How to Price Retainers Properly (And Why Most Agencies Get It Wrong)

When did you last actually sit down and work out whether your retainers are profitable?

Not whether they feel profitable. Not whether the client pays on time and isn’t a nightmare to deal with.

Whether the number leaving their account every month is genuinely making you money — after every hour spent, every tool used, every person involved.

Most agency owners haven’t done this calculation.

And the ones who have are usually shocked by what they find.

The Problem Most Agencies Don’t See

I had a client come to us last year:

• £380k turnover

• Five long-term retainer clients

• Looked like a solid, well-run business

  
  

They came to us because they wanted to scale — but couldn’t understand why there was never enough cash to do it.

We pulled the numbers apart.

• Two retainers were running at under 20% gross margin

• One was actually losing money

  
  

They’d had that client for three years.

Three years of work that was quietly costing them money.

They had no idea.

Pricing Isn’t Just a Number

The price you charge isn’t just a number. It’s a statement about what you think your work is worth — and how well you understand your own business.

How Most Agencies Price Retainers (Wrongly)

Most agencies price in one of three ways:

• What they think the client will pay

• What competitors charge

• What they charged their first client (and never updated)

  
  

None of these is a strategy.

They’re guesses.

The Four-Layer Retainer Pricing Model

This is How to Price Retainers properly.

1. The Cost of Delivery

Start with the true cost of doing the work.

Not just salary — fully loaded cost.

Example:

• £32,000 salary → ~£38,850 real cost

• ≈ £19/hour

  
  

Now calculate:

• Actual hours spent per month

• Include calls, amends, reporting, messages

  
  

👉 Hours × real hourly cost = delivery cost

Be honest here. This is where most people underprice.

2. Your Overhead Allocation

Every retainer needs to carry part of your business.

Include:

• Accountancy

• Software

• Insurance

• Marketing

• Admin
  

👉 Formula:

Total monthly overhead ÷ number of clients

That’s what each client needs to cover before profit exists.

Most agencies skip this.

That’s why revenue grows — but profit doesn’t.

3. Your Margin

A healthy agency runs at:

• 20–30% net profit margin

  
  

To price properly:

👉 Take your total cost (delivery + overhead)👉 Divide by 0.75

This builds in a 25% margin.

If the number feels too high — that’s the point.

4. The Value Check

Now flip it.

What is this work actually worth to the client?

If your retainer generates:

• £50k in new business per year

  
  

And you charge:

• £1,500/month

  
  

You’re underpricing.

Pricing Reality:

• Floor = your cost + margin

• Ceiling = client value

  
  

Most agencies price at the floor.

The best agencies price closer to the value.

What Healthy Margins Look Like (By Client)

Check your gross margin per retainer:

• 50–65%+ → Healthy

• 40–50% → Monitor

• Below 40% → Problem

• Below 20% → Urgent

  
  

How to Calculate It

Take:

• What the client pays you

  
  

Subtract:

• Delivery cost (hours × hourly cost)

• Overhead allocation

  
  

Then:

👉 (Revenue − Costs) ÷ Revenue × 100

That’s your gross margin per client.

The Repricing Conversation Everyone Avoids

“I can’t increase prices — they’ll leave.”

Some might.

Most won’t.

And here’s the truth:

If a client leaves because you priced your work properly — they were never a sustainable client.

You were subsidising their business.

How to Reprice Properly

The agencies that do this well:

• Explain rising costs

• Show team investment

• Highlight expanded scope
  

They’re:

• Clear

• Professional

• Not apologetic
  

The ones who don’t?

They work harder every year for the same money.

Your Checklist This Week

Start here:

• Pick your top 3 retainers

• Calculate real hours spent last month

• Multiply by actual hourly cost

• Add overhead allocation

• Calculate gross margin
  

👉 If any client is below 40% margin — flag it

👉 If you haven’t reviewed pricing in 12 months — schedule it this quarter

Three Things to Do This Week

1. Audit Your Biggest Retainer

Open your time tracking.

Calculate:

• Total hours

• Real cost

  
  

👉 Is the margin what you thought it was?

2. Calculate Your Overhead Per Client

Take:

• Total monthly overhead

• Divide by number of clients

  
  

👉 That’s your baseline cost per client.

3. Identify One Underpriced Retainer

If a client is below 40% margin:

Write down:

• Why pricing should increase

• What’s changed (costs, scope, team)

  
  

You don’t need to act today.

But you do need to face it.

Final Thought

Most agencies aren’t undercharging because the market won’t pay more.

They’re undercharging because nobody ever showed them the formula.

Now you have it.

Want Help Auditing Your Retainers?

If you want to:

• Understand your real margins

• Fix underpriced retainers

• Build a more profitable agency

  
  

👉 Book a call and we’ll walk through it with you

Coming Next:

The Risk Edition - Your biggest client is probably your biggest financial risk — and most agency owners don’t realise it until it’s too late.