Retainer Profitability: Measure the Work Behind the Monthly Fee

This worksheet is for an owner already delivering a monthly service arrangement. It reviews the economics of the work, rather than explaining how to sell a retainer. Bring the agreement, invoices, time records and account-specific purchases for several completed months.

Count the whole delivery workload

Use time categories for production, meetings, revisions, reporting and account administration. Include short customer catch-ups in the time record too. Keep general business selling and administration outside the account unless your method deliberately allocates it there.

The example assumes a $1,800 monthly fee earned for each month's service and an internal delivery cost of $55 an hour. That hourly cost is a management assumption, not a wage rate. Shared overhead not included in that rate must still be recovered from the remaining contribution.

Assumptions: Fictional Australian-dollar management-costing example. Amounts exclude GST that is assumed recoverable; any non-recoverable tax is already included in costs. These assumptions do not establish your GST entitlement. Contribution is before unallocated overheads and income tax.

Month	Fee revenue	Direct non-labour costs	Actual hours	Hours reserved	Contribution after $55/hour
June	$1,800	$100	20	24	$600
July	$1,800	$120	28	24	$140
August	$1,800	$100	16	24	$820
Total	$5,400	$320	64	72	$1,560

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

June is $1,800 − $100 − 20 × $55 = $600. July leaves only $140 because the account consumes 28 hours as well as $120 of direct costs. August leaves $820. Over the three months, contribution averages $520 a month, or 28.89% of the $5,400 revenue after rounding.

Use an effective rate with a clear definition

Gross fee per delivery hour is $5,400 ÷ 64 = $84.38. After direct non-labour costs, the amount available per delivery hour is ($5,400 − $320) ÷ 64 = $79.38. Subtracting the $55 internal hourly cost leaves $24.38 per hour before any unallocated overhead.

Those figures answer different questions. Label them so a gross revenue rate isn't mistaken for a profit rate. Use totals divided by total hours rather than an unweighted average of the three monthly rates.

If a fee covers more than one period, confirm how revenue should be attributed before comparing it with monthly work. A payment in advance does not by itself establish that the whole amount was earned in the month received.

Reserved capacity is a separate commitment

The account reserved 24 hours a month in this example. June used four fewer hours, July used four more and August used eight fewer. Overall, 64 of 72 reserved hours were used: 88.89% after rounding.

Do not add the eight unused hours to actual delivery cost unless your chosen model explicitly costs availability that way. Instead show the capacity commitment separately. Time held for a response promise may be unavailable to sell elsewhere even when the customer doesn't use it.

Likewise, eight unused hours in August don't automatically cancel July's excess under the agreement. Rollover, response times and scope depend on the actual terms. This operational review doesn't decide either party's contractual entitlement.

Find the work behind the difficult month

Break July's 28 hours into tasks. Suppose 14 were production, six revisions, four meetings and four reporting and account administration. Compare that with what the fee assumed. Was a revision round omitted from the estimate, did inputs arrive in fragments, or did the scope change?

Choose an action you can test: consolidate feedback, schedule one agreed review meeting, improve the input checklist or propose a clearer scope at renewal. Record any change with the customer through the appropriate agreement process. Agree any service changes rather than reducing what you deliver without telling the customer.

Business.gov.au's budget guide supports the actual-versus-plan comparison. Xero's overhead explanation is useful when checking which shared costs the internal hourly figure already includes.

Where to get help

Compare the hourly-rate foundation, use job reviews for one-off work, and check overhead recovery. Read the result alongside the profit and loss or return to pricing and profit.