Tell me if this scenario sounds familiar…
Hiring Manager: Can you help us find the top candidates in the market
Recruiter: Sure, our fee is 20%
Hiring Manager: Can you do it for 17%?
Recruiter: Well… our usual fee is 20%, but it’s just a 3% reduction, so sure…
Except it’s not a JUST a 3% reduction really is it? Not on the final fee!
Far from it!
20% fee on a £/$100K salary = £/$20K…
17% fee on a £/$100K salary = £/$17K…
£/$20K reduced £/$17K is a 15% decrease NOT “JUST” 3%!
You end up giving a discount of 15% without even noticing… And that’s coming straight off your bottom line…
(Bad when you as the business owner does it…. Even worse when you let your consultants get away with doing it!)
The same is true on a 20K salary, 40K salary whatever…
And even if you ONLY drop your fee from 20% to 19%…
That turns £/$20K into £/$19K… That’s still a 5% discount on the final fee and not JUST 1%…
And lets say your business operates at a 30% profit margin of that 20K fee…
That same 15% reduction on your final fee (from 20K to 17K). Takes your profit from 6K to just 3K you’ve halved your profits in a single decision without even realising.
Recruitment and Search Business Owners make knee jerk decisions like this on a daily basis without a proper grasp of the numbers. Many don’t even know what their cost of delivery is and so end up accepting business at a loss. Thinking to themselves “any business is better than no business”. NO! It’s not… Especially if it’s not a profitable business.
The subject of “pricing” and your fee-structure is not just about how much you charge; it’s also about positioning your business so you only deal with the clients you want to deal with, and it will make things a whole lot more enjoyable for both you and the client!
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