Justification for the Non-refundable Retainer

Friday I wrote about the reasons small business photogs and videogs should charge a retainer for their work. I also wrote that the retainer should be non-refundable. I want to share with you the justification for that so that 1) you can explain it to your clients should the topic come up, and 2) the better you understand the reasons, the less guilty you have to feel making it so, and therefore the easier it will be for you to tell your clients without you stuttering or stumbling trying to get it out.

There are four primary reasons your up-front retainer is justified to be non-refundable:

  1. Work Spent Acquiring Client: think about how much time you invested in that client relationship before they even signed a contract. How many emails did you share back and forth explaining your services? How many phone calls with them? How many meetings in your office, at their place of business, at their home, and/or at Starbucks did you have with them? How long did you spend writing a proposal? Re-writing a proposal? Drawing up a budget? Depending on the type of work you do, you could easily spend 10 to 30 hours cultivating and winning a client before they ever sign their name to a contract. That is real time you invested in the one client. Think of the up-front retainer at contract-signing as a sort of reimbursement for that time. (It’s actually not uncommon in the commercial video world for a prospect to PAY for a company to submit a formal bid of their services.)
  2. Your Ideas are Worth It: one of the key things that will set you apart from your competition are the ideas you bring to the table; especially if you do any kind of commercial work (photography or video). Those ideas are have real value. Imagine if you sign a $20,000 gig and you’re timid about asking for a high retainer, so you only take 10% up front: $2000. You share all your ideas with the client and they decide to go to ACME Photo/Video who will charge them only $15,000. They take your idea, forfeit the $2,000 and pay the other guy to do your idea (trust me, it happens). They save $3,000 and you’re out a huge gig. That idea could be worth thousands, even tens of thousands of dollars in the long run. You’re perfectly justified charging a high retainer for your intellectual property.
  3. Insurance for the Client: the retainer is also a benefit for your client. It commits you to them. You can explain to them, “Imagine how you’d feel if I took your wedding, then got a better offer for a bigger wedding then dumped you?” The non-refundable retainer is a way for the client to lock in your services and whomever that includes to actually shoot the gig.
  4. Missed Opportunities: lastly, a few event professionals who’ve commented on this post (either here on on Facebook) reminded me of another great reason: missed opportunities. In many cases when you sign with one client, you pass up another. There are certain sacrifices you make both professionally and personally when you book a client. Should they cancel, it could mean losing out on revenue from another gig you passed up. Ben in my comments suggests a “liquidated damages” clause. Seems to me that would cover situations like this.

On top of that, the additional installments are justified to be non-refundable because by then, you’ve invested even more work and time. In some cases, like commercial video production, you may have already paid hard costs in rental fees, rental deposits, employees who may have done some pre-production work, etc.

Bottom line: your time and your ideas are valuable and worth the money your clients invest. Since a lot of both time and ideas are expended early in the process, even before the contract is signed, you are absolutely justified in charging a retainer and having it be non-refundable. So sleep well at night.

3 thoughts on “Justification for the Non-refundable Retainer

  1. Supposedly “non-refundable” retainers and deposits can be easily tossed out by a judge especially if tangible work has not been delivered.

    The best way to deal with the situation is to have a “liquidated damages” provision in your contract that specifies that the client must pay liquidated damages for “failure to perform” if they cancel the contract. A contract goes both ways. Both sides are agreeing to perform certain duties. Just make sure that your liquidated damages meet or exceed your retainer/deposit.

    Ben

    1. Excellent point Ben. In fact, this very same point came up on a forum: whether or not a retainer can be legally non-refundable if you can show work hasn’t been done. The issue comes up as to what is considered “tangible.” What it me and two people on my team have multiple meetings with a prospect discussing their project, sharing ideas, learning about their business, all towards the goal of landing the job. If we get the job, all that info is still viable and will be used in the completion of their video. If we performed that work AFTER signing, you could argue that my team spent real, billable hours on the project and deserved to be paid. My argument here is that, whether or not you do that work before or after signing doesn’t matter. This is just my opinion, I’m no attorney so I can’t say for sure.

      Your “liquidated damages” ideas is an interesting concept. The question I’d pose is, how is that any different than a retainer. Seems like it’s just semantics. Whether you call it a “non-refundable retainer” or “liquidated damages.” Unless you’re saying that these are damages incurred by the studio on account of other work not taken because of the job in question where the client wants to cancel. In that case, that’s actually another great justification. Hmmm. I think I’m going to update the blog post.🙂

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