Repeat clients can help you stay afloat, but they might also demand a great deal of your time. Make sure you have a retainer or an on-call agreement in place that meets their needs and yours.
If you do lots of good work as a consultant for your clients, sooner or later one of them may ask you to be on call for them or to agree that you'll be available for a certain amount of time. Although at first glance, such arrangements might look like an easy way to both keep a client happy and guarantee a certain amount of income every month, you should think carefully before setting up such an agreement.
Whether you work as an independent consultant or run your own small consulting firm, agreeing to be available for either support or additional work can be fraught with risk. For example, you don't want to mar your reputation by being unable to deliver when necessary. However, these arrangements also have their advantages. This article examines how to evaluate the terms of any such agreement.
On call or on retainer?
Basically, a client could ask you to be either on call or on retainer. The difference between the two is small but not insignificant:
- Being on call implies that your client will want you to respond immediately.
- On retainer implies that the client wants you to be available to work on specific projects. While you would be needed within a reasonable amount of time, the element of urgency is probably not as great.
Of course, these terms are hardly set in stone, and a client could mean one and say the other, so be sure you learn what their expectations are. Because most of the factors associated with each are interchangeable, what I discuss here will apply to either unless otherwise noted.
Establish the hours and the time period
One of the first things you want to do is weigh the hours the client wants you to be available against the maximum hours you're willing to be available. For example, you might agree to be available up to 32 hours in any given month (specify the exact hours, not days, or you may find yourself arguing over how many hours are in a day). The goal here is to establish a period of time that will satisfy the client's needs in most anticipated situations but that won't infringe on your ability to take on other projects.
Also, discuss what will happen if the client needs you beyond the maximum hours. Make it explicitly clear that you have the option to refuse the extra work. Knowing this can help the client prioritize the situations under which they will call you in. If you do take on work above the maximum, be sure to arrange payment accordingly and charge at least your usual rates.
You should also think about when you want to make yourself available. Will it be evenings and weekends? If so, can the client call you for any project or support call, or only for emergencies? Do you charge extra for working after hours?
Set payment and billing terms
Payment is tied directly to the hours you agree to be available. In a retainer or on-call agreement, you generally agree to a rate that is somewhat less than your usual rate, given the likelihood that you won't be working all of those hours every month. Make sure the client knows that they will have to pay you for those hours, even if you never darken their door during that time. This sounds obvious, but you'd be surprised by how many clients don't think about this until it comes time to cut what seems to be an "unearned" check.
If you can arrange for the payroll department to pay you automatically every month without your having to submit an invoice, all the better. Of course, if you work any extra hours, you'll need to submit an invoice for those hours. Also, specify the time in which you expect to be paid.
Determine your response time
Here is where any difference between being on retainer and on call might come into play. What if the client contacts you to say that they need you now, but you're working on a critical project for another client? Whom do you alienate? You can make this situation easier if you and the client agree on a response time.
In this sort of situation, being available on evenings and weekends can enable you to satisfy a support call without cutting into your time on your current project. However, if you want to leave this option open, be sure that your client agrees to make their resources available for you at those times as well.
One idea is to specify a tiered system for response time, such as in the following example:
- You will return any call or page received between 8 A.M. and 5 P.M. within two hours. Calls after that will be returned at the start of the next business day.
- Calls received by 2 P.M. that can be handled over the phone will be addressed before 6 P.M.
- Emergency calls that require you to be at the client's site will be addressed as soon as possible but within no more than 12 to 24 hours.
- Nonemergency calls will be handled within 48 hours.
A lot of factors go into determining the appropriate response time for any given client. For example, a support agreement for mission-critical software should entail a much shorter response time than that for a retainer to churn out new graphics for an ad company's Web site. If you aren't entering a support agreement, it's reasonable that you could take as much as two to four days to start on a project, although you should of course contact the client well before then.
Editor's note: This TechRepublic article originally published on September 7, 2000.