Consulting by retainer or hourly rate?

[Hugh Jass]

Anyone have experience consulting and obtaining payment via monthly retainer or charging hourly? I'm a business JONG, and I'm not sure which is more advantageous for me.

Thanks.

[Greydon Clark]

Retainer, work fast.

[Buster Highmen]

Retainer...with dental dam.

[Jackie Treehorn]

The two are not mutually exclusive. You can ask for a retainer up front and still bill hourly. I think you mean Fixed Fee vs. hourly. You're the only one who can figure out which of those is "better" for you.

[Hugh Jass]

^

I should have asked at Epic. Serious questions get serious answers from serious people.

[jrosendahl]

It really matters what type of consulting you are doing, most consulting I know of (IT and Enginering) is by hourly rate, other people where hourly rate is dificult to measure like sys admin, will go retainer. I think in general, it is more difficult to explain the value of a retainer to your clients.

[El Chupacabra]

The two are not mutually exclusive. You can ask for a retainer up front and still bill hourly. I think you mean Fixed Fee vs. hourly. You're the only one who can figure out which of those is "better" for you.

Retainer and bill against the retainer, with agreement that when retainer depletes to X dollars, payment will be made to replenish the retainer.

You'll want a separate bank account for client funds.

[Hugh Jass]

It really matters what type of consulting you are doing, most consulting I know of (IT and Enginering) is by hourly rate

Engineering

Retainer and bill against the retainer, with agreement that when retainer depletes to X dollars, payment will be made to replenish the retainer.

That sounds like an arrangement to my advantage. Thanks.

You'll want a separate bank account for client funds.

Also good advice.

[xtrmjoe]

If you are just starting out hourly may be easier to get a client base going. Then move towards retainer as your demand excedes your supply. Then you can start to raise your prices untill your demand is just above your supply.

[NorCascader]

interesting...

I just started doing some Contract Survey CAD work. I thought a retainer, but my first client offered hourly. There is the chance that you and your client won't agree when you send the bill for hourly. Whereas a retainer they would already know what you will charge.

[Hugh Jass]

If you are just starting out hourly may be easier to get a client base going. Then move towards retainer as your demand excedes your supply. Then you can start to raise your prices untill your demand is just above your supply.

I don't plan on additional clients at this point. The plan is to retain my current position while moonlighting with one customer.

There is the chance that you and your client won't agree when you send the bill for hourly. Whereas a retainer they would already know what you will charge.

This crossed my mind. I'm leaning toward El Chup's advice as a result.

[jrosendahl]

if you are moonlighting I would strongly sugest either hourly or fixed fee but not a retainer
A retaier implies misc services when ever the client wants them. While fixed fee implies I will produce or perform X as defined in the contract for $Y.

What ever you do make sure you have a tight, clear contract that includes a scope of work/services, it will protect you and your client.

[Hugh Jass]

Good points. This will in effect be a fixed fee arrangement, as the scope of my duties must be clearly stated for my current employer.

[Sinecure]

If its a fixed fee arrangement, why the original question. If you've agreed on scope of work, deadlines and deliverables, plus you have the total cost, then a retainer is moot. Its a project and you just have to determine the payment schedule.

Hourly - means you submit an invoice indicating the number of hours worked and they pay that based on a pre-arranged hourly rate.
Retainer - basically the same as hourly, except they agree to give you $X up front, and you bill against that (draw it down) as you do work. They've committed to use at least $X worth of your time and since you are "on retainer," you essentially have to accept the work at that rate. In a way, you can think of it as a group buy where you agree to purchase a certain minimum quantity and therefore get a slightly (or not so slightly) reduced rate compared to the standard, or retail rate.

Fixed rate contract - basically you agree to a scope, deadlines, deliverables, etc., plus the overall cost. You typically get paid a portion on kickoff (or some other milestone early in the project), and then either the balance at successful completion, or paid out at milestones. This is basically how I run my business. We generally get 50% up front and 50% on completion. Of course you base your bid on how long you think the project will take. If you underestimate, you eat it (within reason - if the client changes the scope, that's a different matter and subject to renegotiation). If you work fast, you make more per hour.

If I were you I'd get a bit more advice than is going to be doled out in a series of threads on TGR. At least make sure you and the client are talking the same thing in terms of fees, invoicing terms, etc. You can call a fixed price contract a "retainer" if you want, so long as you and the client both understand what the hell you are talking about.

[Crass3000]

When we do consulting (Backbone fiber optic network design for Telecom companies) it really matters on the client if we go with a fixed bid or hourly. There are so many variables to consider but one that I would strongly consider is the customer screw-around factor. Once a company knows they are paying a fixed bid sometimes (or some companies) loose any interest in doing the things they need to do on a timely basis to move the process along as they promised. In the end we do tons more work than we bargained for with these type of clients.

As somebody else mentioned... only you can really answer the question since you know more about your clients and what you are doing than anyone else. After you have developed a client base you will know who to charge hourly and which companies are fine to work with on a fixed bid basis.