One of the most challenging aspects of being a freelancer is the financial responsibility. If you have moved from ‘normal’ employment to a freelance position, you will likely have suffered through the struggle yourself. Gone are the days of a monthly or weekly income that arrived promptly into your bank account on a routine basis. Now you are faced with tackling everything from invoices and contracts to leads, taxes and self-assessment forms; and it can be pretty overwhelming!
If you are reading this and find yourself agreeing, then it is important to realise that it is completely normal to struggle; especially if you are still new to the freelancing game. Freelancing is one big learning curve, and whilst you will figure out the best way to manage your business, there are some pretty handy things you can consider implementing that will make your life easier, and likely help your business thrive!
One of the biggest game changers for me when it came to establishing my business was the replenishing retainer, and it is something that is surprisingly massively overlooked by many freelancers when they first start off.
So if you are wondering how you can improve your business income, and make life easier for yourself at the same time, you’ve come to the right place!
What Is A Replenishing Retainer?
Before I jump into WHY you should consider implementing a replenishing retainer provision into your contract, let’s first take a look at what this involves.
A retainer is basically a set fee of money that is paid in advance in order to guarantee a service. So in terms of your freelance business, a client would pay you a certain amount in order to ensure your availability as and when you are needed. Unlike other methods of payment such as hourly or fixed rate where you are paid at the end of a project, a retainer will guarantee that you receive money in advance of the work.
This is obviously a huge weight off your shoulders and means that you won’t have to face any uncomfortable confrontations later down the line when you haven’t been paid for your time.
So what about a replenishing retainer then? Surely a normal retainer seems enough of a guarantee that you are going to be paid? Well – it may seem like an over-complication of terms, but by implementing a replenishing retainer provision, you are not only guaranteeing long-term income and security, but you are also doing away with many of the uncertainties and stresses that can come with finding new clients and securing further work.
Essentially, a replenishing retainer offers you a security blanket to rely on when your freelancing is going through a bit of a lull (which is pretty normal for most freelancers!) Replenishing retainers can be used for both hourly and fixed-fee payments and can be great for everyone involved if done correctly!
So, how does A Replenishing Retainer Work?
Put simply, a replenishing retainer is an agreed upon amount of money to guarantee your time on a project. The way they work differs slightly depending on how you charge for your service, so here is a brief example of both hourly and fixed-fee billing methods:
So, if you charge £40 an hour for your services, and your client has requested 10 hours of your time to work on a specific project, they will pay you £400 upfront, which then guarantees your client 10 hours of your time dedicated to their work. Once you start approaching the end of the £400, it is then time for the client to top the money back up. You simply don’t continue to do the work, until the money has been paid.
The client will start by paying you a set amount upfront, let’s say £300, and then following this they will continue to make regular payments usually either on a monthly, quarterly or yearly basis. Again, if the money ever runs out then it should state in your contract that you are obliged to cease any work until money is paid.
Essentially, a replenishing retainer works as a routine income to ensure your time is available when needed, which is brilliant for a freelancer and can be incredible for your reputation as a trustworthy and reliable business person.
What I would stress is that if you are intending on implementing a replenishing retainer for your business, ensure it is in writing in your starting contract. This will save you so much time and hassle later down the line if the client has any disputes. I would recommend setting out the terms of the replenishing retainer, including all relevant time frames, project scopes and terms of cancellation for both parties. Remember, a contract is ultimately there to keep you safe, so it pays to be thorough at the start!
Pros & Cons of the Replenishing Retainer
So, to round things off let’s take a look at the pros and cons of opting for a replenishing retainer:
- It is a source of financial security that can be difficult to find in freelancing.
- It allows you to put more time and effort into your projects, as you won’t need to find new leads as regularly.
- A steady stream of work
- Clients benefit from knowing you are at hand when needed
- Great for building long-lasting client relationships
- It is common that freelancers can take on too much work whilst also having replenishing retainer clients. This is great if you aren’t sent anything too demanding, but if a client has paid for your services in advance it is important that you are available when they need you. Being over-booked can end badly for your reputation.
For me, the replenishing retainer is a no-brainer! Whilst laying out the terms within the initial contract can be time-consuming, it can save so much time and effort later down the line, ensures I get regular income and keeps me busy! I would highly recommend those considering a replenishing retainer to give it a go.