QUESTION: I just started my 1-person recruitment agency this year focusing on IT. I have been able to get master vendor agreements with some Fortune 100 companies and have been submitting candidates to positions. However, the interview cycle is long and the pay cycle is longer, 180 days after placement. Is there a formula to work with small mid size companies on retainer to get cash in the door? – Renee
ANSWER: Yes! This is not a should, but is my philosophy and it is subject to being wrong in certain situations. For the most part, based on my observation of running a firm for 25+ years, and my observation now working with dozens and dozens of clients, it is a rare situation where there is a fantastic relationship, and a big billing relationship, and a strong process relationship where people are thrilled with it, between a recruiter and a big company.
There are exceptions. Do not get me wrong, I am aware of a few, therefore I am not saying this never happens. We actually had an exception in our firm with Nortel when they were a viable company, and another with Cisco when they were a viable company. The extenuating circumstances as to how we made that work would fill a two-day boot camp so I am not going to get into that. It is just that I can name off 2 in 25 years in my entire company.
I would tell you to target, depending on your niche, companies usually about $250 million a year in revenue or less. Generally, with those companies you will have net 30 terms. There will generally will be some HR at those companies, but at $50 million or less, less so.
In our office and on my desk, I had a number of clients that produced $200,000 to $300,000, even $400,000 a year in placement revenue, representing 10, 15, or 20 hires a year from one company, most of them less than $200 million, actually most of them even less than $100 million in revenue. There is this perception that if I go after the Fortune 100 they have all these openings, and it is like spilling ice cream.
When thinking about the Fortune 100 companies, imagine spilling ice cream at 3:00 in the afternoon on a hot sidewalk in the summer and the ice cream melts and you came back an hour later. What are you going to find? Ants! That is what recruiters are to big companies. If you look at 1,000 ants on a pile of ice cream they all look the same and to most companies. I hate to say it, the way most recruiters position themselves, that is what they look like to the company too. If you do not accept my terms, we will move on to recruiter #678 and goodbye.
With smaller companies, there is generally, but not always, more of a sense of urgency because things need to get done quicker and there are fewer layers of bureaucracy to get in the way.
I have hours of training on how to do that and cannot give you the answer on how to get a retainer in 5 minutes as a question. What I can do is give the mindset of how to get retainers.
People have emailed me in the past – Mike, What is your pitch? I hate that word, by the way, but I am using it on purpose because it is the way I am asked. What is your pitch to get a retainer? Like there is some magic words that if I can flow together in a sentence that will make you go, oh my gosh, I need to give you $7,000 up front. That is not the case.
The reason people will give you money up front is because you helped them come to a conclusion that the way they have done things in the past, if they have done it non exclusive contingency, has been less than effective. Ask them if in their last position, were they thrilled with the quantity and quality of the talent they saw in the timeframe they wanted to see it in? Normally, I do not like asking yes or no questions. If they say yes, they are probably being a little bit smarmy and it is probably not true, especially in this economy, then say, why are we talking? Why are you not talking to those other firms?
Treat this process like dating. If someone is too available, they are not sexy. If you are too available as a recruiter, you are not sexy as a recruiter. I would just challenge you to be a little bit aloof when you are going after these companies. Give the impress of I want to have you as a client, but I do not need you as a client. You do not use those words, but that is what you convey. The way you do that is you go in and you just challenge them a little bit.
There is a great book out there for everybody. My clients have heard me mention this before. The Challenger Sale by Matthew Dixon and Brent Adamson. It is a fantastic book on how to approach clients. A summary of the main theme of the book is, the most successful people they measured (they measured across multiple industries and multiple disciplines) and they measured hundreds or thousands of salespeople that challenged the beliefs and the structure of the current companies’ way of buying in a highly consultative way.
If you go in to get a retainer and you just try to pitch your way in with here is all the benefits, and they do not realize that they have a problem, it is not going to work. But if they start talking about the last time they had an opening, they gave it to 4 recruiters and then saw a couple people, and they all seemed to go away. The recruiters did not seem to know a lot about the talent.
You can ask a question like,
Are you open to hearing why that might occur? I do not know who those other recruiters are.
What do you mean, why would that occur?
Bluntly, I know if I am one of four recruiters, I am not going to put a lot of work into it. I do not know if they told you that or not. So what is happening is you are getting exposed to a few candidates from each recruiters’ list and they are probably only leaving one or two attempts and then they are moving on to the next thing. They are putting their effort in to the companies that are making a commitment to them.
That is what I do. I put in a huge effort to the companies that make a commitment to me. Are you open to exploring how relationship like that might work where you would get x amount of talent in x amount of days?
Part of the process is I would make bold promises and then I would honor them, meaning quantity of candidates and number of days. Then it is a process of walking them through exactly what you do in a search. Without spending a lot of time on that, you just walk them through basically how you make the sausage. We are going to put a research team on this. We are going to put together a list of 80 to 100 people. We are going to contact those people by making 6 to 8 attempts to each candidate before we give up on them. You walk them through the whole thing. At the end of the process they are thinking to themselves, my gosh, if she does all that, she has got to find some pretty good people.
Then you say, for us to do that, that represents an investment of 28.6% of the individual’s first year base salary with a deposit of $7,000 upfront. Are the one authorized to approve that or who else do we need to talk to and get involved in this conversation to move that process forward?
That is the 5-minute summary. It is a great question. I would just challenge you first, change your targets and do not worry about getting vender service agreements with large companies. When I get my clients to actually change they are finding that these companies are is easier to work with, they get better fee agreements, and they have a lot more fun.