Never Worry About Rollover Support Retainer Hours Again
Optimising your workflow–aka schedule–will create truly high value (and high earning) support services.
It’s optimal to cover maintenance in a way that reduces reactive work and shift as much time as possible to proactive support (this is covered in more detail in this episode of our podcast).
The Scheduling Dilemma
On a typical hourly retainer agreement, you promise to reserve a set amount of hours worth of work for your client each month.
Great in theory…
Everything is fine when all your support work is predictable and YOU can schedule out those working hours well ahead of time–if you stick to maintenance and proactive support.
But here’s how that can often play out…
The client is so busy in their business that they forget about proactive work all together. You cover maintenance well and fight a few fires in reactive support. At the end of the month, the client has only used 6 of their 20 retainer hours. They ask to roll those remaining 14 hours over to the next month, or ask for a pay as you go / pay for what you use plan.
Things go smooth in the first few months of a retainer. Then one month on day 29, the client realised they didn’t use 12 of their hours and decides to cash in before it’s too late. They (naturally) expect to get what they paid for and your team is scrambling to deliver.
Do Either of Those Scenarios Sound Familiar?
If you don’t manage your time, someone else will. When you don’t control scheduling with support service retainers, your time and resources can quickly get spread thin. What could happens when you have to alter your schedule to meet client demands and needs (that they already paid for)?
- other projects could be neglected and ignored
- deadlines don’t get met across the agency
- the staff’s attention has to be shifted around
- context switching contributes to reduced quality of work
- high pay grade employees can be forced to work on low value jobs (costing you more money)
- your team is pedaling like crazy yet you never get a chance to step back and improve efficiency, or work on those big picture or internal projects
- your team is overworked just to stay on top of the day-to-day work
Terribly inefficient. And the list goes on…
Get scheduling wrong and your business AND your client’s business suffers.
How do you solve the scheduling problem?
Make sure all scheduling is done internally. You need to control scheduling in your agency, don’t let it be controlled by your clients. Easier said than done.
Controlling your schedule takes time and effort. Just skimming the surface, it includes:
- extensively defining priority levels for potential support tickets
- working out manageable agreements in your SLAs
- clearly setting expectations and communicating them to your clients
- training your clients on how and when to raise support enquiries
- highly disciplined internal processes
- structuring your team and resources to efficiently deliver based on your plans.
Rollover hours are just another part of setting client expectations and managing time. Through controlling your schedule and working with your clients to initiate proactive work, you can reduce rollover hours.
While not impossible, many agencies are too stressed to create and implement a detailed service structure. If you’re dedicated to offering hourly support retainers, you must set your priorities and decide:
Do you want to serve clients that value structure, efficiency, reliability and quality? Or do you want to serve clients that value their own flexibility at your agency’s expense?
Your rollover solution could lie in both how you manage your schedule and in the type of clients you choose to serve.
The Value Dilemma
There are a handful of issues surrounding the value dilemma.
1. Value Measurement
The first is how you measure value. There are so many things that your value can be measured by:
- the actual value of the assets you create
- the expertise you bring to the table
- the results your client achieves from your work
- the client’s business growth
- basic ROI
- and much more…
Arguably the least beneficial way to measure your value?
The time spent creating results.
Measuring by the hour is like measuring a marathon by how many steps it takes. Nobody trains for a marathon by dwelling on and cutting back on footsteps. Instead they set their sights on milestones and reaching the coveted 42.195 km goal. Just like a marathon, you want your value to be measured by achievements–anything other than the individual steps it took to get there.
2. Hourly Rates Position Your Agency As A Commodity
If your clients focus on hours spent instead of the results those hours create, this leads to clients possibly viewing your service as a commodity–easily replaceable.
Aside from recessions or financial struggles in a client’s business, budget cuts often happen when there is a change in management, accounting, or when a new CFO steps in. Someone new looks at the books and says, “What do these people actually do for us?”
When it comes time to review finances, the first thing to get cut are commodities.
3. Misunderstandings Of What Can / Should Be Accomplished In An Hour
If you charge by the hour, the client will start to think by the hour (duh). Since clients can’t always fully understand the details behind specific technical tasks (especially reactive support), it can be hard for them to understand how two seemingly similar tasks are actually totally different.
This poses the risk of your client looking at their bill and asking, “Why did this take 4 hours this time when it only took 2 hours last time?” Meanwhile they completely missed the fact that the code was completely different in each situation.
Yes, this is minimised by building a trusting relationship with your clients, but that takes time and is only a part of the value picture. You still want to be sure that underlying decisions are not focused solely on time.
4. Pricing Difficulties
Do you use a rate card or a blended rate? This question alone creates a huge headache when it comes to hourly support retainer services.
With a rate card, you better be a pro at scheduling. If not, you risk situations where the only person available to carry out a low value job is a senior developer (which leaves choosing between taking a hit in profit or explaining a higher than expected bill).
A rate card also reduces revenue predictability. Month to month, you never know if your client’s retainer hours will be used on high earning employees or low earning ones. You even run the risk of clients avoiding proactive support just to cut costs.
A blended rate barely helps you address the value demonstration dilemma, as it cuts out issues of variety in billing. But if the client mostly needs lower skill maintenance support completed and limited proactive support, they could question why it costs so much.
Neither billing method fully covers the scheduling problems we talked about.
No matter how you float the bill, measuring hours internally is still vital to the success of your agency (it just shouldn’t be how your clients measure your value). Tracking time in your agency is one of the key ways that you manage your efficiency, develop standards and processes, and maximise your profit–even for retainers.
Is It Worth Trying To Control The Hourly Problem?
You could offer a “pay for what you use” type of retainer, but it’s not really a retainer then, is it? There’s no reliable recurring income and your scheduling suffers as you save time for clients that may or may not need you.
Another risk is that clients limit hours altogether as they cut costs. Your account managers will likely be overwhelmed trying to communicate the necessity of various tasks, demonstrate your value, schedule the work, and repeat this every single month with every client.
Again, value and scheduling are ridiculously difficult to maintain in this process.
One way to address the value problem with hourly support retainers is to demonstrate your value by explaining and educating on specific actions you take. While transparency is great, it’s not always necessary or desirable to feel like you have to overly explain every minute.
Ideally you shouldn’t have to explain how each hour of your work adds value to your client. Instead clients should be asking themselves, “What is the value and return on investment that I’m getting from this work, regardless of how long it took to do?”
This is the type of conversation you want to happen in your client’s head.
How could you solve the value problem?
You have to make sure the value you provide is understood by your clients every single month.
One effective way is to provide what Brennan Dunn calls a “CEO-Ready” report “that showcases exactly what you did, what effect it had, and really reiterates why they’re paying you.”
If a new CFO or accountant steps into your client’s business tomorrow and questions your invoice, ideally one of your client’s team members should be able to chime in saying:
“In those hours that we pay for, they do ABC every single month. Even when we don’t use all our hours, they provide the peace of mind that our tech runs smoothly 24/7/365… which on average saves us X hours, makes us Y in profit, and reduces costs by Z amount.”
“Great! Moving on.”
If their CFO can’t confidently say those words, you need to revisit how you demonstrate your value.
Revisiting essential business questions like I posed earlier, you also have to ask yourself:
Do you want to serve clients who choose to nitpick on every specific hourly detail in their reports? Or do you want to serve clients who care far more about the value you offer, the results you achieve, and the peace of mind you provide?
Still Have Rollover Problems?
If you’ve managed to fully solve the scheduling and value dilemmas that we’ve just covered, I don’t believe you should have anymore rollover questions.
Rollovers should be addressed in how you set client expectations, structured your support response and constructed your SLAs.
The value you provide should be so clearly conveyed that your client understands what they are paying for… not hours of your time but for the peace of mind that they feel knowing that you maintain and grow the tech side of their business.
If you haven’t found a solution to these two problems then maybe you should look at shifting toward a value based pricing system.
This can be done by repackaging your offers into productised services. Or you could offer a menu of services that the client can pick and choose to create a more bespoke retainer (we’ll talk about these options more in future articles).
Whatever you do, properly managing scheduling internally and demonstrating value externally is essential if you want to completely remove the rollover dilemma from your agency.
Maybe you should step back a little and look at your retainers from a bigger picture.
Identifying and defining the business goals that support your decision to offer retainers is a great first step toward optimising your retainers to best serve your agency.