QUESTION: Mike, I would love your advice on this one. I have a great client who used my services for three searches last year. We agreed on 25%. They paid me a down payment on the first search, and I did not ask for a deposit on the others because it did not seem necessary. They just informed me they want to use my services for a total of 6 searches this year, with the last one wrapped up in August. This is $650,000 in compensation for the six people they hire. That is a lot of fees for me. They asked me to send them a proposal.

I am considering offering the same agreement we used in 2023, the 25%, but also offering an option for them to pay me on retainer, thinking they could pay me one-third down, one-third in April, and one-third in August. How much should I charge, or do you have other suggestions for my proposal? This is my best client. They run every part of recruiting through me. They are loyal and also fun to work with. I want to treat them right. Thanks. This is from Mary Beth.

Strategic Proposal Phases

Alright! Congratulations. This is a phenomenal opportunity. There is a lot here so I want to break it into a couple of phases. First, I would not make a proposal without having them do a verbal proposal on the phone. Then, I’d follow up with a written proposal, because I don’t know who they will slide it around to. The great news here is you already have a really deep relationship. They want to use you. But I am always against sending proposals until I have talked with them and justified and got buy-in on my logic.

Structuring the Proposal Based on Past Experience

The easiest thing for me with 6 positions, there are a couple versions, because I did this one time with a client, what I am about to propose, and the situation was slightly different. I remember, they were paying a deposit on every search. They were paying 30% and they were going to give us somewhere in the neighborhood of 10 positions that they would guarantee us over the next year. They were like, what can you do for us?

Offering Discounts and Maintaining Fees

I remember thinking, do we discount the fee? We were really well embedded there too. That was important. What I did was, we made the proposal verbally, and then we followed up with it in writing. We said, we really appreciate your business. I think we were charging a $10,000 deposit per position. What if we did this? Instead of charging you $100,000 in retainer fees, we will charge $50,000. It will still be $10,000 a position, and we will deduct the retainer from the last five positions filled.

Importance of Perceived Value in Proposals

I will explain my logic. He goes, you would really do that? I go, absolutely, you have been a great client, and we are happy to do it. This is where my instinct was right. We have done similar things with a lot of our clients in this recommendation. At some level, maybe not even intellectually, they think they are saving $50,000. They are not saving anything, nor did I have to cut my fee.

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Utilizing Deposits Effectively

In this situation, because they are already used to paying a deposit, I would get them on the phone and say, here is what I want to do. Whatever that deposit was, you do not have to change that dollar amount. Let’s say you were charging them $5,000 a position – paying a deposit on every position would be $30,000. Just go into it assuming, do not even justify it. It is a deposit-based search which allows me to work at the level we worked at last year, blah, blah, blah, $5,000 per position would be $30,000.

Because you have been a great client, I will only charge you a $5,000 deposit and take it off the last 3 positions. I know you said these will be wrapped up by August, but I will give you all of calendar 2024. Those deposits will expire if you do not give me enough positions. Again, we will bill you the total amount for the three positions, remove the $5,000, and deduct that from placements 4, 5, and 6.

Client Expectations and Risk Sharing

It has a tremendous amount of perceived value. You do not have to overthink this. If they give it to you sporadically, you can charge them. If they give you two now, and they are going to wait until April to provide you with two more, then you can charge $10,000 and take the deposit off the last one. The whole thing here is they do not roll over. If they give you a widget salesperson in St. Louis opening in April and then cancel or fill it through alternate means, you retain the deposit for your work.

That is how I did it. I did not get a lot of pushback. They will ask you if you will roll it over. I was always like, no, because that $5,000 partially – keyword partially – funded the research and the expenses of that search. If you cancel it in a week or two, that is one thing, Mr. or Ms. Employer, but if we have presented a slate of candidates at a $5,000 deposit, we are still losing a lot of money. Share some of that risk with us. My experience with clients is they understand that. I do not feel like you have to give away the farm.

Why Charge on the Last Position?

You might ask, why do you do it off the last, the 6th position? Now, I do not share this with the client. I share this with you as recruiters. If you are going to work on retained, you will fill 8 or 9 out of 10 positions. If they give you money upfront, they want you to fill it.

They probably only have a few alternate means going at it. If you work on it in a bundle, like I did, in a bundle of 10, and I do not fill, let’s say a worst case, two positions, I am going to keep the $20,000 on the backend, which is why I do not want to charge the retainer on the front end.

I know I am going to fill 5, 6, 7, or 8 positions, 6 or 7 at a minimum, I am going to fill. I fill the first five and charge my full fee, whatever the fee is. Again, stay at your 25%. Do not go lower. Then I start deducting the fees. Every time I did that, and if one position out of those ten did not get filled, there was no complaint by the employer that you owed me another placement because that was the 10th search, and they filled it through alternate means or canceled it.

Clear Invoicing Practices

When you do your invoicing, I was very clear, placement number 1/10, or you can do placement 1/6, 25% of $100,000 base salary is a $25,000 fee. Placement 2, Placement 3, Placement number 4, $100,000 salary, 25% fee, $25,000 fee less $5,000 retainer. This way, you and the employer can always keep track. It is the simplest way. What I loved about it was how excited the clients were because of how much money they thought they were saving.

Really, all they are saving is the interest they would make on half of that retainer over the period of time of those searches. That is the discount I am willing to give. That is a great question. I wish you tons of luck. Hopefully this helps.

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