Problem: You’re a freelancer or an employee and you would like to have your own clients. However, the time involved and lack of certainty in finding new clients each month is wearing you down. You would like to take the one-off services you are offering now and turn them into subscription services that your clients will pay for each month, thus giving you some recurring revenue.
Aim: By the end of this worksheet you should have identified:
- The skills you have which companies are ready to pay money for.
- Which of those skills are amenable to a retainer model.
- Which skills you will build a retainer package around.
Step 1: Make a list of your recent clients or employers, and for each of them list what the deliverables or your responsibilities were.
Step 2: Scanning the list, pick out the skills that underpin that work. Keep a count of how often each skill is turning up in your list.
For example if you are a software developer then the skills that are common to each engagement will likely involve programming itself but look for more niche skills like A/B testing, database optimisation or perhaps even notice that you have integrated Stripe payments for a significant number of your clients recently.
Step 3: For each skill, check:
- Could a company benefit from application of this skill on a regular (monthly, quarterly, yearly) basis?
- If so, how?
- How much value does the application of this skill provide your clients? Describe the benefits in terms of their bottom line. If there is no direct monetary benefit (e.g. the service is a security audit) then describe the value in terms of the potential loss that they are avoiding and/or peace of mind.
- Based on this value delivered, roughly how much do you think a company would be willing to pay for this service?
- How long on average per month/quarter/year would it take for you to provide this value to the client in a tangible form, e.g. the work itself plus a full report?
- Taking the rough dollar amount for the amount you think companies will pay for the service, divide by the number of hours you think it would take you to render the service. This is your estimated hourly rate.
- Take the estimate for value delivered to the client and divide that by the estimate for what the company would pay for it. This is the value ratio from the company’s perspective.
- Are your potential clients searching for a solution online? (Skip if you don’t know)
- Roughly rate the difficulty of hiring or training someone else to fulfil this service, and estimate their hourly rate relative to your own.
Step 4: Sort the list of skills by the value ratio in descending order. The higher the ratio, the more of a bargain the service is for the customer. The top entry is the skill or service you will likely have easiest time pitching and selling.
Step 5: Now sort the list by your estimated hourly rate; the top entry may not be the easiest to pitch and sell but it clearly nets you the highest earnings per hour so if that is your priority then this might be the one to go for.
Step 6: The problem with sorting by value ratio and your hourly rate is that you might not have estimated how much a client would pay accurately, perhaps even because you undervalue your skills. You are likely to be more impartial however about the value delivered to the company, so as a sanity check now sort the list by the value delivered to the company, in descending order, and look at the top entries. Do the entries you short-listed before appear up top here too? If not, you may be undervaluing your services. After all, if a company is getting $300 of value for every hour you render a particular service, and you would charge them $50 an hour (a value ratio of 6x), then you are likely under-charging: as a rule of thumb aim for a ratio of 3x so for ever dollar they’re spending on your services they’re making back three. This kind of synergy is easier to sell and for everyone involved to justify and so agree to.
Step 7: Pick one of the top entries that has a healthy ratio (around 3x) and an hourly rate that seems attractive to you. Now take a blank sheet of paper and sketch out:
- What the exact service rendered would be.
- What the deliverable would be.
- How the service delivers ongoing value.
- How much you would charge.
- Your costs in delivering the service, both in terms of time and money spent.
Step 8: Repeat for any service that you are interested in providing. Stick these sheets up on the wall and take a step back. Read each through then take a break, come back tomorrow and go through them again. Which have you got the best feeling about? Which one (in terms of the numbers) makes the most sense as a business?
If you are completely stuck, try to think of or find people who offer retainers and fill in their details here as best you can. You might even want to get in touch with them; the worst that can happen is that they don’t reply, and writing to them may help clarify the questions or concerns you have. Then, come back to this worksheet and try again.