Prices to Charge to be on a Retainer

[Berniedog]

I have the potential for a project where I can be on a retainer rather than bidding the project lump sum. I imagine that I must reduce our hourly rates if we are on a retainer but what is the industry standard for this?

Do you reduce your hourly rates? If so how much?

Thanks

 

[DRWeig]

Hi Berniedog,

I don't reduce hourly rates for any reason. Retainer is great if I have only a vague idea about project scope -- be sure to hold back some of the retainer (I do half) until final invoice, and keep what's left.

Good on ya,

Goober Dave

 

[zdas04]

When I set up my rate sheet in 2003, I expected that my normal mode of work would be retainers. I also figured that time and materials or hard-dollar jobs would take 60-90 days to get paid. Consequently, I offered a 10% discount for a 350 hour retainer and a 20% discount for a 700 hour retainer.

It turns out that Supply Chain Management guys HATE retainers. I mean REALLY HATE retainers. Eight years ago, SCM was not as powerful as it is today and a couple of companies took advantage of the 20% retainer. It really worked out well for everyone--I paid myself from the banked retainer and my client saved 20%. The last MSA I negotiated, the SCM guys made me print a copy of my rate sheet without the retainer option included. I just redacted the retainer portion and everyone who sees it asks "what was cut out????". I tell them it is discount language, nothing they need to be concerned about.

Retainers were about 8% of my total billing through 1/1/2011. That number will just decline from here. I'm not sorry that I included the option, but I like not having to give the discount. It is the only time I ever discount my hourly rate. If someone asks for a hard-dollar bid then I double my hourly rate and add 15% to the inflated total because I don't like taking the risk myself.

David

 

[MiketheEngineer]

I kind of like retainers - some months suck(work too much) and some months are real barnstormers (like I did nothing).

Six of one - half a dozen of the other.

What do you want - ??

As always - negotiate for what is in your best interest.

As a Matter of Fact - company I did work for just "fired" me when they got bought out by a bigger company!!. Said they had their own engineers and could handle it from "headquarters" OR so they were told!!!

I had worked for that company for about 20 years and had about an $1800 a month retainer when I got "fired". Total work was maybe 10 hours a month - I had Excelled most of the computations over the years - loved it.

So guess who calls me two months later begging for help. YEP!!! Their "headquarters" engineers took forever to do anything and didn't understand local codes and practices. Guess who is averaging over $2000 per month on a cost per job basis!!! ME!!!!

BTW - retainers help to "flatten" out the income curve - kind of levels out the feast or famine. I like to have a couple of guys on retainer and then fill in with "money" jobs when available!!