Deep-dive guide
Retainer vs Project Cash Flow Simulator: Feast, Famine and the Cost of Selling Again
Executive industry analysis
A service business can earn the same yearly revenue from one-off projects or from retainers, yet live a very different life. Projects bring larger single payments and the satisfaction of a finished job. They also bring a permanent obligation to sell: each project must be won, delivered and replaced, and between them lie gaps in which costs run and nothing is billed. A retainer pays less per unit of work but arrives every month and rarely needs to be sold again. The question is not which pays more on paper, but which produces the steadier cash with the least selling effort.
The structure of the problem is a flow with two constraints. On the sales side, proposals sent multiplied by win rate gives the projects you can expect each month, and every proposal costs unpaid hours. On the delivery side, one person can only do so many projects, because each project takes working days and is followed by a gap. Profit comes from the smaller of the two flows, minus fixed costs. When sales are strong but gaps are long, the business is capacity-bound; when gaps are short but wins are rare, it is sales-bound. Each case needs a different fix.
The domino cascade shows the weak point. A lower win rate or fewer proposals reduces projects won each month. Fewer projects raise the chance that a month brings no new work at all, which is a Poisson-style risk: with two expected wins, about one month in seven is empty. Empty months require a cash buffer, and that buffer forces borrowing or discounted deals. Each stage feeds the next, so a small drop in win rate in the first box can turn the last one red. Averages hide this, because the same average income can come from steady months or from feast and famine.
The iceberg separates the visible costs from the ones that quietly consume the margin. Above the waterline are delivery costs and fixed costs. Below it sit four costs that rarely get a line: the unpaid hours spent on proposals, work you won but could not take because of gaps, the borrowing and stress cost of empty months, and the financing cost of waiting for invoices to be paid. In a project business the hidden part can equal the whole profit. Use the simulator to find the win rate at which you stop earning, then decide whether a retainer is worth its lower headline fee.
Formula and methodology blueprint
The model works per month for one delivery person. Expected projects won are proposals times win rate. Capacity is 22 working days divided by the days in one project (6) plus the gap between projects. Delivered projects are the smaller of won and capacity. Delivery costs are 30% of billings. Selling time is valued at 45 per hour. Empty-month risk is the chance of no new project, e to the minus projects won, and carries a cost of 15% of fixed costs. Invoice delays cost 1.2% of billings.
- Projects won
- W = proposals × win rate
- Expected new projects per month, which sets the flow of work.
- Capacity
- C = 22 / (6 + gap days)
- Projects one person can deliver in a month once idle gaps are counted.
- Billings
- B = min(W, C) × fee
- Revenue from the smaller of what you win and what you can deliver.
- Empty-month risk
- p = e^(−W)
- Chance that a month has no new project, from a Poisson model of wins.
- Profit
- Net = B × 0.7 − proposals × hours × 45 − fixed − p × fixed × 0.15 − B × 1.2%
- Monthly result after delivery costs, selling time, fixed costs, empty-month cost and invoice float.
Cascading elasticity
Win rate and proposals are the most elastic inputs because they set both income and the empty-month risk. Gap days matter sharply when the business is capacity-bound, since each idle day removes part of a project. Fee and fixed costs are linear and act as a threshold.
Three real-world case studies
Bootstrapped starter
A freelancer building a first client list
A freelancer sells small projects at twenty-five hundred each, sends six proposals a month and keeps fixed costs very low. Gaps are short and a few wins cover costs. Load it to see how a lean solo business can profit on project work even with a modest win rate.
Scaling mid-market
A boutique agency with premium projects
A small agency sells fourteen-thousand projects, wins about three in ten and keeps gaps tiny with a team behind it. Fixed costs are large, but the fee covers them easily. Load it to see how premium pricing and a strong win rate make project work very profitable.
Black-swan crisis
A quiet market and long gaps
A consultant sends five proposals a month and wins one in ten at a lower fee. Gaps stretch to sixteen days, each proposal takes fourteen hours and fixed costs stay at six thousand. Load it to see how rare wins and long idle spells make project work a monthly loss.
Industry benchmark matrix
| Metric | Danger zone | Industry average | Top 10% elite |
|---|---|---|---|
| Proposal win rate (service projects) | Below 12% | 20–30% | Above 40% |
| Empty-month risk (no new project) | Above 30% | 10–15% | Below 5% |
| Delivery utilisation | Below 45% | 65–85% | Above 90% |
| Selling time as share of project fee | Above 35% | 15–25% | Below 10% |
| Cash buffer held, in months of fixed costs | Below 1 | 3–4 | 6 or more |
Variables and levers
Fee per project
What a typical project brings in. For a retainer, read this as the monthly fee.
Lever: Raise the fee or add a paid discovery stage, because a project must cover its own selling time and the quiet weeks after it.
Proposal win rate
Share of proposals you send that turn into signed work.
Lever: Qualify leads harder and follow up on every proposal; a higher win rate cuts selling time and empty-month risk together.
Proposals sent per month
How many quotes or pitches go out in a month, which sets how many projects you can expect to win.
Lever: Keep a steady weekly rhythm of outreach, since a pipeline that is only filled when work runs out always arrives late.
Gap between projects
Working days of idle time between finishing one project and starting the next.
Lever: Book the next project before the current one ends, and use gaps for paid small jobs or maintenance work.
Hours per proposal
Time spent writing, scoping and presenting one proposal, including calls that go nowhere.
Lever: Reuse proposal templates and charge for detailed scoping, because unpaid proposal hours are the cost of project selling.
Fixed costs per month
Rent, software, insurance and your own pay floor that continue whether or not there is work.
Lever: Keep fixed costs low enough to survive a quiet quarter, and convert subscriptions into usage-based tools where possible.
How to use this simulator
- 1Enter the typical project fee and the proposals you send in a month.
- 2Set your real win rate from the last six months, not your best quarter.
- 3Add gap days between projects, hours per proposal and fixed costs.
- 4Read the five dominoes and note the empty-month risk and the cash buffer it implies.
- 5Compare with retainer clients in the Parallel universe tab and share the link.
Mistakes to avoid
- Judging projects by fee alone. A large project still costs proposals, gaps and empty months around it.
- Using your best quarter's win rate. Averages over six months are safer, because wins arrive in streaks.
- Ignoring capacity. Winning more projects than you can deliver does not raise profit and may harm quality.
- Switching to retainers without testing the fee. A retainer priced too low can give steady cash and thin margin together.
Frequently asked questions
Is a retainer always better than projects?
No. Retainers give steadier cash and lower selling effort, but the fee per unit of work is often lower and one client can become a large share of income. The simulator shows the trade for your numbers.
What is empty-month risk?
The chance that no new project is won in a month, modelled as e to the minus the expected wins. It is a simplification, but it shows why low win counts make cash unstable.
Why is selling time priced at 45 per hour?
Because hours spent on proposals are hours not billed. 45 is an assumption for the value of the owner's time; replace it by changing the hours per proposal.
What does the retainer scenario change?
It removes gaps, cuts proposals by 30%, raises the win rate by 50% and takes 5% off the fee. Whether that pays depends on your numbers, so read the 24-month tab.
Does this model include tax?
No. It stops at pre-tax operating result. Tax, VAT and social contributions differ by country, so check current rules with your accountant.
How accurate is this?
It is an educational planning model with the assumptions shown, not financial advice. Replace the inputs with your own proposal and project history.
This is an educational planning model with stated assumptions. It is not financial, tax or legal advice. Replace the inputs with your own figures and verify important decisions with a qualified professional.