A $5,000 retainer that takes 70 hours at a $120 cost rate is a loss, even if the invoice says $5,000. Retainers hide two ratios — utilization and realization — and the write-off that connects them is where margin disappears.
Two Ratios That Matter
- Utilization = billable hours ÷ total capacity. 1,200 billable ÷ 2,000 available = 60%. Low utilization means the retainer must carry idle capacity.
- Realization = collected ÷ billable at standard rate. Bill $150/hr × 40 hrs = $6,000 standard, collect $5,000 = 83% realization. The 17% is a write-off — work done but not paid at rate.
A high utilization with low realization is overwork at a discount. The fix is price, scope, or both.
Pricing the Retainer
Price = (Expected hours × standard rate × target realization) with a utilization buffer. Example: 30 hrs × $150 × 90% = $4,050 collected. At 80% utilization, that $4,050 must also cover 20% idle time, so the effective capacity cost per billable hour rises. Many firms set retainers from competitor price instead of from this arithmetic and then wonder why hiring breaks the model.
The Write-Off Trap
Write-offs live in scope creep: the extra revision, the emergency call, the meeting that was not in the SOW. Each is small; together they move realization from 90% to 75% without a single price change. Track write-offs by client and by retainer month — a client with 75% realization at $5,000 is cheaper per hour than a client with 95% at $4,000.
Keep Your Finances Organized From Day One
Retainers need a ledger that ties hours, standard value, collected, and write-off by client and month. Without it, you raise prices blind.
Beancount.io keeps time, standard, and collected in one version-controlled ledger so utilization and realization are reportable per retainer before the next renewal. Get started for free and make the next retainer a priced capacity, not a guessed fee.