QUESTION: I sent out a proposal yesterday for 25% on a search on a first year base salary. This was the response I got: Hey Todd, thanks. I sure you would like to know you are officially the highest priced recruiter I have ever met, but I supposed there is some pride in that. See you later.
I am curious what the typical fees you charge are. I did not think 25% is that high. I am usually in the 20% to 25% range. – Todd
ANSWER: First of all, I never email or mail fee proposals for that exact reason. Think of a fee proposal as driving down a major route and gas is $2.39, $2.45, $2.35 and all of sudden you see $4.25. The station looks the same, ultra, premium, regular. You are probably going to drive by. You have been going down this road and everything is between $2.35 and $2.50. Why would any moron pay $4.25 for gas? That is what sending out a fee proposal is.
Now 25% normal, but key here of winning at a premium fee in a niche where that niche is in the teens or 20% is doing a great diagnosis. If you have been a follower for a while, this is the one thing I beat a drum on, probably almost every month in one form or shape of someone’s question. In the absence of asking really good questions, uncovering what is working and what is not working in their existing process, and just quoting a fee, you are now like everybody else except if you quote a higher fee you are more expensive.
What you are going to typically hear in an economy like we are in now in 99% of all niches is – I am not seeing a lot of really good people. That is the hook on which you put your hanger for higher fees. So in the absence of hearing that, if you talk to somebody and they are paying 5%, okay, I do not know of anyone, just making an extreme example, you are talking to somebody and they are paying a really low fee, they are paying 5% and they have a recruiter, and they go, geez, Todd, every time we give this recruiter an opening he comes out with 4 outstanding people inside 3 weeks and we always hire one. You have no argument for 25%. My question is usually to that person, why are we even talking?
You do not hear about 5%, but you might hear about somebody that they are paying 18%, 19%, or 20%. I ask, “Why are we talking? It sounds like you have your problem solved.”
Now, when you ask that question, a lot of times they will say, well, you know, he has not been as good lately. Last time we gave him an opening we only saw 1 candidate.
Oh! And was that candidate any good?
No. They did not make it to the second interview.
So it sounds like that has broken down someplace.
Well, here is our process.
You walk them through your process. You say, okay, step 1, we are going to do this. Step 2, we are going to do this. Step 3, we are going to do this. Here is how we vet. Here is what we do. For us to do that, that represents an investment of 28.6% of the individual’s first year’s base salary, and if you are going for a retainer, with a deposit of $6,000 on the front end, fully creditable on the back end.
Now you get into objection time, but now you have a process. If they ask, “Can you put that in writing and send it off? I need to go over that with someone.”
You answer should always be, “Absolutely. Can we set up a call between me and you and the other person? The reason I am asking you, Mr. Hiring Manager or Ms. Hiring Manager to do that is, just like you at the beginning of this call, you probably would have thought 28.6% was expensive because you have somebody else you are paying 20%, they are going to see the fee proposal and they are going to go – this guy is a lot more expensive than the other guy and we are not going to be able to work together. I have been doing this a long time and I know in the absence of the 3 of us talking the likelihood is less than 50/50 that we are going to work together. You have already invested a significant amount of time. Can I do this verbally with them too?”
That is your ideal solution. It does not always work that way, but I am never going to send out a fee proposal until I have gotten buy in from at least 1 person that is involved in the hiring process that they understand we are different and they understand we are different from 2 different angles: One, from the angle of asking great questions and two, is outlining a fantastic process.
I think I answer a question like this almost every month on calls with clients, but I just know this is something that needs to penetrate.
Todd, thank you so much for the question. Great question. Very timely.