Value-Based Fees: How to Charge—and Get—What You're Worth: A Guide for Consultants, Second Edition

Chapter 6. The Fine and High Art of Using Retainers: It's Just the Smarts, Stupid

There is a difference in my book (and this is, of course, my book) between value-based fees and retainer fees. While both are in the same ball park, the view of the field is different in this regard.

A value-based fee is compensation paid by the client in exchange for the consultant's contribution to the ultimate value (improved condition) that the client agrees will be derived. Value-based fees concern projects of finite scope.

A retainer fee is compensation paid by the client in exchange for access to the consultant and the consultant's talents for a specified interval. Retainer fees concern time periods of finite duration.

(Just to keep the record straight, a contingency fee, which I don't favor for reasons cited earlier in the book, is compensation paid by the client as a fixed percentage of a stipulated financial outcome at a certain point in time. Contingency fees, often called "performance fees," concern percentages of monetary gain.)

I've been engaged in retainer fee relationships frequently. I think they make sense under the right conditions, and they can be a wonderful source of ongoing and predictable income in a profession known for uncertain and vacillating cash flow. However, they can also be dysfunctional and unprofitable if they are not controlled and managed properly.

One final caveat: I am not using the term retainer in the traditional lawyer's sense, which is a fixed amount of ...