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Hi, we are working on structuring a retainer agreement for a long-time client. The main motivation is that they want to have full ownership of their files, so by setting it up clearly as a "work for hire" agreement, we will give them ownership to the files created during the term of the agreement. In the process of doing this, the question of marking up outside expenses has come up. Our agency principal is under the impression that having a client on a retainer obligates us to pass through outside purchase/expenses with no markup, but I can find any info to support this. My feeling is that we assume we will continue to mark stuff up as we always do, and not put anything to that effect in the agreement, but it could be subject to negotiation if they ask for it. This account is mostly time, without a lot of outside expenses anyway.
Do you mark up outside expenses for Retainer clients? Feedback much appreciated!
Yes - as long as you are up front with the client you can negotiate whatever terms you want. For instance, one of our clients insisted we only take a 10% mark up on media and outside production (printing, photography, etc). While 10% is less than we typically take for production markup, we agreed to that amount b/c the consistent guarantee of a sizable monthly retainer was more attractive then making a few extra dollars on production.
Another client specifies a specific media mark up in the retainer, but we estimate and bill all out-of-pocket costs outside of the retainer so we just provide estimates that include our standard mark-ups.
There are a number of ways to structure it, but I wouldn't automatically assume a retainer = pass through.
We mark up outside purchases for clients. You have to take into consideration that there are expenses even in "direct purchases", such as interest on credit cards, time involved in accounts payable and receivable, account service time in managing the transaction, and many other cost. So a 15-20% markup is actually just covering cost, it's not even a profit.
First, don't call it a retainer but a Service Fee Agreement. "Retainer" implies they are paying you money just of the joy an opportunity of "retaining you". Couldn't be further from the truth. In fact, you are putting time against this Service Fee. We have both Full Fee Agreements (total yearly client AGI divided by 12) and Supplementary Fee (certain services -- Account Service, Copywriting).
Second, in our free agreement we say that all work produced for the client is theirs once we've been paid for it.
Third, we mark up outside purchases 25% to yield 20% except for postage (5%) and travel and entertainment (at cost).
Finally, as has been mentioned, it's a negotiable document.
We do not include media or hard costs in any of our "retainers". And the services provided are carefully outlined in the retainer agreement and vary from one retainer to another. We mark up both media and hard costs.