February 1, 2022

Please, never include rollover hours in your retainer contract

As nice as it would be otherwise, business is inherently unpredictable. Sometimes you have a slow day, week, or month. Other times you are running around like a chicken with its head cut off. That’s part of what makes the whole thing fun.

Retainer contracts, where you set aside 10, or 100, or 1,000+ hours of service for a client, usually sold at some discount compared to on-demand service, help reduce uncertainty in a couple different directions. For your firm, they help you predict workload and revenue, making it easier to take on big, long-term commitments. For your client, they make sure that you are ready, willing, and able to do whatever work they need you to, and they also know how much to budget for your services each month.

It works pretty great. Until that slow month comes.

After a couple weeks you’ll hear something like this line on your status call “Looks like we’re going to be under retainer, can we rollover the unused hours?”

It completely makes sense why the client would ask this: they think they’re paying for hours that won’t be used and they want to use them in the future.

But in a retainer the labor isn’t what you are actually selling. You are selling them an option to that labor during a specific window.

There is one certainty: the sun will rise tomorrow. Whether or not your contract gets signed, your client gives approval, or your post gets shared, tomorrow is another day — and this one is gone for good. The labor you could have used today was either used or never will be used. You can’t rollover that time to tomorrow, and your contracts shouldn’t let your client rollover their option to that time either.

Allowing for limitless rollover hours can put you in a bind where you might be chilling for a a few months just to be slammed with an unholy amount of work later in the year. This IOU labor becomes a liability that can sink your whole operation.

If you must include some form of rollover (because look, we get it, things don’t always neatly match up to calendars!), you have to smartly limit it. Consider only allowing for a rollover of a handful of hours, maybe a maximum of 25% of the month’s allotment. And then make sure to limit the length of time that the hours can shift — we liked to allow for just a one month buffer.

You can’t sell what you don’t have, and each hour disappears from your inventory every 60 minutes.

About the Author

Ben Guttmann ran a marketing agency for a long time, now he teaches digital marketing at Baruch College, has a book coming out in 2023, and works with some cool folks on other projects in-between all of that. He writes about writes about how we experience a world shaped by technology and humanity – and how we can build a better one.

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