Web developer: Help me justify retainer fees

April 11, 2007 11:45 AM

Please help me justify retainer fees for my website development business. I'm trying to justify it in my own mind and then possibly how to introduce the fees to clients.

I'm a solo website developer. I mainly focus on small, brochure sites. I'm been doing it for a number of years so I have working relationships with a number of clients. Once a website is launched, I provide ongoing updates and hosting. I charge a monthly fee for hosting which is on par with most shared hosting options. I'm trying to figure out how to handle the ever increasing requests from clients. For website updates, I charge an hourly rate at quarter hour increments. The problem is that my day is being taken over with what I generally consider non-billable requests. These can be anything from questions about a client's computer issue or random ideas for possible future work on a site. Each email I respond to can average about 15 minutes. Eight emails and 2 hours of my day is gone. It's usually more than that.

So I'm asking for help on how to better manage this situation. One thing I am considering is some type of retainer fee or management fee or something along those lines. Basically it would be a recurring fee to cover my time on these types of issues.

Is this a good idea? Bad idea? Are there better ideas? How should I price something like this? Some clients require more hand-holding than others, but I don't usually know that upfront. Any advice would be much appreciated. Thanks.

posted by jpep to Work & Money (13 answers total)

A retainer fee sounds reasonable. You get to cut down on administrivia, and they've got more predictable accounts payable—and that's a good way to pitch it. Naturally, you'd want to cap the number of consulting hours covered by the fee, and prepare for the possibility that customers will try to "use up" all those hours every month (I've never worked on a retainer, but some of my colleagues have; I don't think they've had that particular problem).

These "non-billable request" are not non-billable, you're just reluctant to bill for them.

Offer the monthly fee at a slight discount to the equivalent hourly rate (this is the "he's spending less on administrivia" discount). You might also offer customers a "fire and forget" option: you make the website and hand it over, and they don't get to ask for support after that. And if a customer makes a stink about staying on an hourly system, you can accommodate them, but be more meticulous about counting every call towards their bill.
posted by adamrice at 12:02 PM on April 11, 2007

The discussions of ideas for future projects is probably a cost of doing business. It's basically part of doing your own sales.

Supporting your client's other computer issues seems distinctly out of scope, especially since it's costing you real money. Is this really a business you want to get into, or do you want to focus on website development? If you want to maintain your focus, see if you can find a small business computer support person you can direct people to (and who will give you referrals for site development work).

You might also consider whether the hosting business you are doing is really worth your while. It sounds like you are competing with people who have much larger economies of scale. You might do as well letting them handle everything and taking a referral fee and spending your time on your core business. Also, it seems that hosting to opens the door to other support requests.

Another thought. Would any of these things take less of your time if you picked up the phone and called people, rather than relying on e-mail?
posted by Good Brain at 12:05 PM on April 11, 2007

Good idea, & relatively common from my experience. Usually its lumped in with the hosting, though, if you're doing both. Price it as much as that time costs you, minus a bit because they're locked in & guaranteed. To a certain extent, discussing future plans for the site shouldn't fit into this, because you will be eventually paid for those. If you have to do research to get back with an answer though, I'd count that.

Keep track of the amount of time you spend on each client; maybe even itemize it, & if they bitch send them a list of the amount of time you spent on them in particular.
posted by devilsbrigade at 12:12 PM on April 11, 2007

What do you mean when you say "retainer"? I guess there could be different meanings from one field to the next, but in legal practice, a retainer is either 1) a fixed fee per month paid by a client to assure that a lawyer is available for that client and will not work for an opponent (sounds irrelevant in the web development context), or 2) a pool of money held by the attorney from which fees are drawn as hours are billed, basically as a form of insurance that the client will indeed pay for services rendered, at least up to the amount of the retainer.

But retainer funds are still only used to pay for billable services, they do nothing at all to reduce non-billable administrivia. So what did you hope to accomplish through using a retainer?

All that aside, though, I agree with adamrice that the minor troubleshooting you're doing is billable. It might seem trivial to both you and the clients, but as you say, it adds up. I would suggest that you first of all clarify with your clients that you will indeed be charging for these services if they exceed a minimum threshold level (say, 1 short call per week per client). You could also set a lower billing rate since all parties agree these services are less sophisiticated and outside of your core competency. Then, if some client actually does end up taking a couple hours of your time some week, include those hours, billed at the lower rate, and with specific notes as to the service rendered ("printer setup"), next time you bill them.

But, as Good Brain points out, discussions of possible future projects are generally "business development" and non-billable. Unless they're asking you to help structure a web project or something really concrete that amounts to you giving them a service rather than you drumming up more business. If that's the case you could start yet another category of services like "web application architecture" and charge for that at another rate altogether.
posted by rkent at 12:21 PM on April 11, 2007

I recently picked up On the Job, which is time-tracking software for the Mac. When someone calls me, I just hit 'go', and I keep notes as I'm going. It's extremely easy, and it lets you spit out a pretty invoice at the end.

I find that people don't mind paying fees for things like that- what they hate is rounding up. I see a lot of tech firms bill 15 minutes or 30 minutes minimum- someone calls them for a one minute question and gets billed for 15 minutes. I bill exactly what I work- if it's a four minute and 35 second conversation, I bill them for four minutes and 35 seconds- and I provide notes of the conversation on the invoice.
posted by JamesToast at 12:57 PM on April 11, 2007

When I was a one-man operation, I hated timing activities to the minute, running the clock on every phone call or email, so I opted to try to recoup such labour in my quoting. I think most of my my customers appreciated not being nickled and dimed for every little thing.

I would approach this situation by estimating how much time on average you spend with your hosted clients doing seemingly unbillable support, and activities around administering the client's hosting, and then making sure the hosting fee will cover this. If this makes your hosting fees uncompetitive, I'd say that's a rationale to get out of hosting.

Another approach is to make sure you have enough pad in your project quotes, or realistic projections of ongoing maintenance hours, so that the time is covered off that way.
posted by Artful Codger at 1:19 PM on April 11, 2007

I've had it work successfully with clients in the past. The pitch works like this:
"I'm becoming more and more busy, but you are a long and valued client, so I want to make sure you can get your site updates in a reasonable time. I'm offering a chance to reserve XX hours of my time every month for $YY. This will guarantee that I will provide quick and reliable turn around time in the future." Offer a contract with exactly how many hours of your work this will cover, performance expectations, and what any overages will cost. Also make sure they know that the hours and money are based on Conservative estimates of your past work.

If you phrase it right it won't sound like extortion but a service upgrade. And if you have satisfied customers you're basically setting it up so companies are bidding for your time which is a win for you.

_{JamesToast: Are you serious? Billing for a 4.5 minute phone call? As a freelance for 10 years and now a customer of a number of freelance services I hate getting little tiny nit-picky invoices. I don't need to see an invoice with individual seconds billed on it to know you're on the ball or not. If you get the work done satisfactorily I pay you. If not I fire you. Do you also invoice for the 2 minutes and 19 seconds spent preparing and mailing the invoice and depositing the check? Writing and sending checks is a huge pain. Raise your rates and offer stuff like that as freebies. You'll have less admin and your clients will appreciate it.}
posted by Ookseer at 1:33 PM on April 11, 2007 [3 favorites]

I've had exactly the same problem. My solution has been to pad the quotes for high-maintenance clients. If a client tends to make a lot of small requests that are difficult to turn into actual quotable items, future quotes are increased based on this expectation.

If a client asks tech support type questions that are unrelated to my work, I will either a) tell them that's not really my field of expertise and suggest an appropriate person or company to talk to or b) in the case of valuable clients, do my best to solve their problem and consider it part of maintaining good customer relationships.
posted by justkevin at 1:37 PM on April 11, 2007

I've freelanced in the past and the two primary ways I've worked around it are:

• Bill enough regularly so that you can absorb this non-work work
• In your contract with your clients specifically list increments that you bill at, to include phone calls, emails, etc.. (mine was 15min).

Now I didn't always bill the latter, but if a client started to dominate my time, fire off an detailed invoice, you're not a free resource.
posted by patrickje at 1:42 PM on April 11, 2007

I'm a consultant and I run a website on surviving as a consultant. Clients hate being billed for nit-picky little things, as noted above. If you're seeing this a lot, try to forecast it in your quote for the project. Consider including two to four hours of post-project support with an option for two hours of monthly support at $X per month. Or something like that.

For anything outside the project, say, "This is outside the current project scope. Would you like me to send over a change order?" If it has to do with a new project, say, "Great question/idea. Did you need the quote this week?" Make clients realize that you bill for your time.

I don't always bill for little things, but I do when a client starts to need a lot of hand-holding. Realize that some clients do need the support and will actually pay if you ask them to do so. It's all about meeting their needs (so you don't get angry!).
posted by acoutu at 1:59 PM on April 11, 2007

The company I work for often enters into maintenance contracts with clients for whom we've built sites. Essentially, we charge a flat rate for X hours of work per month. Usually, these contracts last for six months or a year. Any unused hours don't roll over to the next month. The rationale for such an arrangement is that we can safely set aside resources each month (because we're being paid to), and the client knows that they'll get the help they need in a timely fashion. Clients tend to understand this. Clients also tend to be more selective in what they ask for—they only have so many hours per month to "spend." Obviously, we still try to help (and bill) clients who don't have maintenance contracts, but if current workload at the company is such that there is no time to do what they need done, then they have to wait until things lighten up.
posted by thinman at 2:06 PM on April 11, 2007

...Pretty much what Ookseer said.
posted by thinman at 2:08 PM on April 11, 2007

_{As a freelance for 10 years and now a customer of a number of freelance services I hate getting little tiny nit-picky invoices.}

I send a single invoice monthly, not one for each incident.

_{Do you also invoice for the 2 minutes and 19 seconds spent preparing and mailing the invoice and depositing the check?}

No, admin stuff is on my time.
posted by JamesToast at 11:47 AM on April 17, 2007