Category: Chapter 9: Retainers Are to Projects as Montrachet Is to Thunderbird

A consulting retainer is vastly different from the typical “retainer” you might hear about from an attorney, just as Beethoven’s Fifth Symphony inspires something other than the feelings you might derive from the hokey pokey. 

Legal retainers are merely deposits, against which future hourly fees (in six minute intervals) and expenses are deducted, right down to the cost of a stamp. But consulting retainers are payments that allow a client to have access to your “smarts.” 

Glossary 

Retainer: A fee paid for a given time period allowing members of a client organization to access you as an advisor in a reactive mode.

Retainers are usually for a minimum term of a month, though I recommend a quarter (90 days) as the minimum (which I explain later in the chapter). They may involve one or a few people, but never dozens. They may involve frequent access or limited access or situational access. They are always reactive, in that the client calls you, you don’t instigate the discussions. Think of being on retainer as being a mentor to the client, not a coach (the latter of which actively intervenes).

Retainers are “insurance policies” in some respects. They constitute a safety valve, or sounding board, or contingency for the client. People hope to never have to use their fire extinguishers, but they’re comforted that they are present and that they work. You can find yourself providing one phone call a month and being held in extremely high esteem by your client. And always remember that you can maintain quite a few retainers concurrently, so that they are of high value and low labor intensity, the very definition of differentiated and successful consulting. 

They also require a different type of proposal, because there is no discrete project involved, with a beginning, middle, end; there are not objectives, metrics, or value, per se. 

Retainers are most common after a project or series of projects, because the client trusts you, you’ve performed as promised, the results are evident, and it makes sense to continue the relationship even in the absence of a specific project. Too many consultants simply disengage without having suggested a retainer to the client.

Think of yourself in an advisory role. Think of yourself as Yoda, from Star Wars! You’re a wise person who doesn’t assertively intervene, but who is there when needed, though probably somewhat less abstruse and metaphysical than the little guy. Presidents have had “kitchen cabinets,” executives often use colleagues from their social and civic networks, and all of us usually have certain people we turn to when we need advice, even though we may otherwise not speak often. In police departments, they are often called “rabbis,” and in business it’s usually someone not in your direct hierarchical chain. 

There are three elements that must be considered in a retainer relationship. 

1. Who? (Number of people.) 

It’s important to specify in the retainer proposal how many people have access. The more people, the more valuable the proposal. It may be your buyer solely, or someone your buyer designates. Or it may be your buyer and three of the buyer’s direct reports. 

Retainers are never time- or activity-based, so it’s important to keep this number small (e.g., six or fewer), and to reflect the value of allowing more people rather than fewer people. The criteria for “admitting” people would be: 

• Who is vital to have access to your smarts for the buyer?
• Who will share the confidential nature of the discussions?
• Who deserves to be in a deliberately small group?

These people must be of the proper level and understanding that you’re being accessed for advice, not for interaction in a project or for “hands-on” work. 

2. How? (Scope of the retainer.) 

The second variable is the nature of the interaction. For example, will it be strictly by phone and e-mail, or also by Skype, or sometimes in person and, if the latter, at scheduled intervals or adhoc? A retainer is unlimited access—that is, without restriction as to number of interactions, but it can restrict the type of interactions. 

For example, does the client have access during Eastern U.S. business hours, where you live, or also during Western business hours, where the client is head- quartered? What about weekends and evenings? What is the response time—within three hours, or a day, or 48 hours? (My personal response time is generally 90 minutes during U.S. Eastern business hours, if we don’t agree to exceptions.) The more flexible you are, the more valuable. 

If the client has a board meeting on the first Tuesday of every month, can the buyer access you on Monday evenings to review the next day’s agenda? 

Are you expected to meet in person (expenses would be separately billed) at given times. (It’s fine to meet in person as long as the meeting remains simply advisory and not otherwise involved, e.g., conducting interviews, observing operations.) 

3. When? (The term of the arrangement.) 

As mentioned, I believe that a retainer must be in effect for a minimum of 90 days because it’s too tough to see the benefits in a mere few weeks, since you’re dependent on the client contacting you. Nor do you want monthly billing, which is too easy to simply abrogate at every hiccough that the client may suffer. 

However, in 90 days, the likelihood is such that the client would have contacted you and found worth in the agreement. Remember, it’s not the frequency but the comfort in knowing you are there as a trusted advisor, and the immediacy of your expertise and advice when a relevant issue arises, prompting the client to seek your help. 

This basic Who/How/When approach is all you need to create a retainer proposal, a sample of which appears later in this chapter, quite different from a traditional proposal. It’s unusual to begin with a new client in a retainer relationship (unless you have profound intellectual property and thought leadership), but it should be fairly common to create retainers with successful current and past clients, so you should become adept at these differing approaches to a highly lucrative business. 

With a retainer, it can be financial suicide to allow it to expand beyond the limits of the three variables cited earlier. When the client does this, either inadvertently or advertently, it’s known as “scope creep.” When you do it by accident or out of guilt, it’s called “scope seep” (a term I coined several years ago when I found consultants doing things that no one at all had ever asked them to do). 

A retainer is a “fixed-fee” project with compensation rendered in consideration for access to your intelligence and judgment, but anything that enlarges its scope or size is a direct diminution of your bottom line. You must resist this at all costs. 

Glossary 

Scope creep: A project expanding and requiring more labor, beyond the original parameters set in the conceptual agreement and in the proposal, because the consultant is unable to deny a buyer (or even non buyer) who is requesting additional work. Generally based on feelings of inferiority. 

Scope seep: Like scope creep, except initiated by the consultant out of guilt, lack of self-esteem, and other factors prompting the consultant to prove that he or she is “over delivering.” Generally based on feelings of inadequacy. 

Ironically, scope seep is the worst and more frequent hazard. It usually occurs when the consultant feels that he or she has not been accessed “enough” by the client to justify the fee. So the consultant unilaterally offers one or more of the following additions: 

• Extend the retainer beyond the current date at no additional fee.
• “Roll over” unused months to the future, sort of like cell phone roll-over minutes.
• Call and write the client offering unsolicited help and opinion.
• Ask for meetings.

This happens all the time, invariably from consultants who feel that they’re not worth anything if not being used and not being used frequently, at that. There is nothing incumbent on you to proactively offer help, because the very nature of your retainer is reactive and in response to client request. The client is paying for the comfort of knowing that you’re there if needed, not to need you every day. A great deal of this is poor business judgment, but some of it is also ego need—wanting to be wanted, which I’ll call the “Brenda Lee Plea,” trusting that a few of you will get that.

Scope creep can arise from any level of the organization, not just your buyer. When I worked with Hewlett-Packard employees, they were very concerned about “undocumented promises.” They would sign a $2 million contract with a client, and assign a large team to implement it. But during the implementation, lower level client people would ask lower level HP people for additional help, “while you’re here.” The HP people didn’t want to cause offense, so they tried to fulfill all such work or promised to do so. These “undocumented promises” wound up eroding the margins significantly because so much more time and delay were entailed. 

The resolution was to simply provide this script to HP people: “Unfortunately, I’m not able to make any changes to work agreements, but I’ll be happy to give this to my manager today for a decision.” That drove the decision to people at HP who could comfortably say no (or evaluate whether some of these requests were actually important to the project implementation). 

You are your own boss, assumedly, so referring this to the proper authorities shouldn’t take long! 

Don’t allow “guilt” about not being used and having that money “in your pocket” drive you to scope seep. The buyer is an adult, and realizes that you’re there to be accessed when he or she deems it necessary. However, not being called is not the same as not being appreciated. If you want unconditional love, get a dog. Otherwise don’t seek pats on your head from your clients. 

It is fine to suggest regular “check-in” contacts. These might occur: 

• Prior to important buyer meetings with colleagues.
• At designated times (e.g., every second Monday morning).
• When certain events occur (e.g., monthly sales figures).

Although we’ve been discussing retainers as an evolution from successful project work, they can arise as the original interaction with a client, particularly if you have strong intellectual property, a commercially published book, a powerful referral from a peer, and so on. 

Retainers seldom run for more than a year, often because of internal restrictions but more often because it’s hard to make such long-term commitments. Let’s turn, then, to how to ensure that retainers are renewed. 

Case Study: The Bank “Project” 

I was introduced to a buyer at a large New York bank by a woman who worked for him, whom he trusted, and who had been impressed by some of my published work. We met in his office, where he had stressed that he only had 45 minutes before an important meeting. 

At the 30-minute mark, I realized that we were having a great conversation,  but there was nothing he apparently needed that I could supply, even though we agreed on many ideas and he was receptive to my “push back” on some of their practices. As I watched the clock tick down to the end of the meeting, I was stunned that I couldn’t come up with a next step. 

Then he said, “I’m sorry, I have to run. But this was great. Call me on Monday and we’ll work something out for you.” 

I was speechless. “Ah, work something out? Like what?” 

“Oh, I don’t know, some kind of retainer where we can call on you. I’m not sure at the moment, but I do know we need more smart people around here, and access to your smarts makes sense.” 

This is why I insist that you meet solely with true, economic buyers. They can do these things. 

Retainers should never be by the month, as explained earlier. There simply is insufficient time to show your worth, because the client may not need your advice monthly, especially the first month, and monthly fees are too easy to simply stop. 

Thus, quarterly is the minimum I suggest and six months to a year are quite common. Multiyear deals are somewhat more difficult because of budgeting requirements and internal rules. 

So the question becomes: How do you assure renewals at the conclusion of the term? Here are some of my suggestions: 

1. Summarize the value over the period. 

Nearing the end of the retainer period, summarize for the buyer the issues you were consulted about, your advice, and the outcome. These are virtual case studies: the situation, intervention, and resolution. The buyer may have become so accustomed to your help that the depth of the outcomes is forgotten or simply assumed. You know the Hollywood sequence: 

• Who’s Audrey Smith?
• Get me someone good to play the role.
• Get me that Audrey Smith who played the role.
• Get me Audrey Smith.
• Get me an Audrey Smith type.
• Get me a young Audrey Smith.
• Who’s Audrey Smith?

Keep your worth in front of the buyer by summarizing progress, especially nearing the end of the retainer term. 

2. Agree that the retainer can be favorably renewed in advance. 

If you have a retainer running from January through June, offer the option of advising you of an intent to renew in May in return for a 10 percent reduction in the fee. However, if the buyer waits, say until May or later, then the full fee will be due again. 

As cited earlier, many firms require that any discount be taken advantage of in projects that are undertaken. This offer provides a benefit for the buyer and a huge benefit to you. 

3. Keep the client apprised of the ending date. 

Many clients honestly lose track, don’t renew, and then call you three weeks later for help, putting you in the awkward position of providing it possibly free, or having to ask for money before providing it. 

Drop a note or mention during a phone call: “Just a reminder, our retainer arrangement will end on June 30, which is three weeks away.” 

4. Watch for critical activities. 

The client will probably need your help more if there are critical activities approaching, such as new product introductions, reorganizations, new technology, and regulatory reviews. Tell your client: “I know that the regulators will be here during August and our agreement expires in June. Do you want to continue it to cover that next period, which you’ve said is always chaotic?” 

5. Listen for the buyer to give you an opening. 

The buyer may well say, “In September, we’re going to have to talk more frequently about the divestiture,” or “I’m going to need your help for the October board meeting.” At these points you say, “Happy to work with you on it, should we talk about extending the term of the retainer to include that period?” 

The more the buyer relies on you the more comfortable the relationship becomes, but that means that the buyer may not recognize that renewals are looming. Don’t allow yourself to become a “friend,” and feel uncomfortable asking for repeat business. 

It’s not the quantity of time—the amount of calls or e-mails or meetings that create value for the buyer in retainers, but the quality and impact of the advice, along with: 

Responsiveness: These clients deserve to be top priority for return calls and e-mail response, preferably within a couple of hours. 

• Flexibility: You have to use your judgment to respond to client need. I once flew to Pittsburgh on a weekend to facilitate an emergency meeting for Calgon. It wasn’t part of the deal, but it needed to be done.

• Accessibility: Your client should have your business, home, and cell phone numbers, as well as a private e-mail address. There are times when unusual circumstances dictate quick and direct contact.

• Prescription: Retainers are not good vehicles to try to gain some kind of consensus with the client and/or the client’s colleagues, nor is it a time to play therapist and ask, “Well, how do you feel about that?” Give an opinion with clarity, rationale, and succinctly.

• Ego control: Don’t become upset if the client doesn’t heed your advice, or doesn’t call during an important event, or tells you flat out something won’t work. You’re an advisor, not a Magic 8 Ball meant to be taken at face value all the time.

Case Study: Calgon 

I had been working on projects with Calgon and the president asked about the best way to work together for the next year, so I suggested a year’s retainer at $10,000 per month, with payments quarterly, but with a $20,000 discount if $100,000 were paid on January 2. We also agreed that we would mutually evaluate renewing the arrangement under the same terms in November. 

We did that for three years, until one November the president said, “Alan, we’re not going to do the $100,000.” I started to desperately review what I might have done wrong or how I may have become complacent. Then he continued: “Make it $130,000, you’ve been more valuable than you think.” 

If you follow these guidelines and heed this advice, you’ll find that your hard- won retainer will stand a far better chance of being renewed. Most consultants do not work with clients for more than a couple of years, at most. That’s because they engage in purely project work, with no retainers. 

I’ve been stressing that retainers are more likely as a result of top-flight project work with existing clients, but they may also arise from direct business with a new client because you have a position of thought leadership, outstanding intellectual property, high visibility, commercially published books, and so on.

I’ve represented this in the Million Dollar Consulting® Accelerant Curve in Figure 9.1 

FIGURE 9.1 The accelerant curve 

You can see that a progression of work with clients can help speed them down the curve, from areas of low barrier to entry (business with you), aided by “bounce factors” (e.g., models specially created for the client), that end up in your “vault,” which comprises such things as licensing and retainers. Counterintuitively, perhaps, as fees increase and the intimacy of the relationship increases (bottom axis) labor intensity decreases.

That “vault” contains breakthrough work and singular value that only you can provide to certain clients. Although it attracts people who have come down the accelerant curve, it also attracts what I’ve chosen to call “parachute business,” which is new business from non clients, which can go directly to retainers. 

If you observe people who are the acknowledged leaders in their field—Marshall Goldsmith in coaching, Jeff Gitomer in sales, Walt Mossberg in technology, Marcus Buckingham in personal development, me in solo consulting—you’ll find that people are quite prepared to initiate a retainer relationship to have access to those respected “smarts.” 

Thus, achieving that type of “star status” no matter how small or grand your field will greatly encourage direct retainer business from new sources. 

But what if you’ve not yet attained those heights? 

Here are other ways to try to stimulate more retainers: 

1. Let the prospects know the option is available. 

Too often you’re focused solely on your project work. If you look at the Accelerant Curve, you’re featuring or speaking about only a few options in the middle. Make sure that your prospective buyers understand you offer retainers and the utility and value of them by: 

• Stating in your casual conversation with prospects that “While I was on retainer with . . .” as a part of your language.

• Insert the same kind of statements in your formal speaking events, such as, “Here’s why I love retainer work—I found myself being called at midnight. . . .”

• Write some white papers, newsletter articles, and blog postings that mention your retainer exploits.

2. Suggest it as an immediate option. 

Remember the bank executive in the case study who told me he needs smart people hanging around? I was lucky he felt that way at the time. You should try to mention that there are several options for working together, one of which is a retainer. 

3. Acquire specific testimonials. 

Among your video and print testimonials should be clients who expressly mention the power of having you on retainer and how that relationship created tremendous value. 

4. Use a retainer as an extension of value in proposals. 

In your top option in the proposal, add a retainer to the project, with the hope that this aspect would be continued as a pure retainer in the future. 

I thought this would be a good place to provide a sample proposal specifically for retainer work only. 

Sample Retainer Proposal Proposal for Marlin Perkins, CEO, the Acme Company 

Situation Appraisal 

You’ve asked me to serve as a resource on retainer to help in an advisory capacity by phone, e-mail, and an occasional meeting with your board preparation, retention issues, difficult customer situations, and related matters. 

People Involved 

I will be the sole resource from Summit Consulting Group, Inc. providing the responses and advice to you and your COO, Jim Perkins. Any additions to the two of you will require an amended proposal. 

Scope 

The two of you have unlimited access to me from 9 to 5 U.S. Central Time during the week by e-mail and phone. If not immediately available, I will re- turn all phone calls within 90 minutes or, if at the end of the day, first thing the following morning. All e-mail will be responded to within 24 hours and usually much faster. We may have regularly scheduled calls at times we both agree on for whatever duration is needed. You may also contact me in emergency or critical situations beyond these provisions. Finally, we will personally meet if and when we both determine that such meetings would be critical to the resolution of high-priority company issues. Any additions to this scope will require an amended proposal. 

Duration and Timing 

This proposal covers the 12-month period from March 1, 2012, to February 28, 2013. We will discuss an extension in December 2012 if warranted. 

Terms and Conditions 

The fee for this retainer is $10,000 per month, payable by quarters at the beginning of each 90-day period (e.g., $30,000 due March 1, 2012). It is noncancelable for any reason, including your not contacting me for given periods, and payments are to be made on all due dates as scheduled. The retainer may not be postponed, delayed, or otherwise rescheduled. 

We offer you a courtesy discount of 10 percent if the entire retainer is paid at commencement: $118,000 due on March 1, 2012. 

Expenses will include only travel expenses should both be decided that a meeting is required, and will be billed as actually incurred. Expense reimbursement is due on presentation of our invoice. 

Joint Accountabilities 

Your accountabilities will include: 

• Providing me with access to you and your COO, including per- sonal contact information.

• Sharing financial details of costs of turnover, loss of customers, acquisition costs, and so forth, as needed.

• Responding quickly to my requests for information.

• Reasonable lead time when discussing urgent matters whenever possible.

My accountabilities will include: 

• Signing nondisclosure and confidentiality documents.

• Responding to your questions and requests as stipulated above. We both will be accountable for:

• Immediately informing the other of any new developments, which might materially affect the success of this project.

For example, the buyer finds out that divestiture is in the works, or I find out that three vice presidents have their resumes on the street.

Objectives, measures, and value are not included. You should include Joint Accountabilities as in our earlier example, and finally acceptance. 

I don’t allow postponements with retainers because you might be in a position of an eternal retainer in such a case. Here, you must hold fast to the agreed on duration. 

These retainer proposals are more like signed agreements—short, to the point, and easy. They simply stipulate the Who?/What?/When? dimensions and clarify that any alterations will result in an amended proposal.

Note that I don’t usually include options here. My feeling is that a retainer is a retainer is a retainer, and providing differing durations or activities during it is simply distracting. 

You may find yourself simultaneously delivering projects during the retainer. That’s fine, it happens, and you simply create the traditional proposal for the project work (and there, of course, you can and should have options). But be careful: If you agree to a retainer and then agree to or suggest project work within it, you are going to lose your shirt as well as your house. There is no retainer large enough to cover the appropriate fees from the value of multiple projects.

So let me conclude this chapter by reemphasizing: 

1. Project work involves a clear intervention, with a beginning, middle, and end, oriented to produce certain results, the value of which provide a dramatic return on your fee. You are the interventionist, even if you’re using client resources, to ensure that the project moves forward. You actively intervene with as many client resources as are required for the objectives to be met. You are highly proactive with the client. 

2. Retainer work is a relationship in which the buyer purchases the right to have access to your smarts under limited conditions, which include people who have access, the degree of your responsiveness, and the duration of the arrangement. You are reactive to the client’s needs. Almost all of the work is by phone and e-mail—remote. 

If you keep these fundamental and significant differences in mind at all times, you’ll have a great career—and submit successful proposals—for both project and retainer work with existing and new clients. 

Finally, let’s look at what to do when bad things happen to good proposals.