The design agency retainer model gets discussed a lot and explained rarely. Austin Schulenburg runs Pen and Mug, a nine-person creative studio in Nashville built largely on retainers, and on the NoRobots Podcast he walks Vlad through the mechanics: what they count, what expires, what happens when a client asks for eighteen things instead of ten, and why the same structure runs in both directions.
Five years as a side hustle first
Pen and Mug began while Austin had a full-time job doing graphic design and motion graphics at a corporate healthcare company. He took freelance clients at nights and weekends for about five years before going full time.
The reasoning was risk, not patience. He’d watched friends graduate with a degree, no clients and no connections, announce they were going out on their own, and find it much harder than it looked. Building on the side made it feel like a stepping stone rather than a leap of faith — and crucially, if you have one client and lose them, it isn’t devastating, because rent still gets paid.
The name came first, deliberately. Not Austin Schulenburg Design Company, because he always intended it to be a team. Pen and Mug is what you reach for at the start of a creative project: the pen for the making, the mug for the thinking.
Deliverables, not hours
Here is the part most studios get stuck on. Pen and Mug retains clients for a number of requests per month rather than a number of hours.
Unused capacity does not roll over. In exchange, there are no long-term contracts — everything is month to month. If a client knows the next few months are lighter or heavier, they retain more or less and the studio staffs accordingly, which also tells Austin which other projects to accept or decline.
When a client with ten requests asks for eighteen, plan A is to spread them out and push eight into future months. If they genuinely all have to happen now, and the team has the capacity, the overflow gets added to the bill. There’s no guarantee beyond the retainer — but if they agree to take it, it’s billed rather than absorbed.
Austin is candid that they’ve gotten this wrong before. An exciting project appears, the time almost fits, and the instinct is to say let’s make it work. That’s the habit they’re actively trying to break.
The same structure, mirrored
The detail that makes it hold together: Pen and Mug sets up retainers with its freelancers exactly the way clients set up retainers with Pen and Mug.
The studio asks a freelancer to commit to roughly ten projects a month across a couple of client accounts. The freelancer gets predictable work, the studio gets reliable capacity, and deliverables are tracked in both directions. Clients retain the studio; the studio retains the freelancers; the same unit of measurement flows through.
The team today is six full-timers including Austin and three freelancers, all paid monthly and all in the weekly rhythm of the same client accounts. Other freelancers get pulled in for single pieces of single projects, but those nine are the team.
Hiring without test projects
Austin has been advised many times to run paid test projects — hire five or six people for the same task, keep the best one or two. He hasn’t done it.
Every freelancer so far has come through connections, referrals, or one or two degrees of separation. They take applications, review portfolios, pick the person who feels right, and start small. If the work doesn’t meet the standard, the team can back up and do it themselves.
What he actually wants to know can’t be tested on paper anyway: which part of that portfolio piece was yours, what did a collaborator do, how do you work around a roadblock. His method is to hand over a real project without hovering, and if that goes well, hand over another. Several full-time team members started exactly that way. Others were offered full-time roles and said no — happy as freelancers, which works fine too.
Events, software, nonprofits
The studio niches into three areas and each earns its place differently.
Tech and software companies bring consistency — new marketing, content, feature launches, events, always something in motion, which suits a retainer. Nonprofits have the same recurring rhythm around fundraising and campaigns.
Events bring what Austin calls cool points. Professional motorsports, IndyCar, a music festival, Major League Pickleball. He’s careful to say these aren’t low money and high glory — the budgets are in the zone they want — but the added appeal is real: those logos come up in every sales call and every conversation with a prospective hire, and the team usually gets to attend.
For the larger clients they act as the whole creative department. It works through consistent prioritisation meetings, planning around the event calendar — lighter in early months, dense near the date — and knowing enough people to phone a friend in an emergency and still trust the work.
Where the clients actually come from
Referrals and repeat clients are number one. After that, and this is worth noting for anyone investing in social, Instagram has produced nothing useful: mostly requests for a single t-shirt illustration for a hundred dollars.
What has worked is Clutch and directory listings, where prospects can see the service mix, the reviews and the reputation before getting in touch.
And increasingly, people arrive saying they asked ChatGPT for a creative studio of a particular size and specialism, and Pen and Mug came up. Austin credits Clutch for nearly all of that, because they’ve done nothing on their own site to optimise for it. It’s a neat real-world confirmation of what Elad Hefetz argued in our GEO episode: third-party mentions move AI recommendations more than your own pages do.
AI as an ingredient, not a finished product
No service of theirs has been replaced by AI. Inside the studio it’s used sparingly, mostly for operational work — project management and similar. Email stays human, because the point is to communicate rather than clear notifications.
Where it does earn its place is production. A tire brand needed specific makes and models of car wearing specific tires, with no photo library and no practical way to stage a shoot in another country. Generate the car in the right environment, take it into Photoshop, clean it up, add the tire. Another: a teaser ad for a company whose logo is an elephant, built around an elephant under a tarp — a shoot he has no idea how he’d have organised otherwise. Even then, the generated image is raw material, colour specified by hex code, finished by hand.
For logo design and illustration they don’t use it at all, because it won’t produce what the team can. His summary of why: AI copies. It gathers what exists and recombines it, which is precisely why the ideas it offers rarely excite him.
AI didn’t take his job. It took the job he started in.
Asked what AI has replaced, Austin is clear that no service of theirs has disappeared. Nothing they used to sell has been taken off the menu. His concern sits somewhere else entirely: the bottom rung of the ladder he climbed himself.
The pattern used to be reliable. A business owner or an early-stage founder needs something cheap, fast and good enough to get started — a logo, a simple site. They hire a freelancer, a college student, or a nephew who’s handy in Illustrator. Austin was that college student, taking on work to build a portfolio while he still had a day job.
That tier of work is where new designers got their first real clients, their first feedback, and the first pieces they could show. Now the same person generates it themselves in an afternoon, because at that moment they don’t need considered options or craft — they need something to exist.
His conclusion is uncomfortable and he doesn’t soften it: it’s going to be harder to convince anyone to hire a recent graduate over generating it, which makes getting a first footing in the industry harder than it was for him. He isn’t worried about being replaced. He’s worried about how the next Austin gets started.
From creative department to creative director
The plan for the next few years is less about headcount than positioning. Pen and Mug started by taking requests and making things; Austin wants to be the creative director as well as the department — learning a brand deeply, bringing ideas and opportunities rather than only executing them.
His reasoning is plain: if you’re only executing, you’re the thing a cheaper option or a better model replaces. The consulting layer is where he believes businesses will keep wanting a human partner, because anyone content to hand the whole job to AI was optimising for cheap and fast, not for doing it well.
Find Austin and the team at pennandmug.com or on LinkedIn, and watch the full episode on YouTube. For another approach to pricing and knowing when to walk away, see our episode with Josh Webber of Big Red Jelly.
