A Simple Guide On How To Calculate Flat Monthly Retainer Fee For Marketing

how to calculate flat monthly retainer fee marketing service

As a freelance or independent marketer, determining how to bill retainer clients in a way that benefits both of you is an arduous task. You want to be well-compensated for your work without necessarily overcharging the client. 

The benefit to you of billing a flat monthly retainer fee is it guarantees that you will be paid consistently. The client also benefits because it simplifies payment into an understandable structure by compiling all dues into a single monthly number. Therefore, this payment can easily be factored into their monthly budget. 

Calculating The Flat Rate Monthly Retainer 

The best calculation method entails first finding your total desired annual pay then dividing it by your billable hours to find your hourly rate. Multiply this hourly rate by the number of hours you work in a month to get your flat-rate monthly retainer. 

Find Your Annual Pay 

To find your annual pay, consider three factors. 

1. Salary Goals 

First, what are your annual salary needs? Consider what you have earned previously from similar jobs, and what your peers in the industry are getting. This comparison ensures you choose a suitable amount. Ask for too much, and the client will feel exploited, ask for too little, and they will question the quality of your work. 

Let’s pick $70,000 as an example for this article. 

2. Expenses 

Secondly, add the cost of all your expenses. Your expenses may include coworking space fees, outsourced services, travel costs, phone bills, insurance, among others. 

If your total cost sums up to $50,000, you add this to $70,000 to get $120,000. 

3. Profit 

Thirdly add a profit margin. The recommended profit margin for most freelance, independent, or consulting businesses ranges from 15% to 25%. 

Taking 20% as our profit margin, we find 20% of $120,000. Our profit is $24,000. $24,000 added to $120,000 is $144,000. 

The annual pay in our example is $144,000. 

Determine Your Billable Hours 

What are Billable Hours? 

Billable hours are the number of hours you will spend working for your client; hence you will be compensated for them. To know if what you are doing is billable, consider if the task contributes to the betterment or completion of the project and whether it benefits the client more than you. 

Billable work freelancers do include planning for the project, doing research related to the project, attending physical or virtual meetings that pertain to the project, doing the actual project, and making revisions on additions included by the client. 

Non-billable tasks include any research or cost incurred when you pitched for the job, and back-office activities that do not relate to the client, like networking or team building activities. 

Communication processes like sending and reading client emails are billable, whereas sending invoices or processing payments are not. 

Typical marketing consultants spend about 65%-80% of their time in billable tasks, with the remaining time used for professional growth and business development. We’ll use 70% for our example. 

How Many Billable Hours In A Year? 

The ‘work year’ is 52 weeks x 40 hours per week, or 2,080 hours. Factor in 4 weeks for holidays and vacations, and 1,920 hours per year becomes the baseline number of potential working hours per year. 

Since you will only be billing your client 70% of your potential working hours, your billable hours will be 70% x 1,920, or 1,344 hours a year. 

Calculate Your Pay Per Hour 

Divide your annual pay by your number of billable hours to get your hourly pay. 

$144,000 divided by 1,344 hours is $107 per hour. That is the rate you should set in order to achieve your desired salary. 

To ensure your hourly rate is fair, compare it to what other marketing consultants are getting. Use the information you have gotten to either increase or decrease your hourly figure accordingly. 

Arriving At Your Flat Monthly Retainer Fee 

Now that you have an hourly rate, apply this to the number of hours you will make yourself available to the client each month. Recall that you need to include time for growth, development and continuing to build your client pipeline so that when this retainer ends you have additional work on hand. We established that your billable hours would be 70% of total working time. 

So, if a month is 160 hours (4 weeks x 40 hours per week, your full-time availability to a client should be 0.7 x 160, or 112 hours per month. 

If you dedicate yourself ‘full-time’ to one client, be sure they understand what that means in terms of hours (112 vs 160), then multiply those billable hours by your rate: 112 x $107. Here, your full-time monthly retainer rate will be $11,984. 

Since the business world is dynamic, agree with your client to review and revise your pay after stipulated periods like once or twice annually. 

Does this process seem a bit difficult or demanding? Fortunately, there are pricing worksheets and simple but effective calculators online you can use. Here, you just put in your data then the calculator does the rest.

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