The Structure of Retainer Deals for UX Designers
Freelance and contract design is fraught with risk. You often find yourself in contexts that are unfamiliar, especially in business deals with business people.
You are often alone, representing your own interests, backing your skills and knowledge, and negotiating deals that represent both short-term and long-term contractual (ahem, monetary) agreements. That’s a lot of risk.
Today, I’m here to help you reduce some of that risk. Let’s talk money.
Per-project and hourly agreements
At some point, by choice or by force, we’ve experienced both per-project and hourly agreements. Those are usually the only options we know! Contract designers often find themselves in difficult negotiations. Here are a few scenarios:
Scenario ➊
Per-project budget -or- The Big Number Conundrum
Client: “Yes, we’d like for you to redesign our website. How much?”
You: “$8500.”
Client: “How do you arrive at that number?”
You: “It’s based on an estimate of my total time relative to my hourly rate plus an average rate of overage.”
Client: “And what if you don’t need to spend all that time?”
You: “I find that projects often run longer and take more time than projected. In truth, I‘m valuing the product outcome, not my time to produce it.”
This kind of conversation is healthy, but difficult. It’s based on a contradiction that people outside of our industry find difficult to understand: scope + overage.
Challenges to overcome:
—Verdict: Not recommended 👎—
Scenario ➋
Hourly rates -or- The Nickle-and-Dime Time
Client: “Yes, we’d like for you to design our website. How much?”
You: “$85/hour.”
Client: “How many hours will it take you?”
You: “My rough estimate is 100 hours total.”
Client: “So it’ll take you about 2½ weeks?”
You: “No, my estimate includes facilitation, communication, and production that will take approximately 2–3 months.”
Client: “Sounds like an expensive project. I don’t want to spend any more than $8500.”
You: “I will keep you updated on hours each week and let you know if it’s trending past the total budget.”
Again, not a bad conversation. To most business people, time equals money—it may help you get a yes quicker. But especially during longer projects, it’s a risky move that you will regret later.
Challenges to overcome:
—Verdict: Not recommended…like ever 👎—
So what do I recommend? Retainer agreements
Before you dismiss this type of contract as a ridiculous notion, please know this: If I can do this, you can too. It doesn’t have to be amorphous and it is definitely not evil (read: lawyer). I find that both designers and clients like retainers more than any other contract. Just introduce these as the only two options you use for your contractor agreements and you’ll be shocked when almost no one says no.
I approach retainer deals in two ways.
Scenario ➌
Ongoing monthly standard rate (with flexible hours) -or- The Classic Retainer.
This is probably one you’ve heard of before. Advertising agencies were using retainer agreements in the early days, but as you likely know, lawyers have perfected it. As a freelance designer, I usually add a 20% flexibility that lowers my average hourly rate and gives the client flex time for increased need.
For example, I might say $4000 a month for approximately 44–56 hours per month. Any work in excess of those hours is billed hourly. The monthly rate is collected in advance of the month where the work exists (almost like rent on an apartment).
Client: “Yes, we’d like for you to design our website. How much?”
You: “I estimate that it will take 6 months at my retainer rate of $4000/month.”
Client: “How many hours will it take you?”
You: “Each month covers 44–56 hours.”
Client: “What if it takes less time?”
You: “Each month is billed in advance of the month where the work exists. Any unused time is sacrificed at the end of each month.”
Why this works:
—Verdict: Recommended for long-term contracts 👍—
Scenario ➍
Blocks of hours -or- The Block Retainer
The IT industry popularized this contract approach a few decades ago to reduce surprise billings from unexpected hardware and software updates. In this unique agreement, the client buys “blocks” of hours ahead of time. For example, 10 hours @ $850. Then, they use that block until the time runs out (almost like a gas tank).
Blocks are an easy and non-committal way for clients to understand your relationship.
Client: “Yes, we’d like for you to design our website. How much?”
You: “I estimate that it will take 1–2 months, and I offer blocks of my time (20 hours each) for $1700.”
Client: “How many hours will it take you?”
You: “My rough estimate is 100 hours total.”
Client: “What if it takes less time?”
You: “Each block is billed separately as it is used. Any unused time is banked for you for one year.”
Why this works:
[Note: My lowest number of hours 10. Why? That’s the smallest project I’m willing to accept. You have to decide for yourself and keep adjusting over time.]
—Verdict: Recommended for short-term contracts 👍—
I have been running my freelance agreements as retainers for about 15 years with rare exception. Avoiding pitfalls like over-billing or surprise billing is required…but you’ll find clients are best behaved (sometimes even happy, gasp) when they are well-served and know they’re getting a fair deal. Always be checking in with them to make sure the money relationship is going as well as the design relationship.
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