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Are Your Fees Feeling the Squeeze
Most of us have felt the pressure to lower our fees. And in moments of weakness, we sometimes make concessions.
The discounts we give are typically represented by a reduction in fee percentage, say from 33 percent to 25 percent. But all too often, we make additional—and unnecessary—concessions without even being aware of it. These hidden discounts result in a double taxation that affects our profit margin and fosters the perception that our services can be sold to the lowest bidder.
To avoid erosion of your income, look for these subtle, yet common forms of fee compression:
- "Introductory" rates. Extra-deep discounts are usually given by rookie recruiters who lack confidence in their abilities. But if you think about it, who among us works the hardest and shows the most dedication to the client? Often it's the rookie, whose placement is no less valuable than that of a seasoned veteran.
- "Volume" discounts. I've found that every search is unique and requires an equal amount of work, even if you're recruiting on two positions with the same title. If you feel a discount is justified, it's best to apply the discount only after the first job is filled and the full fee is paid. That way, you'll avoid giving a discount to an employer who turns out to be a "one-hit wonder."
- Flat fees and hourly rates. These types of fees may sound appealing, but they generally symbolize the beginning of a downward spiral in a recruiter's income.
- "Base salary only." If you give the employer a discount, then your fee should be calculated on the candidate's total compensation, not just the base salary. Otherwise, you're applying a double discount. I'm often amazed at how much money recruiters give away when filling sales positions with salaries that are seriously back-loaded. The difference can sometimes represent a de facto discount of 50 percent or more!
- Refunds. I've found that whenever a guarantee and a fee are tied together, it transfers responsibility from the client to the recruiter. That's why I offer a 60-day replacement guarantee, not a refund (prorated or in full). I've seen too many guarantee agreements morph into self-fulfilling prophesies.
Like death and taxes, every recruiter can be certain of the pressure to discount fees. Just be sure to pay attention to hidden concessions and not give away the store.
Bill Radin is a top-producing recruiter whose innovative books, tapes and training seminars have helped thousands of recruiting professionals and search consultants achieve peak performance and career satisfaction. Bill’s extensive experience makes him an ideal source of techniques, methods and ideas for rookies who want to master the fundamentals—or veterans ready to jump to a higher level of success.