It turns out that recruiters like to talk about money. Hard to believe, isn’t it? Last week, we had a dynamic discussion on the Independent Recruiter Blog about whether independent recruiters should refund their fees. Today, I’m going to follow up with some tips about how to resist the pressure to reduce recruiting fees.
One of my favorite sessions from the 2011 Big Biller Summit was Gary Stauble’s presentation about how to increase recruiter profits. One way to maintain or increase your profit margin is to protect your recruiting fees. Here are some pointers to help you avoid lowering your fees:
- Establish an “odd” fee. Gary discovered that he encounters much less haggling over a 29% fee or a 31% – basically, anything that is not a round, even number. Give it a try – it just might work.
- Only reduce your fee if your client gives you something in return. After all, you have other clients paying your standard fee, right? It’s not really fair to those clients if you start charging other clients less money for the same work. Here are some of Gary’s ideas for what you could ask for in exchange for a lower fee:
- An upfront engagement fee
- An exclusive agreement for the next 3 hires
- All candidate interviews to be conducted in your office in a single block of time (great way to get instant feedback!)
- An in-person meeting with all of the client’s hiring managers
- Fee must be paid within 10 days of candidate start in order to get the discount
- Remember, some clients will ask for a discount with no real expectation of receiving one. As NPA’s president, Dave Nerz, is fond of saying, “It’s all negotiation until someone says no.” Are you sure your client would actually walk away if you refused to lower your fee?
It seems a common tactic for clients to ask for reduced recruiting fees in a weak economy. Why is that? Have your business costs decreased just because the economy is weak? Maybe the client is trying to protect their own expenditures. But maybe the client just doesn’t think your services are worth your fee. Do you know why you charge what you charge? Can you clearly articulate what specific work you will conduct? And why your work is better or different than any other independent recruiter? Once you agree to a discount, how will you ever get the client to return to paying full fees? I once heard recruiting trainer Jeff Kaye say that if you can’t differentiate based on service, you’ll be forced to differentiate on price. Is being the cheapest provider the competitive advantage you want to offer?
If you can’t avoid reducing your recruiting fee, here are some additional strategies from Gary to make it less painful:
- Make sure you offer a flat-rate discount, not a percentage discount
- Make it a “one-time” or annual offer
- Tie it to multiple placements – after 3 hires in a single calendar year, offer a flat discount of $1,000. It’s still a significant savings.
- Finally, if you MUST offer a percentage discount, start with 1%.
Employing these tips will help you maintain the integrity of the recruiting fees your charge. Has a client ever asked you to lower your fee? Did you agree to do it? What strategies have you used to avoid a fee reduction?