean perhaps that this is the average value per client?
- Unfortunately, no, we see in the next bullets that after 11 years they have only 1 retainer client at only £350 GBP/$435.39 USD per month. The rest of their revenues come from 15 regular (but uncommitted/non-retainer) clients and 20 ad hoc clients, which I’m interpreting to mean an average of 20 project clients each month. The problem is that at this number of clients they should be making several thousands of dollars per month! I can’t even imagine (well, actually, I can) how overwhelmed and overworked they are… and for such a paltry sum on money! To give some context/frame of reference, I make more with just one of my retainer clients than they make in an entire month from 36 clients.
- They also mention having relationships with two typists. This business owner is barely making ends meet at these figures, where on earth is there any margin to pay anyone else? (Answer: there isn’t.) It means that they are doing all this work at a loss! Especially at gross figures that don’t even account for expenses, operating costs, taxes, etc.
- This is not a profitable business in any way, shape or form. What has most likely happened is that burnout caught up to them (no wonder!) and they are now trying to unload the sinking ship. But there are no assets of any value to sell here. The clients it has are being charged such an ungodly little amount, there is almost no way in hell to ever reset those kind of expectations. They’ve branded and positioned this business as “cheap” and there is just nowhere you can go with that. It would be faster, easier and less costly for you to create a business from scratch and establish the brand based on properly set foundations and expectations and charging higher, more profitable professional fees.
Don’t misunderstand me. This examination is in no way a denigration of the business’s owner.
Rather, it’s utterly heartbreaking to me that they have made so little money working with too many clients with basically no commitment and constant churn. I wish I’d had the opportunity to help them early on.
When we talk about these things, there are always a certain number of people who don’t understand why it’s so important to have these conversations.
But bringing this consciousness to the fore is integral to being able to improve things so you can better earn in your own business.
It’s why I’m always talking about money, how you are marketing and positioning your business and brand, how not charging profitably sets you up for failure, about how the expectations and perceptions you create in clients directly affect your ability to charge properly and earn well.
These are the topics that will make or break your business.
It’s this fundamental business education — and not the latest, greatest software or tools — that is key to creating a profitable, sustainable business where you can get, work with and keep great clients (clients worth having who value you, not cheapos looking for a free handout), make great money and that works around and enriches your life and what’s important to you (instead of the business running you).
What could this person have done differently?
- Business planning. Going through the exercise of business planning forces you to think through and get clear and conscious about all the important details of your business such as your needs, goals and intentions around money, what kind of clients you want to work with and are worth working with, and what business standards, policies and procedures to establish accordingly.
- Getting off the project work merry-go-round. A business based on project work needs a shit-ton of clients and work in order to stay alive. It’s a constant, never-ending hamster wheel of marketing, even while you already have clients and work to take care of in front of you, and you never know where your next meal is coming from. Nothing wrong with project work, but think of it as secondary income, the gravy to the meat and potatoes where you make your “real” money.
- Expecting a commitment. Retainer clients (clients who pay a monthly fee upfront for a plan of support) are where the real money is at. A commitment of working together each month allows you to do your best work and gives you something to actually work with to achieve a tangible, demonstrable value and results for clients. But of course, if you don’t ever expect a commitment, you’ll never get one. That’s why it’s so important to set standards in your business around what’s important to you. An expectation that clients must make a minimum commitment to be given a place on your client roster is a standard that will serve you (and your clients) well, even if some of them might not understand that at first. (You’ll have a far easier time getting commitments if you learn how to set up and navigate the whole consultation process and pricing conversation.)
- Get clear and conscious about the money. Charging fees based on what you see others charging (who are more often than not just as lost as everyone else) is the worst way to set your fees. It’s not about what everyone else is charging (stop looking at them!). It’s about knowing what your target market values, how you can improve their circumstances with your support and what they gain from working with you, and learning how to articulate that value to them in the context of their business and goals.
- Choosing a target market. This business is all over the map when it comes to who their clients are and the work they’re doing. And that is a huge part of the problem. Very simply, a target market is an industry/field/profession that you focus your administrative support on. This specialization is key to making the big bucks. That’s because when you know who it is you are focusing on, you can determine very quickly and clearly what they do in their business and what their common needs, goals, challenges, values and interests are and then develop your support solutions around those things. Your offerings will be much more interesting and compelling that way, and you’ll be able to charge more (because there will be more relevant, specific, higher perceived value) and get clients more quickly and easily.
- CHARGING MORE! At the poor fees this business would have to charging to account for so little monthly/annual revenue, it’s a clue that the business owner is not understanding the economics of business. You simply can’t charge rates that amount to employee wages and expect to earn well. Business is a completely different ballgame. It’s why I’m constantly reminding people, you are NOT an employee, you’re a business. There’s also this crazy, but nonetheless immutable law of business: The more you charge, the better clients you get. And what do we mean by better clients? Client who value you and what you offer. Clients who are invested and make the commitment to working together. Clients who aren’t looking for the free buffet. Clients who are loyal to you and the good work and results you provide them with, not how little they can pay. When you have better clients who make a monthly financial commitment to working together toward established goals, you can make more money working with fewer clients and have more time for your own life in the process.
- Stop calling yourself an “assistant.” One of the reasons people have a hard time charging more or seeing their value in a different light (and gaining some business self-esteem and confidence) is because so many of them insist on calling themselves “virtual assistants.” This keeps them thinking of themselves as employees and seeing things through that lens instead of from an entrepreneurial/business mindset. Here’s what you need to understand: Assistant is a term of employment, not business. Terminology (just like pricing) is a part of marketing. How you price and the words and terms you use to describe yourself have a direct influence on how clients perceive you and the expectations, perceptions and understandings they come to the table with. When you call yourself an “assistant,” they don’t look at you as a business owner and advisor. You are teaching them to view you as a type of subservient employee, and what they expect to pay is based on that wrong, harmful perception. When you call yourself an “assistant,” you are predisposing them to value you less, not more. If you want to be able to charge higher, more appropriately profitable fees, you have to create the proper context. The verbiage and terminology you use directly impacts that context.
I have a couple of complimentary (as in free) business-building tools that shed a ton more light on all of this and will help you course-correct in your own business. If you don’t have them yet, be sure to go get them now.
How about you? Why did you go into this business? I’m assuming a large part of it is that you love putting your administrative talents to use and helping clients and truly making a difference in their businesses and lives.
I can’t imagine that it gives anyone joy to be broke and working too hard for too little money. So over and above that, how do you want your own life enriched and improved by owning and running your own business? What are your money aspirations? What does “profitable” and “financially successful” mean to you?
Just FYI: Retainers and “packages” are the same thing.
If you sell hours, a retainer is a package of hours.
That said, I’m not an advocate of selling hours because it limits your income potential. (Video: Why Selling Hours Is Killing Your Business)
I am a proponent of a methodology called Value-Based Billing, which I’ve adapted for those in the administrative support business.
In the case of this billing method, a retainer is a package of administrative support with clearly defined parameters that you determine based on your consultation with a new retainer client.
What’s more useful for you to understand instead is the difference between project work and ongoing support because those in fact are two different animals.
Retainers are used for ongoing support relationships with clients paying an upfront fee every month, whereas a project is a one-time “event” that ends upon completion of the project (designing a website is an example of a project).
There are all kinds of methods people use to bill for project work. Some people think they are only allowed to bill at the end of a project.
First of all, being “allowed” has nothing to do with it. YOU make the rules in your business.
Also, it’s not true that you can only bill after the fact. You can decide to charge clients for the entire fee upfront if you are so inclined. That is a perfectly legitimate and standard business practice.
Or, you could choose to charge an upfront deposit to be applied to the final invoice.
Or, depending on the size and kind of the project, you could break it up into stages/phases and charge the client either upfront or upon completion of each stage/phase and only continue to the next stage once the prior stage’s invoice is paid in full.
The reason it’s important to understand the distinctions between the two is because an ongoing support relationship creates actual, consistent cashflow whereas project work and the money you make from it is more sporadic and incidental.
Understanding these distinctions, you can more intentionally decide which kind of business you want to be in and plan and prepare accordingly.
For example, let’s say you’ve gone the project-based business route (the correct term for these is “secretarial service”) and find it difficult and exhausting to market and keep enough of a constant flow of work and clients to earn a living.
Recognizing that you can earn a more consistent monthly income in advance each month (and potentially more money when you learn how to do it right), you might decide you’d like to be in the admin support business instead and can focus your attention on building that kind of practice.
The nice thing about an admin support business is that you can make an extremely comfortable income with just a handful of clients.
It’s also a much easier business to run because there isn’t that constant churn of clients and projects and administration over and over that you have in a project-based business.
Plus, when you have a base of dependable retainer income, any project work that comes your way becomes gravy.
When you aren’t dependent on project work to survive (and the feast and famine cycle that comes with it), you have more freedom to be selective about the projects you take on that interest you.
You might even be doing as well as you please financially with your retainer clients that you find you have no interest or need to take on extra project work (other than that which you might do occasionally above and beyond your monthly admin support retainer for current clients).
Either way, you always have the choice to decide what kind of business you want to be in. You’ll be more successful at either of them by being aware of the differences.
What Is a Retainer?
This question was asked on the ACA LinkedIn Group recently:
“Hi! So I’m looking at signing my first services agreement with a client. There will be a big kick-off project and then a monthly retainer. Do I charge the client half up front for the kick off and then have them pay the rest once I deliver? For the monthly retainer, do I have them pay me at the end of the month once my work is done or the beginning before I start? I’m trying getting burned as much as possible. Thanks!”
Here’s my advice:
Upfront, upfront, upfront!
It’s important to remember that you’re in the administrative support business, not the credit and loan business.
As a service provider, you’re not obligated to extend anyone credit.
Which is what it would boil down to by you doing all work upfront and billing later.
The problems with billing after the fact include:
- You deprive yourself of cashflow, which is the lifeblood of every business.
- Clients will take you and the work less seriously and abuse your time more frequently. It’s too easy to blow things off and rack up debt on that which they haven’t paid for yet. When they have made an actual financial investment (skin in the game, as they say), they are more compelled to focus their attention to it.
- You’ll have more late/non-payers.
- Having to chase after and deal with those late/non-payers adds to your administrative burdens, creates stress, zaps energy, reduces your morale and spirits, and deprives good clients of your full, positive attention.
- It doesn’t do anyone any good (including clients) to go into debt to you. The more they owe, the harder it will be for them to get caught up while you’re the one who suffers and pays the price for that.
- You’re in a far worse position if a client doesn’t pay after you’ve expended your time and business resources helping them than if you were to mitigate possible losses by getting at least some money upfront.
So here’s what I recommend…
Retainers, by their very nature, are always upfront. That’s the whole point of them. They are typically due on or before the 1st of each month.
In my practice, instead of having retainers due on the 1st, they are due (and processed) on the 25th of the preceding month. For example, April’s retainers are due on March 25.
This is because I don’t want my billing and being paid (along with all that beginning of the month work and bills we have to contend with in our own businesses) competing with the 1st of the month work I do for clients.
I also process my payments automatically… and I never pay myself late. 😉
To do this, I have clients sign a Credit Card Authorization Agreement (AGR-30) at the start of the relationship. By signing this agreement, clients give their consent for you to keep their credit card information on file (because you can’t do that without a consent agreement in place), and for you to automatically process their regular monthly charges.
Once I process the payment every month, I put a courtesy PDF copy of their paid monthly invoice up in a shared Dropbox folder for their business records.
Retainers are the holy grail in this business because it’s where the bigger, more consistent money is. To learn how to make retainers profitable and build a business where you can earn a great living working fewer hours with fewer clients (and get off the nickel and dime project hamster wheel where you always have to chase down your next meal), I highly encourage you to get my Value-Based Pricing & Packaging Guide (GDE-39).
A project is different from ongoing support in that it is self-contained and ends upon completion of the work.
Designing a website is an example of project work because it’s not ongoing. Once the site design is complete, that’s the end of the project.
With project work, clients should definitely be paying at least something upfront, and 100% is entirely acceptable business practice.
With projects, there are a number of ways they can be charged. Getting a minimum or deposit upfront works like earnest money and helps clients respect your time and take the work more seriously.
Requiring payment upfront also helps weed out those who are not serious prospects.
I hate to say it but it’s nonetheless true: there are dine-and-dash clients that new people in business often fall prey to who engage them to do a bunch of work, and then disappear when the bill shows up. You want to avoid that.
The rule of thumb in my business is that if it’s $1,000 or less, I charge 100% upfront.
If it’s a larger project, we break it up into logical phases and they pay for each phase upfront. If you do it that way, you get paid for work you were engaged to perform and complete, and work only continues beyond that once the next phase’s payment is met.
While you’re at it, if you want to learn all my secret policies and procedures that allow me to run my business 3 days a week while earning a full-time income working with just a handful of clients, be sure to get my Power Productivity and Business Management Guide (GDE-41).
Is this information helpful or eye-opening to you? Let me know in the comments. 🙂
I am so absolutely stoked and enthused about the new and improved version of my famous client consultation guide!
I added a ton more educational content while streamlining and simplifying the information into more easily digested chunks. Getting the knowledge and skills to confidently conduct consultations (and get those prized retainer clients nearly every single time) has never been easier.
I’m the type who doesn’t rest and will continue to hone and improve things until I am satisfied. And I am so totally pleased as punch with this latest incarnation!
So what is this guide all about? Why do we conduct consultations in the first place?
Because we’re not selling hotdogs, right? 😉
Providing ongoing support is a bigger relationship that requires more of a commitment from clients. Therefore, it requires a bigger conversation.
The consultation process plays a vital role in creating your ideal business for a number of reasons:
- To prequalify prospects;
- To break the ice, establish rapport and get to know each other;
- To better understand the client’s business and his or her unique needs, goals and challenges;
- To see how you might help and where your support can be best leveraged in their business;
- To determine chemistry and fit;
- To provide context for your fees so clients more clearly see and understand the value of working together;
- To educate clients and set proper expectations and understandings;
- To set the tone of the professional relationship; and
- To demonstrate professionalism and instill trust and credibility.
The other reason to conduct consultations is to get the kind of clients you want—like those all-important retainer clients.
Retainers are the holy grail of most service-based businesses because it’s where the bigger, easier money is:
- Retainers provide you with more consistent, dependable cashflow every month;
- In a retainer-based practice, it only takes a handful of clients to earn well;
- A retainer-based practice is simpler, easier and less hectic to run because you’re working with fewer clients, there’s less administration, and you aren’t having to constantly chase down your next meal like you do in a project-based business;
- You always want to maintain a marketing presence even when your client roster is full, but marketing a retainer-based practice is far less frantic because you only need a handful of client to earn really well;
- Because it’s an easier, less frantic business that requires fewer clients to earn well, you have more room to grow and be more at choice in taking on side projects and developing other income streams; and
- With a retainer-based practice, you will have more time for life beyond your business. That’s one of the biggest reasons most of us went into business for ourselves, right?
There is no reason for you to continue struggling with getting clients or conducting consultations. My guide takes all the guesswork out and tells you exactly what to do and how to do it, including those two biggees: how to talk about fees and how to deal with the most common client objections. And just having a step-by-by process to follow (complete with diagrams and checklists) will infuse you with greater confidence. You be gung-ho to conduct your next consult!
Do you want retained clients, but aren’t sure how to get them? If a roster of well-paying clients who pay you an advance monthly fee for your administrative support and expertise is what you long for, your entire website and marketing message must be geared toward that goal.
You want to think of your whole website as a sales page with a singular goal: to get those retained clients. From there, it’s a bit of a dating process that happens a lot like this:
- You catch your prospect’s eye somewhere (through your marketing and networking).
- They observe you from the across the room (by visiting your website and taking a look around).
- They like what they see and hear and ask you out (by requesting a consultation or more information).
At this point, it’s important to understand that most people aren’t going to hire you right off the bat any more than anyone is going to be proposing marriage after one date.
Relationships develop and transpire over a course of time and interaction. Different prospective clients will have varying comfort levels initially.
This is the where most people aren’t sure how to proceed. Clients want them to “audition” by trying them out with small projects.
The problem with that, however, is when you fritter away your limited time and energy on nickel and dime projects, you are chasing after pennies instead of hundred dollar bills.
That small project might buy dinner that night, but it does nothing to help you achieve your long-term goal of achieving a well-earning practice. It only distracts you from building your real business and the work and focus needed to establish a retained roster of clients.
Some folks think: “Yes, but if I do a good enough job, maybe the client will eventually hire me on a retained basis.”
That almost never happens.
Your business and income can’t depend on hopes and maybe’s. You’ll never build a roster of well-paying monthly retained clients by chasing after penny-ante “sample” projects and letting the wrong prospect lead you around by the nose. To get a commitment, you must expect one.
On November 29, I’m holding a class to show you how to do just that by offering products and services that support your overall goal and marketing message to get retained clients AND create multiple revenue streams for you at the same time.
You’ll learn how to:
- Nurture those prospective client relationships and lead them toward the retainer commitment;
- Eliminate auditioning and the need to chase after penny-ante project work and carrots on a stick so you can stay focused on building your retained client roster;
- Provide selective demonstrations and “proof” to prospects of your skills and expertise that they seek;
Create passive income streams;
- Establish you as an authority and expert in your field;
- Set a more respectful tone for the relationship where prospects and clients treat you as a trusted advisor, not a cost to be managed or some kind of gopher;
- Create an easier business to operate that affords you more time and space for your support work to happen;
- Provide the foundation for a more flexible and freedom-filled lifestyle and business;
- Get PAID to market your business!
Join us! Click on the link below to get the class details and secure your registration:
A week ago I promised my mailing list community that I would share with them a script for responding to prospects when the first thing out of their mouth is What’s your hourly rate?
I feel you!
It can be the most irritating question in the world when it’s pretty much the first words they utter right out of the gate.
But guess what? You have a lot to do with why they are asking that in the first place.
And no, it’s not because you don’t have pricing on your website. Pricing for professional services doesn’t belong on your website.
But we’ll discuss that in a moment.
First, I want to preface things by saying that the response to that kind of question is different depending on the context.
For example, selling products is a completely different ballgame than selling professional services.
There’s a completely different context, different process, and different conversation involved for each of them respectively.
On my blog, we’re always talking about retained ongoing monthly administrative support. This is what is known as a collaborative partnering relationship.
This is not the same thing as selling products or piecemeal project work (i.e., secretarial services).
So, it’s important that you understand that the scripts I’m going to share with you are for the context of retainer clients (i.e., clients who pay a monthly fee for ongoing, monthly administrative support).
Unless you are selling a cheap commodity, clients need have context in order for your fees to make sense.
If there’s going to be any kind of mutually beneficial relationship, you can’t answer that question off the cuff. There’s a bit more to it than that.
There are simply things you need to find out first from the client before you can even begin to understand their needs, goals and challenges, and then devise your support plan recommendation for them.
When the first thing a prospect asks is What’s your hourly rate?, that’s a clear sign that:
- they have not bothered to read your website (and, thus, are not a good prospect), or
- your website has not properly educated them, and failed to provide them with the right information in the right way (which is more commonly the case).
When you don’t provide your site visitors and prospects with thorough information, you don’t give them any other criteria with which to evaluate the value.
They will always resort to the pricing question when that’s the case.
This is something you can correct:
- Stop parroting the same tired, boring, homogeneous (and ineffective) party line that EVERYONE else in the industry is reciting chapter, line and verse. You’ve GOT to stop this people, seriously! This is your business, not a high school clique where you’re only allowed to belong if you conform with the crowd. Blending in is NOT what you need to do in business; you need to STAND APART from the crowd, come up with your own message and speak in your OWN voice).
- Adding more thorough content and information. Because you don’t want them asking How much? You want them saying, I’m intrigued. I can see you understand the business and profession I’m in and the kind of challenges and issues I face in moving forward. I’d like to schedule a consultation to find out more about how you can help me achieve X, overcome X or solve X.
In the context of your business, as an Administrative Consultant who works with clients in an ongoing support relationship, your goal is to find retainer clients.
What you need to do in that case is gear all of your information toward that goal, educating clients about what you’re in business to, how you help them, how it works, how you work together, etc.
Think of your website as a form of mini or pre-consultation itself. Have it answer all the questions a potential client could conceivably ask you or want to know.
The more information you provide, the better you prequalify your prospects (because the ones who are not a fit will weed themselves out) and the more likely your ideal prospects will take the next step (i.e., scheduling a consultation).
You want to provide a nearly exhaustive amount of information on your website — everything except pricing.
- You are not a cheap commodity that can only be quantified by price. When you portray yourself as nothing more than something on a shelf that they can get at one of a thousand other places (the only differentiating factor being your rates), you actually create the very price-shopping mentality you seek to avoid. You want clients who are truly interested in the value of the work in helping them move forward, achieve their goals, overcome challenges and grow their business. By insisting on that standard and holding yourself and what you do in that esteem, you weed out the cheapskates and those only looking for quick fixes. If you make people who can’t pay, don’t want to pay, or who are impatient with your process your clients, you will be the engineer of your own business unhappiness, unprofitability and unsustainability.
- You cut your nose to spite your face. Some people argue that posting prices helps get rid of the price shoppers who waste their time. But when you do that, that’s the thing nearly every visitor to your site zeros in on to the exclusion of everything else that’s more important — including all the information that conveys your value. There are far better ways to prequalify clients, my friends!
- You throw the baby out with the bath water. Here again, when you try to get the price-shoppers to weed themselves out, you’re also scaring off all kinds of other perfectly suitable client candidates who may simply misunderstand what things would really cost and mistakenly think they can’t afford this kind of support relationship. They need context, but they’ll never get that far if you scare them off before that can happen.
- It’s not the time and place. Ongoing administrative support is a bigger relationship. It requires more of an investment and commitment from the client, and, therefore, requires a bigger conversation. Prospects need context in order to make sense of your fees and that only happens in consultation, not on your website.
So this is what you’re going to say when the first thing out of a prospects mouth is What’s your hourly rate?:
I can’t answer that question off the cuff because my goal is to ensure you get the best support you can afford. Your business needs, the challenges you face and your underlying goals and dreams are unique. We need to meet first in a consultation where I can gather more information and learn more about those things before I can create a support plan just for you and tell you what it would cost.
There is a way to provide a frame of reference for potential clients that doesn’t promote price-shopping. You do that by simply letting them know the minimum monthly investment they would need to make in order to work together. So what you would add onto the comment above would be this:
What I can tell you is that the minimum monthly investment any client would need to make in order to have my ongoing monthly support is $X per month.
And on your website, instead of listing fees, you would instead talk about your pricing methodology and its benefits, how and why you bill as you do, and include that statement about the minimum monthly investment they would need to make.
Remember, the goal is to get them in consultation and talk to you further, not your website, so that you can provide needed context for your fees.
When prospects ask the rate question, the other thing they’re trying to determine is whether or not they can afford it.
Letting them know the minimum monthly amount helps them do that in a way that gets them to look at fees from a more value-based perspective and encourages the opportunity for further discussion.
My wish for you would be to get away from billing by the hour (selling hours) entirely because it cheats you and cheats the client by putting your interests at odds with each other.
It’s a very archaic, UN-beneficial way of charging for your value — for you and the client — and actually discourages prospects from seeing your value.
Your goals for getting paid for the value of your time and expertise should be in sync with the kind of goals and results the client is looking for from the work and how that work achieves their objectives and helps move them forward in their goals and the pursuits they’re aiming for.
You don’t want that question boiling down to how fast you can kill yourself doing the work so that the client doesn’t have to pay as much. That will be the death of you and your business.
When you employ my value-based pricing methodology, here’s what you get to add to all of the above:
I don’t charge by the hour and here’s why: hourly billing cheats you because it puts our interests at odds with each other. Billing by the hour, I obviously make more money the longer things take, and you, naturally, prefer things to take the least amount of time possible so that you don’t have to pay so much. That’s a horrible dynamic for us to work together in! And so I don’t. The work that’s going to truly get you results, move you forward and keep your business humming along smoothly can’t be dependent upon a clock. And when you work with me, it doesn’t. I want to achieve real results and progress for you. That can’t happen by selling you hours. Your needs, goals and challenges aren’t cookie cutter and so I don’t offer cookie cutter solutions. Instead, what I do after we meet in our consultation is come up with a support plan recommendation. From there we can hone it until it’s just the right fit. And you will pay one simple monthly fee for that support. That’s it. No worry about hours running out. No overages. It’s easy to budget for and all our focus will be on the work and accomplishing your objectives, not on the clock.
There’s much more to learn and understand when it comes to pricing and how to talk about fees with clients. I’ve packaged all that up for you in my Value-Based Pricing and Packaging Toolkit, which I encourage you to check out. (Be sure to read the testimonials and success stories.)
I am fairly new to the business and have a few clients I know and trust, but am branching out and will be acquiring clients I have no prior experience with. Do you have any recommendations or suggestions on how to deal with billing new clients who you have no prior working relationship with? When billing a monthly retainer package of $1,000, for example, if you do a month’s worth of work, then send them the bill, and wait another 30 days to get paid, you could potentially be working for 60 days before you get paid. Do you recommend asking for part or all of your monthly fee up front or would you bill at the end of the month? —LB
This is a great question because it’s another reminder for us veterans that we can never take for granted that everyone knows what we think are commonly understood principles or details in business.
So, the first thing I would explain is that a retainer is a monthly upfront fee paid in full and in advance of service. And the service for which retainers are charged in our business is a month of ongoing administrative support.
The idea is that you and the client are entering into a relationship. With the retainer, they are securing a spot on your roster, reserving your time and preserving their priority over any other side (non retainer) clients or project work you do in your business.
With retainers, they are generally billed with due dates of “on or before the 1st.” There are no “deposits” toward a retainer because it’s not a layaway plan. They either pay beforehand or they don’t receive services.
In my practice, I have clients sign a credit card authorization form (AGR-30 in the Success Store) so that I can automatically run their credit card when it’s time for them to pay their retainer each month. So essentially, I pay myself, and my due date is the 25th of each month (and I never pay myself late, lol).
I do this because:
- the 1st is one of the busiest days of the month for me and for my clients (and most people running businesses, I think). I don’t want my money and being paid held up in any way; and
- if I happen to do billing for any clients (i.e., invoicing their clients on their behalf), I don’t have my business’s billing and theirs all trying to compete for my attention on the same day.
If you are billing after the fact, that is not a retainer. For the reasons you recognize (and that fact that you’ll run into far more nonpayment issues with nothing to mitigate your losses), you will have all kinds of financial problems if you bill at the end of the month for services already rendered. The last thing you need to be in is the credit lending business (which is basically what you’d be creating by billing after the fact and waiting to be paid).
How you bill in your business becomes part of your business management and systems for success. It should be given as much careful thought and consideration as every other planning and operational aspect of your business.
It came up that a client with whom I’m working on a retainer basis has just alerted me that in a month he will be taking 4 to 5 weeks vacation so he will interrupt the service for that period of time. We started our relationship in March, so we have been working together for three months now. How do you handle this kind of situation? Is it acceptable that he interrupts the service agreement at no cost for him? One of the clauses in our Service Agreement states that if for any reason one of the parties decides to discontinue the agreement he/I should give notice to the other party at least 30 days in advance. He is almost complying with that. But this clause was meant for the finalization of the agreement, not a temporary interruption. Should I accept this? Or should I let him know that if he interrupts the service, I might not be available when he is back at work, hence I should charge at least a minimum amount to reserve his space in my roster? Thanks in advance! —Mirna Bajraj, MB Asistencia Virtual
Hi, Mirna! Great question; I’ll do my best to help. 🙂
This is another one of those situations where there is no right way or wrong way. It all depends on how you want to run your practice and what is acceptable (or not) for you.
Obviously, we never want to hold a client hostage if they can’t or don’t want to continue working together, whatever the reason. At the same time, and as you recognize, they need to be fair to us as well. This is the reason our contracts contain a termination clause that gives both parties simple, fair and equal recourse for ending the relationship: 30 days written notice.
But this situation differs because the client isn’t saying he wants to permanently end the relationship, he simply wants to interrupt the service. And here begins our thought process.
So, the client goes on vacation and now you have an open slot on your retained client roster. Obviously, you are not going to sit around and wait for him to return. That’s income you now need and want to replace.
This is where a conversation with the client would be in order.
By all means, be gracious about his wishes. However, it would be a service to him to clarify your policies. You may want to remind him of the termination clause of your agreement with each other (i.e., proper fair notice). You might want to let him know that you don’t offer “service interruptions” per se. If a client opts to terminate the contract (per the termination clause), then the contract is ended. You are then, obviously, going to fill that slot on your roster with another client because that’s income you need to replace.
Therefore, the client needs to understand that when they return, you may not have a spot any longer for them. And, if you did have a spot, the whole contract process, etc., would naturally need to start from scratch as if they were a new client. It may also mean that your rates and other particulars may be different when they return as well.
At this point, you may want to let the client know that to keep his spot on your roster, there would need to be a continuance of service and that means continuing to pay their monthly fee.
I like to use the analogy of insurance as an example, and this would be especially apt if you are using my Value-Based Pricing methodology.
When you pay for insurance, you aren’t paying for actual use. You are paying for the event of use. In other words, we may not need to use healthcare services every month, but that doesn’t mean we get to stop paying our insurance premiums for those months we don’t use any services. We don’t pay, our insurance is cancelled, we lose our spot (and possibly our grandfathered plan) and have to start all over again new.
Another thing comes to mind… and it’s hard to tell since this client is so new, but is a vacation really the reason they are wanting to interrupt service? Might there be some other issues going on, that with some conversation, could be solved to mutual benefit?
This is another reason it’s so worthwhile, especially in the beginning stages of our retained client relationships, that we have weekly telephone meetings. It really helps us keep our finger on the pulse of things with the client, their needs and concerns, and allows us to get to know and understand them better.
Hope this helps, Mirna 🙂 If you have additional thoughts or questions or need further clarification, please feel free to post in the comments. This will help shed more light and help others at the same time as well.
I have a question for you. How do you cope with holidays? I’m about to go on holidays for a month. The first year I was doing this full time, I actually worked while I was traveling. Last year I had a friend fill in with a couple of my clients doing some of the work and other parts were left until I returned (mainly database entries). However, this year, I am requiring my friend to take on a lot of my clients (about six of them). One particular client requires my friend to take over everything I do which has required me writing a very long and extensive manual and take the day to train her tomorrow (only part will be for this client). However, when I asked if the client was willing to pay for some of the cost of my time in preparing the manual and for training, they have baulked. It has taken me approximately 8 hours to write the 60 page manual plus there will be another 3 or so hours training tomorrow for just this client. Who do you think should be responsible for paying for this? —Sarah Munro, Sarah’s Office Services
Two questions for the price of one! lol
Let me preface things by saying there’s no right or wrong way when it comes to how you want to handle things in your business. So I’m just going to offer my own personal thoughts on this.
As far as the manual goes, to me, that’s just the cost of doing business. The client didn’t ask you to go on vacation and they didn’t ask you to develop a manual so you could have your support step in to do things. They just want to have the support they are paying for each month. If it were me, I wouldn’t charge the client for this as I initiated it as something to make things go smoother for me while I’m away.
And even if they had asked for the manual, I would still include it as part of our relationship retainer. Of course, you may not be pricing and packaging things the way I do, so that makes a difference as well. I charge and get paid well enough that things like that don’t even need to be a blip on the radar, so to speak.
You actually have me somewhat stumped on the month-long vacation, lol. I mean, I have never taken an entire month of vacation away from my business. But I also don’t feel deprived in any way because I’m not working like a slave the rest of the time either. I don’t ever have feelings where I need to escape, which I know a lot of people do have (not saying you do, just saying in general).
My business is part of me, part of my life, so when I go on vacation it doesn’t bother me to keep a certain amount of tab on things and keep up with the most important things and delay or reduce others to half-mast.
In fact, maybe it’s just me, but one of the things I really enjoy when traveling or going on “vacation” is (for example) sitting in front of the ocean and doing a little work or checking emails on the laptop and aircard. When I lived in Europe, one of the things I absolutely loved to do was “set up shop” at my favorite cafe and do work while savoring the sights and sounds, people watching and soaking all the atmosphere in. Cafe society in Europe is so delicious!
Of course, that doesn’t mean I’m going to actually deprive myself of a real vacation either. What I do is let clients know at the beginning of our relationship my policies and standards when it comes to the fact that I will be closed at times and even go on vacations. I don’t want them to be taken by surprise (which they really shouldn’t be anyway, but still it’s helpful to have those conversations upfront so they expect it and know exactly how things work).
I let them know how and what things will still be taken care of during that time (or not, as the case may be) and how/when they may need to step in and do things themselves. Yes, clients should never be dependant upon you! It’s their business and they should be able to step in when they need to.
I want clients to view our relationship as a whole, in the context of ongoing, so when they pay by monthly retainer, it’s more of an installment type of thing, in an abstract way of thinking of it. At the same time, I can’t justify for myself being paid a full month’s retainer if I plan to take an entire month off without giving them any level of support whatsoever. If I were to ever do that, and really and truly not work at all (and I’m just speculating here because I’ve never fully taken an entire month off), I would probably make sure there is some kind of support still available while still being half mast and/or maybe give them some kind of reduced retainer rate.
The whole vacation thing is one of the reasons I advocate for Administrative Consultants partnering with their own Administrative Consultant in the same kind of ongoing, monthly relationship that our clients have with us. When you do that, you have someone who gets to know you far better than someone stepping in off the cuff, who learns the ropes of your business and is a partner to you, not a subcontractor. This makes it much easier and more fluid for them to step in and take care of things when you are away.
I hope you have a blast on your vacation. And if I do ever decide to take off a whole month, I’ll be coming to you for advice!