Shopify Ecosystem

Building An Ecommerce Safety Net: A Guide

building-an-ecommerce-safety-net:-a-guide

Does it seem like you’re either working around the clock or things are so slow you can’t pay the electric bill?

If you’re stuck in the feast-or-famine cycle, consider using agency retainers. Done right, they can help ensure you’ll have a consistent volume of work. Then you can budget for the future, plan your team’s time, and enjoy all the other benefits of regular income and billing processes!

How to Pick the Right Kind of Agency Retainer

Working on retainer can have some pretty nice perks for your agency. Just think of that steady cash flow! It can also help strengthen your client relationships. Your administrative overhead drops when you don’t have to pitch proposal after proposal to the same client.

And yet, agencies often struggle to create and sell retainer offerings. It’s important to remember that retainers are an iterative process, and it’s your job as an agency to provide the general framework. Over time, your offering will become more comprehensive, but it will always be a work in progress.

Retainers can be used for clients that need help with a project, clients that need ongoing assistance, and clients that need help with growth. Here are four of the most common types of ecommerce agency retainer models:

Hourly Retainer:

Hourly is the simplest retainer model, in which a client agrees to pay a specified sum in advance to secure a number of hours over an agreed-upon timeframe. Generally speaking, you set aside those hours each month, and if the client doesn’t use them, they lose them. Alternatively, you can agree in advance on a maximum number of unused hours that can be carried over.

Hourly retainers are ideal for:

  • Projects that are almost complete.
  • Clients that request additional hours beyond the original scope of a project.
  • Project-based Retainer:

    Project-based retainer models take the total estimated cost for a project and split it into a monthly fee for the estimated duration of the project. So, if a $20K project will take 4 months, the client will be invoiced $5K at the start of each month. It’s important to attach expected

    deliverables for each payment so you have no issue justifying invoices. But remember to maintain focus on high-level deliverables, rather than individual tasks or hours spent.

    Project-based retainers are ideal for:

  • Agencies that have a high volume of projects who want to guarantee consistent monthly income.
  • Agencies that want to be able to allocate their resources in advance.
  • Time-based Retainer:

    Time-based retainers are one of the most common kinds of retainers agencies use. They usually involve charging time out at daily, weekly, or monthly rates, which allows agencies to schedule their resources in advance. It also provides financial stability, which is essential to scaling an agency.

    Time-based retainers are ideal for:

  • Agencies that want to scale their team,
  • Agencies that want predictable cash flow each month.
  • Value-based Retainer:

    Heads up! Value-based retainers are one of the most difficult retainers to get right. Ultimately, you are charging a monthly fee for a projected value that you can deliver. The focus for value-based retainers is how much value a set of deliverables will bring to the client’s business.

    A great way to implement a value-based retainer is to propose a pre-set retainer according to the client’s main area of interest, such as conversion rate optimization (CRO) or pay per click (PPC). Submit a proposal that outlines value-based deliverables and a monthly fee that you feel justifies your efforts.

    Value-based retainers are ideal for:

  • Agencies that are confident in their expertise.
  • Agencies that are comfortable with offering a proactive approach to retainers.
  • How to Implement Value-Based Retainers: A Pro’s Tips

    For value-based retainers, there’s a simple three step process: (1) analyze where you can make the largest impact for the client, (2) implement your solution, and (3) optimize to continually grow results. This provides the framework for a 3-month retainer—the perfect amount of time to build trust, without asking for too much of a commitment from the client. Start by selling 3 months, and after you’ve proven your worth you can lock in for 6 or 12 more months.

    After the 3-month retainer is complete, use the data to provide recommendations for a 6- to 12-month retainer agreement. It’s imperative that deliverables are clear in advance so clients know what to expect and can see the value that you bring to their team.

    Your retainers should be fairly high- level to avoid setting unrealistic expectations. Remember, once you put something in writing, your clients will hold you accountable! It’s your responsibility to ensure that retainers are as profitable as possible. If you try to squeeze too many tasks into a limited budget, you’re doomed to fail. Retainers are about quality, not quantity.

    Clients should not be getting free services. Measure your retainer profitability according to the volume of billable hours. If a client is paying $2,500 per month and your standard hourly rate is $100 per hour, you can give them 25 hours each month (this is an hourly retainer). But remember, this includes all time spent by your whole team. Say your account manager calls the client for an hour twice a month, and brings two specialists in on each call. That’s $600 of your agency’s time spent on calls! If you did this for 10 clients, you would lose $6,000. Unless your clients are aware and have agreed that the calls would be taken from their monthly allowance, it’s going to be tough to get compensation for this time.

    You can see that it’s critical to minimize the amount of non-billable work, especially if you are working on a value-based retainer rather than an hourly one. You need to know what services you’re offering, and how long they take in terms of human hours.

    Special thanks to our friends at Rewind for their insights on this topic.
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