How to price an agency retainer so it survives contact with delivery

Most agency retainers are priced by looking sideways. You check what comparable agencies charge, land somewhere near the middle, and adjust when a prospect flinches. That number has no relationship to what the work actually costs you, which is something you only find out once delivery starts and the hours begin landing against an account nobody costed.

Start with the cost, not the market

Take one representative account. For four weeks, track actual hours against it: strategy, production, account management, QA, the two hours a week your ops lead spends unblocking it. Everything.

Load those hours at fully-burdened cost, not salary. Fully-burdened means salary plus payroll tax, benefits, software seats, and a share of overhead. A practical shortcut is salary multiplied by 1.25 to 1.4, divided by roughly 1,700 productive hours a year.

You now have a real number for what one month of that retainer costs to deliver.

Divide by your margin target

If a month of delivery costs $3,200 and your target gross margin is 50%, your price floor is $6,400. Not $5,000 because a competitor charges that. Not $5,500 because it feels round.

Fifty percent is a sensible floor for an agency that wants to be worth something. Below 40% you have no capacity to invest in your own growth, and you will feel it the first month a client leaves.

Then, and only then, look at the market

Now compare your costed floor against what the market actually pays.

If your floor sits comfortably below market, price to market and keep the difference. If your floor sits above what anyone will pay, you have learned something far more useful than a price: either your delivery is inefficient, or you are selling a commodity and need to change what you sell. Discounting is not a response to that. It just moves the loss onto your balance sheet.

The capacity check

One more test before you commit. Take your target monthly revenue, divide by the new retainer price, and you have the number of accounts you need. Multiply that by delivery hours per account. Does your current team have those hours?

Most agencies discover their revenue target requires 1.4 times the delivery capacity they have. That is a hiring plan you now know about in advance rather than in month three of a signed contract.

Re-pricing accounts you already have

The uncomfortable part. Some existing accounts will sit below the new floor.

Work through them from worst margin upward. For each one, decide whether to re-price, re-scope, or release. Re-scoping is usually the easiest sell: same price, less delivery, honest about what fits.

Give ninety days' notice and a clear reason tied to scope rather than to your costs. Clients do not care about your costs, and saying so out loud reads as an apology.

Expect to lose some. In our experience the accounts that leave over a return to a 50% margin were the ones funding their own discount out of your profit. Losing them is the point, not a side effect.

What it looks like when it works

SOAR With Us went from £80k to £700k a month. Every new account was priced from a costed model before it was sold, so growth added profit instead of consuming it.

Read next

• Why agency growth eats margin, and how to price so it doesn't
• Agency capacity planning: how to know what one more client actually costs