finance
Retainer
Recurring monthly fee for ongoing service - the service equivalent of subscription revenue.
Definition
A retainer is a recurring monthly fee paid for ongoing access to a service - common in marketing agencies, law firms, consultancies, fractional executives. Retainers convert project-based service businesses into recurring revenue businesses, which dramatically improves cash flow predictability and valuation multiple. The trade-off: retainers require defined deliverables (otherwise the customer feels they're paying for nothing) and discipline against scope creep (otherwise margin erodes).
In your business
- →Define retainer scope in writing - what's included, what's overage
- →Track retainer hours vs allocated - scope creep is the silent margin killer
- →Retainer-based businesses are valued at 2-3x revenue multiples; project-based at 0.5-1x - the model matters