A retainer is a fixed recurring fee for ongoing work. Done properly it is the most valuable income a small service business can have. Done vaguely it becomes unlimited work for a fixed price, which is how good clients quietly turn into bad ones.
The three retainer structures
| Type | What the client buys | Works for |
|---|---|---|
| Capacity | A set number of hours or days a month | Consulting, design, development |
| Scope | A defined list of deliverables each month | Maintenance, reporting, support |
| Availability | Priority access and a guaranteed response time | Emergency call-outs, IT support |
Most disputes come from selling one and delivering another. A client on a capacity retainer who thinks they bought availability will expect everything, immediately, within the hours.
What the agreement must say
- What is included, in specific terms, not ongoing support.
- What is excluded, which does more work than the inclusions.
- Whether unused capacity rolls over. The default answer should be no, and it should be written down.
- What happens when it is exceeded. An hourly rate for overage, agreed up front.
- Notice period for either side.
- Annual review date, so a rate increase is expected rather than a surprise.
Invoicing it
Invoice in advance, at the start of the period, not in arrears. A retainer is capacity reserved, and reserving it is what the client is paying for. Invoicing after the fact turns a retainer into a timesheet.
- Use recurring invoices so it goes out on the same date every month
- Each issue gets its own invoice number
- Reference the agreement and the period on the document
- Send a statement quarterly, so twelve invoices a year stay reconciled
The review nobody does
Retainers decay. The scope creeps, the rate stays where it was in year one, and neither side raises it. Diarise a review at the same time each year, look at what was actually delivered against what was agreed, and reprice. A retainer that has not been reviewed in three years is almost always underpriced.
Common questions
Should a retainer be invoiced in advance?
Usually yes. The client is buying reserved capacity, and reserving it is the service.
What if the client uses nothing that month?
That is what they bought. Rollover is a choice, and if you allow it, cap it.
How much notice should either side give?
One month is common for smaller retainers. Longer where you are holding significant capacity.
Set the retainer up once as a recurring invoice and it issues on the same date every month.
Create your invoiceDisclaimer: This content is for general information only and does not constitute legal, tax, accounting or financial advice. Always confirm important requirements with SARS, the relevant authority or a qualified professional.
