Which Retainer Fee Strategy is Best: Flat Fee or Percentage?

Determining how to charge for non-refundable retainers is one of the biggest hurdles for service providers. Should you charge a flat fee or percentage? And, should it be a certain amount or a certain percentage? When the pandemic hit, the situation got even murkier. Do you go for a flat fee that treats everyone who books you equally, or do you opt for a percentage-based fee that fluctuates with the package price?

The big thing to know is that the pandemic significantly impacted how service providers charged retainers. During COVID-19 clients argued that a 50% percentage-based retainer was unreasonable, given cancellations, non-rendered services, and the fact that they were charged more than other clients if their packages were higher priced. During that time, The Legal Paige encouraged service providers to go for a flat-rate retainer. This approach leveled the playing field by charging the same for all clients, regardless of package details. By doing this service providers quashed the argument that clients were making about the fairness of the retainer relative to the package price.

Fast Forward to Now: Post-Pandemic Retainer Realities

Fast forward four years from the pandemic's start, and things are stabilizing. However, the retainer debate remains. Percentage-based retainers are making a comeback, even though flat fees have been more commonplace in the service industry. The 50% non-refundable retainer is still around. Now, while we're not entirely shaking our heads at this choice, let's face it, 50% is a pretty hefty chunk of the package price and leaves a lot of argument on the client's side to say it's not a reasonable amount to charge for simply booking a date on your calendar.

In 2024, The Legal Paige suggests a more moderate approach. We will always hang our hat on the fact that flat fee booking retainers are way easier to legally implement and have a much higher chance of you being able to fully keep that non-refundable amount even if a client were to get litigious about it once they cancel. But, we understand some providers prefer percentage-based retainers, so it's crucial to explain the rationale to clients about what the amount is for, especially when services haven't commenced. Many service providers now opt for a 25% to 30% retainer of the package cost. This is more of a middle ground where its not too much of the overall price but not too little. This is not only easier to justify but also holds up better if disputes arise in court since it's purely just a ‘booking fee’ for crossing off a date and/or time on your calendar where no other prospective clients are able to book.

Strategic Moves: Payment Plans and Non-Refundable Payments

Providers dealing with substantial package prices (e.g. in the $5000-10,000+ range) often set up payment plans with non-refundable installments. This safeguards against costs incurred in the booking process, client interactions, location scouting, vendor coordination, and planning. It ensures that a client cancellation doesn't leave you uncompensated for your time and resources since you likely deserve more than a 25% cut of the total package price if you are super close to the event date and have already put in a substantial amount of work. 

While ultimately how much to charge for a retainer is a personal business choice, just make sure you are legally strategic about it. The choice between flat fees and percentages does depend on how you want to run your business and how you would prefer to get paid. But, it also depends on case law in your state and federal jurisdiction on what courts deem as ‘reasonable’ booking fees.

Ready to solidify your retainer strategy and ensure legal clarity? Explore The Legal Paige's Contracts to safeguard your business. All full length contracts come with robust fee and retainer clauses so you don’t have to worry about whether you’re legally protected. 

THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.
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