Agency retainer pricing calculator

To price a retainer for a target margin, divide your monthly delivery cost by (1 − target margin). Delivery cost is the hours the work takes × what an hour of delivery costs you, plus tools and pass-through costs for that client. 40 hours at $45 an hour plus $150 of tools is $1,950 of cost; at a 50% margin the retainer is $1,950 ÷ 0.5 = $3,900 a month. Enter your own numbers below, and optionally check a price you've already quoted.

The calculator

How the calculator works

All amounts are per client, per month.

Margin check on a quoted price (P):

• Quoted margin = (P − delivery cost) ÷ P.
• If P < delivery cost: "you lose (cost − P) a month on delivery alone".
• If quoted margin ≥ target: "meets your target".
• Otherwise: show the gap in percentage points and the price that would hit the target.
• Maximum hours at P = (P × (1 − target margin) − tools) ÷ blended hourly cost. If that's 0 or less, no number of hours hits the target at that price.

Input rules: hours, hourly cost and tools must be 0 or more. Target margin must be 0–95% (100% would divide by zero, and anything near it produces meaningless prices). Quoted price is optional; if entered, it must be more than 0. Any invalid field is marked and results show "-".

Worked example (the default numbers): 40 hours × $45 = $1,800 of labour, plus $150 of tools, is $1,950 of delivery cost. At a 50% target margin, $1,950 ÷ (1 − 0.50) = $3,900 a month. That leaves $1,950 of gross profit, a 50.0% margin, an effective $97.50 per delivery hour and a 100% markup on cost. Adding 50% on top of cost instead would give $2,925, which is only a 33.3% margin.

Margin vs markup: the most common pricing mistake

Margin is profit as a share of the price. Markup is profit as a share of the cost. They're easy to mix up, and mixing them up always underprices:

• A 50% markup on $1,950 of cost is $2,925. Profit is $975, which is 33.3% of the price.
• A 50% margin needs a price of $3,900. Profit is $1,950, which is 50% of the price and a 100% markup on cost.

If your target is a margin, divide by (1 − margin). Don't multiply by (1 + margin).

How to work out your blended hourly cost

Blended hourly cost is what one hour of delivery costs you on average, across everyone who works on the account. It is not your billing rate.

1. For each person on the account, work out their cost per productive hour: yearly pay plus payroll taxes and benefits, divided by the hours a year they actually spend on client work (after holidays, time off, internal meetings and admin). For contractors, use their hourly rate.
2. Weight by who does the work. If a $60/hour strategist does 10 of the 40 hours and a $40/hour specialist does 30: (10 × 60 + 30 × 40) ÷ 40 = $45 an hour.
3. Count your own hours too, at what it would cost to hire someone to do them. Otherwise the price only works while you're doing the work for free.

The margin this calculator targets is gross (delivery) margin. Overhead (sales, admin, rent, software the whole company uses, your non-delivery time) and net profit both come out of it, so set the target high enough to cover them. Your own books are the best guide: overhead as a share of revenue last year tells you the floor.

Before you send the price

• Scope the hours honestly. Margin leaks through work nobody priced: calls, revisions, reporting, chat messages. Track actual hours on the account for the first two or three months and re-run the calculator.
• Write down what's included. A retainer is a fixed price for a defined scope. List deliverables and limits so extra requests become change orders, not free hours. Turning a service into a fixed scope is covered in productizing your service.
• Re-check the margin quarterly using the quoted-price check: enter the price you charge and the hours you actually spent.
• Onboard every retainer the same way, so the first month doesn't eat the margin. See the client onboarding checklist template.

Where Ariyel fits

Ariyel is a CRM and operating system for service businesses, implemented for you by Ariyel's team. Once a client signs, Ariyel runs the parts that protect the margin: a client onboarding template that starts on every won deal with owners and due dates, and Reports on your pipeline and closed deals. See how Ariyel is implemented and Ariyel pricing.

FAQ

How do you calculate a monthly retainer? Add up the monthly cost of delivering the work (hours × your hourly cost, plus tools and pass-through costs), then divide by (1 − your target margin). $1,950 of cost at a 50% margin is $3,900 a month.

What margin should an agency target on a retainer? High enough to cover your overhead and leave the profit you want. Work it out from your own numbers: overhead as a share of revenue, plus your profit goal. We don't quote an industry figure because published ones rarely say how they were measured.

Should I price retainers by the hour? You can price from hours without selling hours. Use hours to calculate cost, then sell a defined scope at a fixed monthly price. The client buys the outcome; you protect the margin by controlling scope.

What's the difference between margin and markup? Margin is profit ÷ price. Markup is profit ÷ cost. A 50% margin equals a 100% markup.

Is my data stored? No. The calculator runs in your browser and sends nothing anywhere.