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Be careful with the retainer

I remember a conversation I had with a gentleman who provided a non security related service to a client. His client asked him to find and recommend an EP company to assist in an upcoming event, he called me and asked if we would be interested. He and I have never worked together in a contractual relationship before however his company had been contracted to do services on a detail that we were on. That gave us a somewhat of a prior relationship.

20120717-085618.jpgIn this particular situation BPI would be subbing under him. I prepared the contact and proposal and submitted it to him. The detail was scheduled for about a week, with the client paying for lodging. All I needed to do was maintain meal expenses for submission after the gig was up.

This scenario is pretty familiar to me and since the detail was local there was no flights associated with the team. After a day or so I received a call from the service provider whereby he told me to add a retainer clause in the contract for 25% upon execution of the contract and an additional 25% at the start of the detail. I’m no math genius but that was 50% prior to the first radio check.

This was a longstanding client of his and I assumed that because he had been with them for such a long time that payment was no issue. I inquired about that on the front end and he confirmed that they pay out invoices within 14 days after receiving the invoice. I was good with that. I was also good with having to pay may guys in lieu of receiving that payment. Not a problem.

But the addition of the retainer made me think. My contract was to him and not to the client. Why would he insist that I ask him for 50% up front. Then it made sense. He didn’t have the capitol to meet his service needs and wanted to use my contract as leverage to be “fronted” money. I already assumed that he was going to step on my rate anyway because the client would never see my contract. But by adding a retainer for the security element it would get him working Capitol and not tarnish his relationship with the client.

Retainers are good, BUT you have to know when to ask for them and when not too. Retainers are NOT in every contract and should not be. Long term engagements where you have to put a lot of your own capitol on the line usually incorporates a retainer followed by a possible schedule of payment drops.

There is a formula that is used and when to use it. It also should be understood that a retainer can kill a deal. Be careful with the retainer.

2 comments

  1. Vantrell Wilson

    Good Info!! I look forward to your daily blogs…very informative for

    1. Eric Konohia

      Thanks Vantrell

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