Retainer agreements: Good idea? Bad idea?

Thanks to reader Jennifer O. for suggesting this topic: retainer agreements and whether they are a good idea for freelancers, or not. Let’s take a look:

First of all, what is a retainer agreement? Retainer agreements allow clients to purchase a fixed amount of your work (which could be hours, words, or something else) at a fixed price, which guarantees them that you’ll reserve time for their projects, and which guarantees you that the client will send you at least as much work as the retainer agreement covers. You could say that I have a retainer agreement with my website manager; for a flat monthly fee, he does things like monitor my traffic, update plugins, etc., and the ongoing monthly agreement means that I know he’ll block out time for that work, and he knows I’ll provide him with a certain amount of income each month.

In the translation industry, retainer agreements aren’t — in my experience — extremely common, but lots of freelancers still wonder about them, and whether retainer agreements could be good for their business. I most commonly hear from freelancers who have an ongoing client proposing a retainer agreement as a way to offer a guaranteed volume of work at a lower rate than they’re currently paying. For example the client may currently be paying 20 cents a word, and offers the freelancer, “If we guarantee you at least 10,000 words a month, could you do that for $1,800?”

Here are my tips for evaluating whether a retainer agreement is a good idea or not:

1. This sounds basic, but…how interested are you in ongoing work from regular clients? This is an important question, and one that many people don’t answer. Are you interested in committing part of your work time to one client on a consistent basis, or do you like to just see what comes your way? Are you already overloaded with well-paying work from regular clients that you enjoy working with? Ask yourself these questions before you go any further, because in my experience, many translation clients are interested in a retainer agreement that is financially advantageous for them: basically they want to pay a lower, or at least slightly lower rate in exchange for a guaranteed volume of work. In some cases, that can be a win-win: you get a “bird in the hand,” and they save some money. But it’s not always appealing: read on for some reasons why.
2. Most importantly, beware of “teaser” retainer agreements, along the lines of “We anticipate having a high volume of work for you, so can you charge us less than your regular rate?” First, this type of client needs to show me the words, or agree to pay my regular rate if this high volume doesn’t materialize. I would first ask this type of client how much volume they anticipate. Let’s say they estimate 10,000 words a month, at 10% less than my regular rate. First, I would evaluate whether this guaranteed volume of work is appealing to me, for economic or non-economic reasons (more on that below). Second, I would require the client to meet a volume benchmark in order to receive the discounted rate, such as, “Offering a 10% discount for 10,000 words a month or more works for me; however if the volume in any given month falls below 10,000 words, I will bill you at my regular rate.”
3. Remember that there are non-economic reasons for entering into retainer agreements. Many, or even most translators would rather work than look for work, and retainer agreements can allow you to do that. If you have several retainer agreements, they can even turn freelancing into something like a regular job where you set the hours. Let’s say that you have a client you really enjoy working with, whose budget is slightly less than you usually charge. Retainer agreements can allow you to work with them, while ensuring that they send you enough work to make the arrangement worth your time.
4. Also remember the worst reason for entering into a retainer agreement: because the client simply doesn’t have the budget for a professional translator, and you’re more loyal to them that you are to the success of your own business. Carol Tice has a great post on her blog, Make a Living Writing, on this very topic. It’s one thing to say, sure, I love working with you and I hate marketing, so I’ll discount my rate slightly, in exchange for a guaranteed volume of work. It’s another thing to say, sure, you don’t have the budget for a professional, so I’ll charge a rate that does not meet my financial goals, but we’ll just call it a retainer agreement so that I feel better about it.
5. Yet another option is a “hedge”or “on call” retainer agreement. I don’t necessarily recommend this, but let’s look at it anyway, for the sake of putting all the options on the table. In this type of agreement, the client would agree to pay you a lump sum, per month, whether they need you or not. Let’s say that a client often needs small projects done at short notice, and let’s say each project takes about an hour, three times a week. But some weeks they have no projects, so they don’t need you at all. You and that client might strike an arrangement where you reserve those three hours in your schedule, but even if the client doesn’t need you, they pay for one hour, in exchange for you keeping the three hours open. Again, not that common, but it could happen.

I hope you find those tips helpful! If you have anything to add, let’s hear it in the comments!