Estimated reading time: 5 minutes
Basically, I strongly oppose making support / retainer agreements with suppliers. First, I do not like fixed costs, and secondly, I know that there will be periods when I will not use their services, therefore the money will just be wasted.
The agreements may be called something different
This setup has many names. Sometimes it’s called a support agreement, sometimes a subscription, and other times it’s called a retainer agreement. What’s common to them is that an amount is paid every single month, regardless of whether the service is used or not. It often results in a waste of money because you forget to opt-out of the services you don’t use!
For example, to avoid wasting money, I get an Excel sheet every month with an overview of all our automatic bill payments so that we can cancel the services that we don’t use.
Two different types of subscription businesses
Broadly speaking, one can divide companies offering subscriptions into two categories: companies that for a fixed monthly price (subscription) perform a job, and companies that for a fixed monthly price sell a digital product or service where the costs are more or less the same no matter how many subscriptions they have, like software-as-a-service such as Dropbox, Microsoft Office 360, etc.
Companies selling a service on a subscription basis
In this case, a company charges a fixed monthly payment to provide a service, for example:
- Technical support and maintenance of websites and webshops.
- Linkbuilding – where "high quality" links are built from selected websites and blogs, including writing the content of articles.
- Adwords - account setup and maintenance.
- Facebook and Instagram - setup and maintenance.
- SEO - reporting and consulting.
The problem with this is that disagreements can arise about how much is included in the monthly payment. Companies often address this by describing how many hours of work are included in the monthly payment and how much it costs if you go beyond it.
Personally, I am very much opposed to subscriptions for services that are not digital because the customer always ends up paying either too much (if they do not use the allocated hours) or gets an additional invoice when they spend more hours than what the subscription includes.
You will therefore be better served by agreeing on a reasonable hourly rate and then just "pay as you go". Remember to get into an agreement that is not billed at 30 or 60-minute minimums. When you talk to a consultant for 10 minutes, only 10 minutes must be billed!
Companies selling a digital product on a subscription basis
In this case, a company charges a fixed monthly payment for the use of a digital product or service:
- Companies that run software as a service (SaaS);
- Companies and leading consultants selling "e-books, podcasts, and systems";
- Software companies selling a software program installed on a computer. Such programs often come with an annual subscription that gives the customer the right to support and upgrades to new versions for free or at great discounts; or
- Hosting companies.
Companies love subscription agreements
- They can know their turnover every month.
- Customers forget to opt-out of the agreement—so they make money, often without having to do anything.
- When the customers finally want to cancel the subscription, they forget to do it in time :-). It often results to customers being forced to renew the subscription for another time period, e.g. one year :-(.
- Not everyone who buys the subscription actually uses the services. Think of gyms: people happily buy a monthly fitness subscription with automatic renewal - after a year and 6 visits, they finally get it together and cancel it :-).
Remember to measure if you get something out of your agreement
It's easy to make an appointment with a Google Adwords specialist (or Facebook, Instagram, etc.) for setting up and maintaining an account for a fixed monthly payment.
Initially, there’s a lot of activity because the account is set up, there are meetings held, strategies are put in place, and you start to see more visitors on your website or webshop.
So many companies make the mistake of "forgetting" to check whether the ads are working.
Often the only thing that comes on time is the monthly bill for the maintenance of the account.
The subscription on your phone is also a retainer
If you’re like most people, then you probably have a number of subscriptions running - music services, newspapers, magazines, backup service, etc. The services are paid monthly and Apple / Google is kindly pulling the payment directly from your credit card without you doing anything.
Deep in your phone settings, you can see the subscriptions you have running. This is also where you can unsubscribe from the services you no longer use.
I've made it a habit to always cancel a subscription the moment I sign up. The subscription typically runs for 1 month or 1 year, and when it stops automatically, I then make a new subscription if I notice it's stopped. If not, then I avoid wasting my money.