How many retainers can you afford to lose?
People think about client risk one client at a time, which is why the year two go at once always feels like bad luck. Six retainers, six independent renewals, and the count comes back as a distribution.
Marketing Intermediate Monte Carlo Pro engine
After you install, this is the model to open.
What If Two Clients Leave at Once?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
- Two or more leave
- 22.5% of simulated years, at 15% churn on each retainer
- The year loses money
- 26.8% of 20,000 years, while the client list says all is well
- Median year
- $145,000 of profit, with the usual single departure
- The bad year
- -$335,000 P5 of profit, against $960,000 of fixed cost
Six retainers worth $1,225,000 between them, each with a 15% chance of not renewing at its anniversary, against $960,000 of fixed cost that is mostly people on salary. Fifteen percent is the number an agency owner will tell you without hesitating, and they will tell it to you one client at a time, which is exactly the mistake. Click Run and read the retainers lost line first.
The agency loses an average of 0.9 retainers a year, which sounds like the reassuring answer. But the median is 1, the ninetieth percentile is 2, and the third output, the one offered under Output cells, is the one to read twice: two or more retainers go in the same year in 22 of every 100 years (22.3%), not the once-a-decade people assume.
Nothing in this model is a recession or a reputation problem. It is six ordinary renewals with ordinary odds, and collisions are what independent risks do. The profit line then tells you what that costs. Mean profit is $81,250 against the $265,000 the plan assumes, the fifth percentile is a loss of $335,000, and the agency loses money in 27 of every 100 years (26.6%), because $960,000 of fixed cost only works if roughly five of the six accounts come back.
Second run: raise the fixed cost to $1,080,000, which is one more senior hire, and run it again. The loss-year rate climbs sharply while the distribution of retainers lost does not move at all, which is the honest way to look at a hiring decision in a retainer business. The hire does not change your client risk, it changes how much of it you can absorb.
What this cannot tell you is whether the six renewals are really independent. If four of them came through the same network, or all six sell into one category having a bad year, they move together and the two-at-once number is worse than 22.3%. Add correlation pairs at about +0.4 and watch it climb. To adapt it, list your own retainers largest first, set each probability from the last real conversation you had with that client rather than from a blanket rate, and put your true fixed cost in.
The model
It arrives on a tab called Template: Client Loss:
| Retainer 1, the largest account ($) | 390000 |
| Retainer 2 ($) | 260000 |
| Retainer 3 ($) | 210000 |
| Retainer 4 ($) | 150000 |
| Retainer 5 ($) | 120000 |
| Retainer 6 ($) | 95000 |
| Retainer 1 does not renew (1 = yes) | 0 |
| Retainer 2 does not renew (1 = yes) | 0 |
| Retainer 3 does not renew (1 = yes) | 0 |
| Retainer 4 does not renew (1 = yes) | 0 |
| Retainer 5 does not renew (1 = yes) | 0 |
| Retainer 6 does not renew (1 = yes) | 0 |
| Retainers lost this year | 0 |
| Retainer income kept ($) | 1,225,000 |
plus 4 more rows on the sheet.
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- Which launch day is a coin toss against the rival, and which is worse?What launch date has even odds of beating the competitor?
- Which budget hits the lead target eight months in ten, and what do the extra points cost?What spend gives 80% odds of hitting the lead target?
- How many tickets does the event need before break-even is more than a coin toss?How many tickets to sell for 90% odds of breaking even?
- Which part of the conference actually decides the date?Conference Plan: What Sets the Date?
- Which event risks are worth paying to prevent?Event Risk Register
- Where should the next ad dollar go?Split the Ad Budget for Maximum Orders
Every model like this one, and the method behind them: Monte Carlo simulation.