Should Professionals be Compensated With a Retainer or Paid by the Hour?
ByWhen you are in a service business whether you are a doctor, dentist, lawyer or PR professional, you are basically selling time. That may sound crude to highly trained people with special skills. I can hear the objections, “I don’t sell time — I heal people…
I make sure my people are properly represented in court,” and so forth. All true. But there are only so many hours in a day so how do your leverage yourself to the maximum financial benefit? By keeping track of your time you can more accurately gauge your income. You will soon figure out the clients that are profitable and those that are not.
Now let’s look at it from the client side in the PR business (this would apply equally to ad agencies, law firms and accounting firms). The client’s goal is to stretch the time the agency spends on its business. The client is not so interested in how many hours the agency takes to complete an assignment. So a monthly retainer can be a very good deal. It is often difficult for an agency to figure out how much to charge because of the unexpected — that emergency that burns through the retainer. The reality is it always comes back to time. Will the client retainer result in a profit for the agency? Again, most clients are not interested.
But they should be. If a client sucks the life out of the retainer it will soon find more junior people (read less expensive) on its business. So whether the account is on a retainer or the work is for projects based on hours, the client and the agency need to work together to ensure that the relationship is mutually beneficial.
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