How do I check an HR consulting firm’s mix of retainer clients and project clients?
Ask for a client list that labels each client as retainer or project, with how long each has been a client, what they bought and how the work is billed. Then look at how much comes from the largest accounts. Retainers bring steadier work, but only if clients actually use and renew them.
Request the list in a simple form: client, type of arrangement, start date, services used and annual billings. Make sure the labels mean something. Some firms call a client a retainer when the client only buys occasional projects. Look at the agreement and the invoices, not just the label.
Next, test the retainers. Ask how many hours clients actually use, whether unused time carries over and what happens when a client stops calling. A retainer that nobody uses may be at risk at renewal. For project clients, ask how many come back and how the firm finds new ones. Referrals from a single source are a risk worth noting.
Finally, look at who holds each relationship. If the owner handles most retainer clients personally, ask how those clients would react to a new owner. With the seller’s consent, speak to a couple of clients. Your accountant can help you read the billing pattern, and your lawyer can review the agreements. Ask finally how the firm moves a project client toward a retainer, and whether that ever happens, since it shows how sales really work there.
Key takeaways
- Get a client list labelled by arrangement, with start dates, services and billing.
- Check invoices and agreements against the labels, since the words do not always match.
- Find out who personally holds the main retainer relationships.
- Ask how, and how often, project clients become retainer clients.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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