Retainer Fees: At what point would you decline an opportunity?

Made Essential Reading on 23 July 2010 Lee Lomas

The story carried in PR Week today about a number of large PR agencies declining to pitch for the Ryanair account got me thinking. Basically, in 90s super-model parlance, several agencies have decided they wouldn’t get out of bed for the monthly fee on offer.

So, at what point would you decline to offer your services? Let’s face it – Ryanair is not a low profile account is it? Would my company have declined the opportunity for a £6,300 monthly retainer fee? Without seeing the detailed brief I can’t answer that and clearly we are at a different stage in our growth than some of the ‘big boys’-  but it still comes down to how you value yourselves.

Once you have looked at your own costs for staff and offices etc, you then must decide what margin you want to make on a job. This is then easily worked into a number of hours that you can spend on a job for a fixed fee. The simple question then is “Can the job be done in the time available?” If not, are you prepared to discount your margin to gain more hours for the fixed fee? If the answer is no to both of these questions then either the job is restructured or you decline the job.

In the early stage of any agency, where you are selling your skills by the hour, retainers are a double edged sword. They provide a bed-rock of income and therefore some stability but they are the jobs where extra hours (and therefore profitability)can easily be spent trying to please the client. It is so easy for your perceived major clients to actually be the biggest drain on your profitability.

Only once you have a firm grip on your own worth and can clearly monitor your hours against a job, can you thrive. Those companies that have declined the Ryanair opportunity clearly see a likelihood of their worth being diluted by the time required for a good job vs. The available monthly fee.