How To Get The Most Benefit From Your Web Agency’s Retainer Services – Even If They Just Break Even
The fire, though only 25 seconds long, reached 1,000 degrees in some areas. But it wasn’t the heat that got to the three crew members on board… the fire burned through the pure oxygen within the spacecraft module, leaving the crew with nothing to breathe.
Investigations uncovered flaws in the spacecraft’s design, along with quality control and engineering. Later, one U.S. Senate report cited “a false sense of confidence and therefore complacency in this operation…”
It was a very sad and helpless moment in NASA’s history, but one that changed the future of space exploration.
“I love it when a plan comes together”
– John “Hannibal” Smith from the A-Team
I think you’ll agree when I say:
Retainers are a GREAT way to guarantee reliable income.
But are they really?
It turns out that offering a retainer service doesn’t guarantee anything if you haven’t clearly defined the business goals that drive your retainer services…
… goals that aren’t as cut and dry as “more money.”
Instead, you need a strong plan to optimise your retainers for long term business growth.
In this post, I’m going to cover the two types of web agency income (you can also think of these as agency focuses, goals, structures, or plans) that retainer services contribute to, and why choosing to focus on only one of these two income streams could be the solution to skyrocketing your agency.
The Backbone of Agency Growth and Stability
Last year I began our podcast, Happy Porch Radio. It’s dedicated to helping web agencies thrive and grow as a business, with the first season focused on creating long term relationships with clients.
As I interviewed highly successful web agency owners and agency growth consultants, I noticed two specific key points in agency success–retainers and communication.
While retainers were a major part of success, the purpose of the retainer greatly varied from one agency to another and this also affects communication.
Most agencies struggle through feast and famine periods of business and offer retainers in the hope of creating a consistent source of income. The truth is, as many agencies begin to experience growth and stability, they often reach an Apollo 1 moment, sometimes to the point of feeling “a false sense of confidence and therefore complacency in this operation…”
What I discovered from my podcast guests is that nearly every highly successful agency reached a certain level of stress–their own “fire in the cockpit” moment–which often leads to a change in their businesses.
This change? Clearly defining and limiting what they do as an agency–which directly shapes how they approach their retainer services.
Defining Your Agency Focus Is More Than Just Setting Goals
Goals are important. Yes.
But the purpose of goals are just as important than just a desired outcome. What they do is provide structure and, most important, limitations to what you do (and don’t do).
How focus can help:
1. Set yourself up to achieve your business and life goals.
If you want to succeed, say “no”…
… a lot.
It’s so natural to want to do everything for every client. Big projects followed by support, ongoing marketing, design and creative services… the works. But as a growing small or medium sized agency, specialisation and expertise is essential.
Excelling at your core services first, serving the right clients (versus anybody with a checkbook), and slowly expanding your services over time will move you to the top.
Being a full-service generalist right out the gate?
That’s the the quickest way to experiencing scheduling and resource issues, late deliveries and massive headaches.
2. Eliminate the chance of creating a business that you hate, gets out of control, or carries potential for income loss.
Nobody goes into business planning to create a job that they loathe or lose money. It usually just happens. The reason this happens is usually from a lack of planning, structure and limitations.
Every time you say yes to a request or idea that doesn’t fall in line with your agency’s core focus, you are welcoming stress and disorganisation (and much more so if you haven’t defined your agency focus).
Blind sighted by the potential for fast growth and increased profits, most agency owners–and business owners in general–let their business rule every waking moment of their lives.
You don’t want to suddenly wake up realizing that you’re a stressed out job owner instead of a proud business owner… you’ve missed watching your children grow up… or you’re suffering from a boatload of other stress-related problems.
When you’re out of control, there is always increased potential for financial and personal disaster.
3. Agency focus leads to team focus.
I found this point extremely fascinating as my podcast guest, Janusz Stabik, explained it to me with his business.
When restructuring his agency, Janusz came to the realization that some of his team members were better suited to certain types of work.
This seems like it should be so obvious yet most agencies don’t even consider how they can maximise results by simply allowing their employees to do the work they do best.
For Janusz, that meant identifying which developers were best suited at working on large projects and which ones enjoyed the detective work of tackling small support and maintenance tasks. The truth was that there was a clear difference. The outcome…
Each type of developer found more satisfaction from the work they did, the agency noticed improved performance, they delivered higher value to the client and ultimately it all led to business growth.
4. Escape feast or famine.
Nearly every agency owner I’ve spoken with knows this feeling all too well.
Trying to be everything for everybody, time is split between getting new clients, working on projects, maximising existing clients with retainers, offering new services, etc. etc. etc…
The whole purpose behind a retainer is to avoid starving in famine mode or getting distracted by the work and neglecting to generate new business in feast mode. In reality, if you don’t define your agency focus and purpose, your retainers could just contribute to these problems.
Here are just a few things that could affect your retainer offers depending on your goals:
- You expand or reduce your services and rates
- You communicate with your clients more or less often
- You organise your team structure and their workload differently
- You offer more or less consulting advice and services (and at a wide variety of rates)
- You serve different types of clients
Can you effectively make all these choices if you don’t know what your agency’s core focus is?
I don’t believe so.
The purpose of goal setting isn't just to create an ideal destination. The purpose of setting goals is to help create and define the roadmap to get to your destination.
Creating structure and limitations in how you operate your agency will influence every decision you make. It could be the difference between owning a highly successful agency or having a highly stressful agency that owns you.
Now let’s take a look at the the two focuses / income streams of web agencies.
The Two Sources of Agency Income and How Retainer Services Are Involved
It’s important to note that we’re not talking about the actual services you offer such as marketing, web development, creative or design services.
Instead we are looking at HOW you serve your clients.
I’m going to be bold and say there are only two main types of agencies:
- Project based agency - Your primary source of income comes from major projects
- Retainer based agency - Your primary source of income comes from ongoing services
Okay, I lied. The obvious third structure (which nearly every agency on the planet falls into) is a combination of these two.
Let’s take a deeper look at these structures and how retainer services should come into play:
1. Project based agencies should use retainers as a client communication and relationship building tool.
Podcast guest, Matt Inglot’s cockpit was on fire. He built a complete feast or famine web development agency.
When business was good, extremely long hours caused major stress. When business was bad, financial worries added to the stress load. It didn’t take long at all for Matt to realise that he was completely burnt out.
What Matt did was drastic. He pared down, restructured everything, and focused only on his highest value clients.
Matt discovered that a small percentage of clients brought in the majority of work (which was project based). By focusing on serving these major clients, his agency continued to be awarded more project work and the revenue grew substantially (as his work hours and stress decreased).
Matt realised that not every client needs loads of recurring services. Plenty of potential clients have steady streams of projects that they need completed. It was just a matter of finding and focusing on serving those clients above all else.
While retainer services aren’t the major bread winners for the agency, Matt’s agency uses retainers as a communication tool to build and strengthen relationships with their high value clients.
With every touch point, Matt makes sure to demonstrate the value that his agency provides in both his ongoing services and with each project delivered.
By limiting his client base and following this structure, Matt’s agency was able to easily create recurring, reliable revenue while still sticking to a project focused business model.
The main thing to understand is that project based agencies can avoid feast and famine by finding the right clients and building strong relationships with them.
2. Retainer based agencies should use retainers as growth engines for their clients.
It’s hard to build a retainer based agency if your main service is maintenance and support. While absolutely necessary in the tech and web industry, you’re not likely to scale your agency with support and maintenance alone.
That’s why there is a new wave of web agencies embracing the growth driven design model of serving their clients.
On one episode of our podcast, Luke Summerfield explained how he developed the concept of growth driven design and why it has taken web agencies by storm.
Instead of doing one-off projects, increasingly more agencies are looking to get a minimum viable project off the ground quickly for their clients. Then they optimise and improve that project over time.
Since the agency shows incremental monthly growth and improvement for their clients, the clients happily continue paying for services and often increase their budget for even greater results.
This model works great with clients who understand and appreciate incremental growth in their business.
Where a project based agency uses retainers to lead to more one-off projects, a retainer based agency uses one-off projects to qualify clients and lead to ongoing services.
The key to growing as a retainer based agency is to excel at your services while slowly piling on more skills and offers, all the while communicating your results and value to clients.
And just like project based agencies, retainer based agencies truly excel by serving the right clients, continually communicating the value they provide, and continually working to strengthen their client relationships.
So here you can see the two ends of the web agency spectrum. But the reality is that almost every web agency is already doing a combination of these two concepts.
3. Agencies that see significant revenue from both projects and retainers
This seems like the logical balance.
- Take on as many high earning projects as possible.
- Shift as many of these clients on to high earning ongoing services.
- Maximise each retainer to its full potential.
- Rinse and repeat.
- Have your cake and eat it too!
But trying to do both is one reason why so many agencies struggle financially, why agency owners are stressed and overworked, why many agencies tend to level out, and why other agencies reach that “fire in the cockpit” moment.
It was very clear from my podcast interviews that many small or medium agencies struggle in some form or fashion.
This could be poor leadership or planning, a shortage of staff, skills, finances, organisation, clients, or simply the lack of mental bandwidth to effectively offer high level projects AND high level ongoing retainer services.
In fact, each of my podcast guests cited paring down as much as possible to one side or the other as being a major turning point in the growth of their business.
In instances where they did make the leap into completely full service agencies, it took a conscious decision to create separate teams to handle the two sides of the business.
This was the case with Janusz’s agency, Mayfly Media. At some point they found that offering full, high level support services was hindering their ability to deliver on project work. Developers suffered from splitting their time among projects and support and, possibly worse, the quality of their work suffered from constant task switching.
It came to a point that the team made a decision.
Rather than a) work constant overtime and pull out their hair trying to make things work; or b) scale back on one side or the other… they chose to do what Janusz described as “split the business in two.”
That was the most logical way for Mayfly Media to offer high value projects and high value retainers… treat the business as if it were two!
This is a great option to do, but many agencies still simply don’t have the capacity to do this, yet.
Though it sounds ideal to be everything for all clients, the challenges of trying to hit too many goals at the same time are overwhelming. Your agency is likely to see more success by focusing on a particular aspect of your service and serving your most ideal clients.
So where do you fall on the agency spectrum?
It doesn't matter if the core of your agency revenue is from large projects or small recurring services. Either way, offering retainer services is a great way to top of mind with your clients.
Most important is that you seek out the right clients that fit your skills and offer, deliver exceptional quality and value, then continually communicate with your clients to demonstrate your value and build trust.
How to Determine the Focus of Your Agency
To simplify matters, and if you’re willing to make bold choices for your agency, you could simply decide what you and your team likes to do best.
Large projects with a clear end result? Or smaller ongoing work where you improve client results over time?
A decision like that is likely not so easy to make. So instead it’s a great idea to step back and evaluate the current state of your business.
Start by asking yourself these questions:
1. Are your current retainer services profitable, break even or in the red?
Measure your retainer service revenue against your project based revenue. Which one is making more money?
If it’s the ongoing retainer work that is driving your business, then the indications are clear. A shift to focusing on maximising retainer services and using your initial projects as a compatibility test with clients could help to massively improve your business focus.
But maybe your retainers are just break even or even losing you money. If your business is still profitable (hopefully so), it’s clear the majority of your income comes from large projects.
Consider how often your retainer clients are coming back to you for large projects, how profitable those projects are, and if continuing to offer all of your retainer services even makes sense. When you evaluate your current clients, you should be able to identify which are highest value to your agency based on their profit to pain ratio.
If you want to maximise repeat project work, you may find that you need to make adjustments in your retainer offer to pave the way. Or you may need to completely restructure your positioning, communication and relationship building strategy.
2. Do you and your team enjoy the work behind delivering your retainer services?
You may find that as a business and a team, you just don’t feel the energy and happiness from small retainer work like you do from winning and completing major projects. On the flip side, you could feel extreme satisfaction from helping and watching your clients grow their businesses over time.
There is plenty of honor in both options and the decision is purely based on your preference and the personality of your team.
3. Do retainer services compliment your team (or individual team members) and their strengths?
As we mentioned, retainer work suits various personalities. Some developers will thrive on it. Others will dread it.
Misallocating work to your employees can seriously impede on their performance. It’s best to sit down with your entire team and flesh out their strengths, weaknesses, and interests.
4. Does your team have the skills, are you willing to acquire the skills, or are you willing to hire someone with the skills to expand your retainer services?
If you’d like to generate the majority of your long-term profit from retainer services, you will definitely need to look for ways to offer increasingly higher value.
When you are ready to grow or scale your agency, the quickest ways are to either increase your earnings from each client and/or get more clients. Both have their ups and downs, but either way you must consider whether you have the ability to serve each client to the level that they need and deserve.
5. Can you improve the efficiency or structure of your retainer services and agreements?
There are a lot of ways to skin a cat, and the same can be said about how your agency structures, packages, prices and delivers your services.
Consider what your agency is currently offering and how the time and service you provide to your clients could be more optimised.
Increasingly more agencies are finding that packaging their recurring services into predefined deliverables–productised services–creates a lot of needed structure and clarity. They can reduce the stress load while increasing agency productivity and revenue.
Productised services often shift the value to the client from hours worked to results delivered, allowing agencies to better manage their time and serve more clients. By going with only productised services, your agency may find it easier to scale up its client base.
At the other extreme are fully customised retainer agreements for each client. This option isn’t necessarily better or worse than the productised service model. It just takes more time and planning to reach an efficient agreement and manage all the various client agreements you have over time.
No matter what type of agreements you make, getting crystal clear on your deliverables and communicating that to the client is essential if you want to improve efficiency and reduce headaches. In addition, it’s almost always most beneficial to your agency if you direct the client conversation toward results provided versus hours spent.
6. Do you offer retainers to all clients?
If you are already doing this, you should definitely reconsider. Not all clients are created equally and your first project or period of service is the time to evaluate whether a client is a good candidate to work with long term.
Factors to consider are whether you like working with them, if they run a business that you support, do you see opportunity to help them grow, are they easy to communicate with, are they receptive to your input and expertise, do they respect your time, etc…
Whether a client is too small or they just aren’t easy to work with, it’s nobody’s fault if you decide that they aren’t high priority.
You have to look at the pain versus profit ration and in the end decide to focus on the clients that will help your business grow.
These are just a few questions to consider but serve as a great jumping point to hone in on your agency focus.
Perform a thought exercise called an Advance Retrospective
I learned about this exercise from our podcast guest, Karl Sakas. It’s a brilliant process where you visualise exactly what an ideal workday in your agency is like at some point in the future (6 months, 1 year, 5 years…).
But here’s the catch:
You do this as if that day has already happened. This can help make the day more clear and real in your mind.
There are many benefits of doing this exercise, but my favourite benefit is that it can bring a lot of clarity on what needs to happen in order to achieve your goals.
With a crystal clear idea of what the future looks like, you should be able to ask yourself:
“What needs to happen with our retainer services in order to achieve a perfect work day like this?”
Working backward from the end result can help you to create a real, actionable plan on how you would get to that point.
(the Advance Retrospective exercise is so powerful that I highly encourage you to listen to the podcast episode featuring Karl or read the transcript to learn more)
A thorough analysis of your agency’s current state of affairs coupled with the deep and revealing Advance Retrospective exercise is an incredible place to start when narrowing down your focus, goals, and the trajectory of your agency.
Only you can determine the direction of your business, but doing so takes a lot of strategic thought and consideration.
If you don't take the time to consider where your agency is now and compare it to where you want the agency to be, you have no roadmap to achieving success.
Carve out some time to take a deep dive look at the current state of your agency. Ask the hard questions and involve your whole team. Then look into the future and imagine how you would like your agency to be. As best as possible, connect the dots and decide what needs to change in order to achieve your goals.
Create an Action Plan Toward Your Goals
So you’ve decided to narrow down your agency’s focus. The next step is to create a plan of action toward your goals.
If you did the Advance Retrospective, you should have a solid idea of the actions you need to take. With both a project based or a retainer based agency, here are some core steps to take that should help:
1. Identify your highest value clients and focus on them.
As we said, clients are not all created equal. Almost every agency owner I’ve spoken with reports that shifting their focus to their highest value clients (and even firing the low value ones) was a major turning point to increasing revenue and decreasing stress in their agencies.
Evaluate the pain versus profit ratio with each of your clients and you’ll likely see a revealing trend.
Beyond money, you have to consider your current agreements, the nature of your current SLAs, and the next steps you must take in that regard to shift the direction of your agency.
2. Outline the core strengths of your agency and determine how you can maximise them.
Consider the skills that your team already has and how you can show your clients a return on their investment. This could include anything from making them more money to saving them time, stress or money. It can be improving efficiency, or simply making their lives easier in some way.
3. Step into and embrace the role of consultant, expert, or authority, and start developing your positioning strategy.
The cornerstone of long term retainers and repeat projects is trust and a strong client relationship. This starts with your agency’s positioning.
Clients come to you for a reason–you provide a result that they can’t get or don’t want to do themselves. As Brennan Dunn pointed out in our podcast interview, “they [clients] are begging, in a way probably, for some advice……the thing clients hate is when they talk to somebody, they talk to a freelancer and it’s just like, yeah, let’s talk, ... they want you to take charge.”
In their eyes you are a leader, but if you don’t act like one, they may go look for someone else.
Being a leader means taking a proactive approach with your clients. Conversations will shift from, “How would you like this project done?” to “Where is your business going?… Based on your goals, I believe we should…”
4. Discover the next steps in your client’s journey, then demonstrate and increase the value you provide (and ideally your revenue).
This is another extension of your positioning. Every step of the way you are looking to increase value for your client. And, as podcast guest, Matt Hodkinson, talked about in our interview, you must communicate the value of what you do and why you do it.
With retainers, you must forecast where your services could level off in value and where your clients can improve, then be prepared to take the next steps needed to help them achieve business growth and success.
With projects, you must monitor your client's’ business progress, their industry, and keep them up to date on your industry standards. When you keep them in the loop on major changes that could affect them, your clients will be far more likely to remember you for the next project.
No matter how you serve your clients, it takes proactive, forward thinking and planning on your agency’s part.
5. Create a communication schedule.
Here’s the bottom line:
Look at every happy couple in the entire world and you’ll see one common thread–communication. The same goes for agencies and their clients. Unfortunately this is where many agencies drop the ball.
At the heart of your positioning, expertise, and proactive behavior should be a well defined and scheduled plan for communicating with your clients. Your team should calendar in times to email, call and meet in person (if possible) for multiple purposes.
It’s not enough to wait for a request or simply check in and see if your clients need anything.
You’ll want to report on your results, probe for upcoming projects or services that you can provide, teach clients the value of what you do, guide your clients on the next steps, keep them up to date on industry news and standards, and anything else that will provide value.
Any way to subtly remind clients why they pay you and why they should continue to pay you is encouraged.
But… you’ll want to develop a communication balance. The last thing you want clients to think is that every call from your agency is you fishing for more work.
Not every point of contact has to be too serious. One podcast guest, Lee Jackson, made a great point when he said that his agency tends to only work with people they like. Through their trust and communication, Lee’s agency often builds friendship level relationships with their clients.
By striking the right balance between socialising and serving your clients, you’ll be far more likely to be a welcome and helpful guest rather than an annoying pest.
Most of all, realise that communication is essential for long-term business with a client (as a project based or retainer based agency).
6. Correctly distribute the workload among your team.
As mentioned earlier, your team will excel in some areas more than others. Take extra time and care to discover where each member fits in best and where the team fits as a whole. They will feel more gratification with their work and they will suffer less from context switching than if they were forced to split their time among too many types of projects.
You’ve already gone through the hard part of winning clients, positioning your agency, communicating value, and building a relationship… all that’s left is to deliver the work to an exceptional degree. Make that part easy on your team!
Creating predictable revenue in your agency is much more likely to happen if your retainer services include these key pieces:
- Identify and win the right clients for your individual agency and offers
- Focus on your agency's core strengths and how they can improve and expand over time
- Embrace the role of a leader to your clients
- Continue to find and demonstrate more ways to provide value to your clients
- Create a reliable communication schedule to stay at the top of your clients' minds
- Understand your team and distribute their work according to each person's strengths
“Houston, Tranquility Base Here, The Eagle Has Landed”
So many agencies get into trouble because they are lacking focus and structure. They haphazardly throw out a bunch of retainer services, chase after projects, and basically do any work that is handed to them.
At some point they may enter a stressful feast mode, develop a false sense of comfort, get distracted by their work and end up in a famine.
It’s so common to want to do everything, to launch full steam and figure things out later. The allure of serving up a ton of large high dollar projects with new clients and then converting them to equally high earning retainer packages can quickly become the “fire in the cockpit” for young or middle aged agencies.
I definitely don’t want you to reach that Apollo 1 stage in your agency. Instead I want your agency to be like Neil Armstrong on Apollo 11… Tranquility Base.
That’s why I want to invite you to jump on a quick 30 minute call with me. I’m not going to try and sell you anything. Instead, I want to help you do a “diagnostic” to gain clarity on the state of your agency. My goals is to leave you with 3 specific actions you can take to start moving forward in your agency.
All you have to do is sign up below to get started. You’ll receive a preparation email and the link to schedule a call on my calendar.