What your first consulting retainer agreement should cover — but often doesn’t

New consultants are often excited to land their first retainer client. A retainer sounds like a dream: predictable income, ongoing work, and the start of a stable client relationship. 

But without a well-structured retainer agreement, both sides can quickly end up misaligned. Your consulting retainer agreement needs to be written so that it holds up under the real-world conditions of your business. Ultimately, the agreement should protect your time, ensure stable revenue, and have a clear scope that your client understands. 

A retainer agreement should be structured differently from hourly work or fixed-scope projects. Hourly work ties payment strictly to time spent. Project work ties payment to specific outputs or milestones. 

Jake Stein, co-founder and CEO at Common Paper, describes a retainer this way: “You are guaranteeing some capacity or prioritization to the client. They’re going to have access to you, your team, or other resources for a certain amount each month, whether that’s hours or something else.”

For consultants, a retainer model can stabilize cash flow, since you’re receiving the same payment from your clients every month. But this model only works if the contract clearly defines the nature of your work and what the client is receiving in exchange for your time and expertise every month.

You have a few options when it comes to your first retainer agreement. You can hire a lawyer to write one, or use a template that you find or purchase online and modify it.

Here are some clauses that you should include. 

Scope of services

The scope starts as a discussion with the client. You’ll want to make sure that you have a good understanding of what problem the client is trying to solve or the business objective they’re trying to meet.

From there, you’ll talk the client through your project process and what you’ll deliver. That’s the scope of the agreement. 

The written version of the scope should include:

• Any specific deliverables you’re providing
• The time commitment per month, if you’re providing services in hours
• Any limitations on the scope, such as what falls outside of scope

For long-running or ongoing engagements, it’s helpful to include a structured touchpoint (like a weekly or biweekly check-in). This approach makes scope a shared responsibility and keeps everyone on the same page.

Payment terms

Many consultants charge for retainers upfront at the start of each month or at the start of the project. This ensures that you’re compensated, even when client-side delays prevent work from moving forward. From the client’s perspective, the payment reserves your time/bandwidth for the month.

Specifically, the payment terms in your client retainer agreement should include:

• When invoices are issued
• When they’re due
• Any fees for late payments

Learn how Mercury works for agencies and consultants.

Duration, renewal, and termination clauses

Most retainer agreements use an open-ended or automatically renewing structure. Because of this, you’ll need to include some language around termination of the agreement and the notice period required. A 30-day notice period is common. It gives you and the client time to wrap up any loose ends (and also gives you time to find a replacement client).

The contract should specify what the client receives upon termination. Both sides have to work in faith during the remaining 30 days so that the client is in a good spot. Consulting agreements are terminated for many reasons that have nothing to do with the consultant’s work, such as budget or priority changes. If you end on good terms, you leave the door open to work together again in the future.

Communication and collaboration expectations

The scope of consulting agreements can quickly get out of hand if a client thinks they have unlimited access to you. A retainer client may assume they can ping you any time, on any channel. 

To protect your time, the agreement should outline:

• The communication channels you’ll use (e.g., email, Slack, project management tools)
• Expected response times
• When meetings will occur and how they’re scheduled

It’s less about restricting access and more about shaping how communication will flow between you and the client. You can even provide a more information expectation around your response time (rather than including it in the agreement). For example, you can let the client know that you’ll respond within one business day. You might also consider batching multiple questions together and sending a single response. That way, the client isn’t expecting an immediate response. 

“You can’t eliminate all risk in the contract,” Stein says. “You’re banking on a level of trust and goodwill with the other side. There’s no amount of contracting that can turn a bad relationship into a good one.”

That being said, there are some clauses you should include to protect yourself in a retainer agreement.

Client responsibilities

Projects frequently stall not because the consultant is behind, but because the client doesn’t complete a task that they need to do. They may need to provide you with access to their systems or data. You might spend weeks waiting on approvals or input from internal stakeholders. When the contract doesn’t explicitly define the client’s responsibilities, the consultant ends up absorbing the delays — whether that becomes delayed payments, delayed projects, or wasted time.

A stronger retainer agreement outlines:

• What the client must provide
• The expected timelines
• The consequences of delays

Stein points out that while the client’s project is often your top priority, it might not be the client’s. He suggests explicitly laying out what you need and the specific decision points within the project. “Include a line in the agreement that specific items are critical for delivering the scope within the timeline,” he says. “And if you do not get it, the client will not get whatever the end result is. Position it that you want to help the client mitigate that risk.”

Handling out-of-scope work

You’ll want to define how decisions about additional work will be made. Describe how new requests are reviewed, how you’ll present the impact on timeline or cost, and when a separate statement of work will be required. This prevents surprises for the client and gives you a clear means to protect your half of the project.

Late payments

You should outline what happens if a payment is missed. If the work is ongoing and payments are due monthly, for example, does the work stop if the client’s payment is late? You have to protect your business, so you should make it clear how late payments are handled. 

Intellectual property

It’s common — and reasonable — for consultants to retain ownership of work until invoices are fully paid. This protects you if a client doesn’t pay you on time or withholds payment. Include a line in your agreement that transfer of ownership occurs upon payment in full. 

Many new consultants grab the first contract template they find online. There are two issues that come up repeatedly with this approach:

1. Using the wrong type of template. An independent contractor template is different from a professional services retainer agreement. Templates for freelancers don’t automatically fit agency-style engagements.
2. Treating templates as finished products. Templates are starting points, and they require customization. Copy-and-paste clauses from a retainer agreement sample rarely reflect the nuances of your actual working relationship with your clients. 

If a template lacks a termination clause, defines deliverables vaguely, or doesn’t address client responsibilities, it’s likely to cause problems later.

Check out the consulting agreement retainer examples from Common Paper: the Professional Services Agreement  (a company or agency retainer agreement) or Independent Contractor Agreement (an individual retainer agreement).

Not every consultant can afford a lawyer for their first client, and that’s perfectly fine. There are ways to start with a template while still protecting yourself.

• Use a template designed specifically for your type of service
• Rely on guided platforms can help you tailor the agreement (like LegalZoom or Common Paper)
• Add an addendum outlining the scope, payment, termination clauses, and intellectual property when clients require you to sign their template

Many consultants choose to seek professional legal review once their income supports it or when they begin working with larger or more complex clients.

Your client agreement won’t be perfect on day one. Each engagement offers lessons that you can use to evolve future agreements, such as refining the scope or putting more boundaries around communication.

You may also make different decisions at different points in your consulting career. If you’re just getting started, you may sign a client’s template — even if it doesn’t have all of the terms you want — because you need the work. Once you’re more well-established, you have more leverage. 

The best agreements reflect not just what you do, but how you work and how you want your business to run.