QUESTION: How can I raise fees with my existing clients? I settled for 20% with some of them a few years ago. Now, I have proven myself to them, and I know they are paying higher fees to others.
Starting the Conversation About Raising Recruiting Fees
A mentor of mine taught me this years ago when I wanted to talk about raising fees, and I will share with you what he shared with me. Whenever one discusses raising fees, there must also be a corresponding conversation about how to increase value to the customer. Even though you might be doing everything you can, you still need to discuss providing more value.
For example, if you are the client, I would say, “I have loved working with you. I have been deeply grateful for our relationship over the past few years and the opportunities you have provided me. I want to place you in our top tier of clients. At 20%, I do not have enough margin to make the investments in the searches I need to do to take it to another level to engage our research team or to go deeper on the searches, to make more attempts for candidates who are not getting back to us, to get those people that are not the lower-hanging fruit.”
My proposal is – and I would have whatever it is that you can do in the relationship – “A, B, and C, and for that, I propose that we raise our fee from 20% to 22.78%.” Or pick a number if you want to get closer to 25%.
Using Specific Numbers to Increase Recruiting Fees
I recall a campaign in the late 1990s, when I had several clients who were 20%. I went at them with 21.9% or 22.5% increases, and I didn’t encounter much resistance. It is harder to do a bigger jump, but play with it. What I have also learned is to use a very specific number, such as 22.78%. It gives the appearance that you sat down with a calculator and said, “My margins, I cannot afford to invest more because my margins are too tight at 20%. Here are all the things I want to do.”
Even if you are already doing them, they might not know it because if you are doing a full search and giving them 6 to 7 attempts per person, they are getting a bargain. Just talk about your process and that is going to represent an investment of 22.78%.
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How to Justify a Recruiting Fee Increase
“Can you authorize that increase? They are going to go, a lot of times, ‘Where the heck did you come up with that number?’”
My response was always, “I looked at your projects. We did a time-and-motion study and looked at how many attempts we have to make to get a hold of people, to go after the people that are harder to get a hold of, the ones you really want to see. We know we can go even deeper. How long that took us, what the investment in research was, what the investment with our admin team was, factoring in all the costs, we got a good feeling for the number of hours, and then we took out a calculator and did what we felt was a fair markup, and that is where we came up with that number.”
Applying the Same Strategy to New Clients
I find that this technique works, by the way, when you are quoting new fees. Whenever you quote a really specific number, the negotiations are, and the concessions I see our clients give up are minor. It is an interesting conversation. Everything I just said was true, by the way. We knew our metrics with our clients, including the average number of calls, the average number of people we had to talk to, and the average number of attempts it took to get them to fill a search.
You could do that. How many hours is that? You do not take the recruiter’s bill rate at their billings, divide it by 52, and then divide it by 40. This means you do not say, “My recruiter’s salary is $40,000, and their bill rate is blank.” No. This is someone who bills out at $300,000 a year, so that is the bill rate to consider when you factor these things in, if you need that help. That is how I would raise fees with existing clients.
P.S. Whenever you’re ready… here are 4 ways I can help you grow your recruitment business:
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4. Work with me and my team privately
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