How to Calculate Flat Monthly Retainer Fee for Marketing
Original post by Matthew Schieltz of Demand Media
As an independent marketing consultant, you have several different ways to bill clients. For example, you can charge hourly and log your hours for the client, agree to a commission structure, bill on a per-project basis or use a retainer. Calculating an ongoing monthly retainer that the client must pay gives you the benefit of having your salary and fees paid all or mostly upfront. For the client, a fixed retainer may also be simpler than other billing methods, because it bundles all your services and work into one monthly figure. The client knows how much he must pay you and can budget it into his expenses.
Determine your annual salary. Choose an amount based on a figure that you've earned for doing similar work as an employee of a previous employer, what other marketing consultants in your industry earn or a combination of other factors. For example, assume you want to earn an $80,000 salary.
Calculate your annual overhead and add it to your salary. Overhead includes all the expenses you incur to do business, such as travel expenses, office rent, equipment, stationary and supplies, insurance and phone bills. Let's assume your overhead for the year totals $45,000. Using a salary of $80,000, adding $45,000 equals $125,000.
Calculate a profit margin as a percentage of overhead and labor (your salary) costs. Profit margins for a consulting business may range anywhere from 15 to 25 percent, on average. Add your calculated profit margin to your salary and overhead. In this instance, assume you would like a 20 percent profit margin. Multiplying 20 percent (0.20) by $125,000 equals $25,000. Adding the two figures equals $150,000.
Estimate the amount of time you'll be working for your clients. As a marketing consultant, you can probably estimate that you'll spend about 65 to 75 percent of your time working on client projects, while the rest of your time may be devoted to administrative tasks and marketing your own business. A standard year in which you work eight hours a day, five days a week and allow for a couple weeks vacation consists of 2,000 hours. Multiplying 2,000 hours by the 70 percent of time you'll be working directly for your clients equals 1,400 billable hours.
Divide the annual figure you calculated (salary plus overhead and profit margin) by your billable hours to determine the hourly rate you must charge clients. In this instance, dividing $150,000 by 1,400 equals $107 per hour.
Compare your hourly rate to others in your industry. Adjust your rate up or down, depending on what you find and how competitive you wish to be. To find the hourly rates other marketing consultants earn, contact the professional organization or association for your field or read the association's publications. You can also ask other professional marketing consultants about their rates or discuss rates and fees with potential clients and customers.
Estimate the number of monthly hours you'll devote to your client and multiply it by your hourly rate to determine the monthly retainer. Some consultants use the guideline that you can expect to work two hours for each hour of face time you consult with clients. Others figure working hours by reviewing the different types of activities (e.g., website development, social media) a client wants and estimating the hours for each task. You can also create different packages for clients that guarantees a certain level of service, consult or working time from you. Multiply the number of hours by your hourly rate to calculate your monthly retainer. For example, multiplying 25 hours by an hourly rate of $107 equals a $2,675 monthly retainer.
Tips & Warnings
- You may want to make an agreement with your client to review the monthly retainer amount with him every so often (e.g., six months, a year) and adjust it up or down if variables change.
- Nolo; How Much Should You Charge for Your Services?; Stephen Fishman
- Gaul Advertising; Why Retainers May Be Best For You; Gregory Gaul
- Mark Goff Marketing Consultant; Marketing Facts Revealed: Real Costs of Hiring Marketing Talent; Mark Goff
- Bloomberg Businessweek; Determine What To Charge as a Consultant; Karen E. Klein; December 2009
- Forbes; How To Price Your Consulting Services; Mary Crane; November 2006
About the Author
Matthew Schieltz has been a freelance web writer since August 2006, and has experience writing a variety of informational articles, how-to guides, website and e-book content for organizations such as Demand Studios. Schieltz holds a Bachelor of Arts in psychology from Wright State University in Dayton, Ohio. He plans to pursue graduate school in clinical psychology.