Ok. Let me make this perfectly clear. I am NOT a fan of discounting your fees or markups ever, in the hopes that it will bring in more business. 
In fact, many of you have already seen this video on why not to do that. If you haven’t, then check it out…CLICK ON ME! That said, it isn’t reasonable to assume that prices wont drop during a recession (or anytime when supply exceedsdemand) or that there aren’t times when it simply does
make sense to lower a feee. I often hear from people who are concerned about the long term impact of lowering their fees with their existing clients… For example, “Neil. I have always done business with this one client at 30%.. Now, they are doing poorly and the president really wont approve any deal that goes above 20%. They are hurting and truthfully, I am also. BUT, if i lower my fee now to 20%, do you think that I will then always be stuck at 20% and will have a hard time getting it back up to 30%?”. Well, I have a great easy TRICK FOR YOU!
The key is to actually NEVER EVER EVER NEVER EVER NEVER (get it) LOWER YOUR FEE OR MARKUP!! NEVER!!!… BUT.. Feel free, WHEN YOU HAVE TO, to offer a special one time or limited DISCOUNT to your fees!
For example, using the above example, if you always do 30% fee with a client , and decide that you WILL agree to what NETS OUT TO BE a 20% fee, then here’s how you do it. Simply KEEP YOUR FEE at 30%, but give them a 33% special “recession buster” (or whatever you want to call it) discount. Bear in mind, if you place temps, this works exactly the same for markup!
Thus, your invoice would read the fee at 30% less a special “recession or agreed upon one time discount” of 33% and then show the net fee… For example, on a $50,000 salary, you would invoice the client $15,000 and then show a $5k discount, with a net fee of $10k. Thus, your fee is really a NET of 20%, but you have invoiced them at 30%!
The client gets what they want.. You have made it clear what your fees are and you haven’t lowered your fees, per se. This is also great, because even most recruiters get stumped by how much of a discount you are offering a client (or what they are asking for).. For example, a client may not think twice to ask you to go from 30% to 20%, because after all, that is a 10% discount. But, we just showed that it is a 33% discount!! Going from 25% to 20% Fee is a 20% discount.. twenty percent is a huge discount, so if you are going to do it, you might as well make your generosity obvious!!
I might also offer up this tip that has made people ALOT OF money! DO THIS ALL OF THE TIME and ANY time that you have to discount. So, if you negotiate starting at 30%, then as soon as you agree to do a deal at 25%, then try to write it as a 30% fee with a 16.67% discount.. This way, you may raise the fee one day.. Of course, you can always agree to give your client a lifetime “priority” discount of 16.67% and never have to raise the fees.
Try it.. You’ll like it!
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9 Comments
Preston Peery
Love it! I’ve also see these ideas done in the past when sending out invoices.
One other thing I haven’t seen mentioned in the comments so far is the X amount of hours guarantee on contractors (40 hours for instance). If the manager decides the contractor doesn’t fit and/or isn’t qualified within the first 40 hours of billing then it’s free. If they work anytime over the 40 hour mark though then its business as usual for billing. For hiring managers that are on the fence about a candidate this many times will make them pull the trigger.
It’s a tough pill to swallow if the candidate ends up not working out and you have to pay the candidate but in turn not get paid by the client. I’ve used it before and seen it used many times, and I haven’t seen a client kick a contractor out yet that was placed with this guarantee in place (of course now that I said that it’ll probably happen).
Happy Hunting!
-Preston
Adriana Estrada
This is great and something I haven’t thought of myself. Thanks for sharing your expertise, once again! What I’ve done, when clients are expecting a discount, is to offer a 1-time flat fee for a specific position. That way they don’t get a percentage stuck in their brain and only see this as a one-time special deal. I typically only do it for lower level under 50k salaries.
Anonymous
You are so right. So few people understand percentages.
On a different tack I phoned a radio chat show to complain that our Chancellor of the Exchequer was wrong when he claimed any increase in taxation from 24% to 25% was a 1% increase – it is in fact a 4.17% increase. The radio station researcher said of course it was a 1% increase. That’s how politicians get away with it!
Ryan Ollerenshaw
Really good play on words to make the client realise what they are actually getting – everyone is happy.
If we do discount our fees we always make sure we get something in return – either exclusivity on the role, short payment terms etc. We also send out the invoice quoting the full price and the discounted price with a note saying if they do not pay with the 7, 14, 21 days payment terms – they will automatically be re-invoiced for the full fee – good incentive for them to pay quickly.
Neil Lebovits
LOL re the politician. Yes, that is classic! It is also VERY COMMON!.. So, I urge all of you to use this to your advantage. Don’t just drop from 30% to 25%, as this is a whopping 16.67% discount. So, explain this to your clients and offer, say a 10% discount, etc. Same for training your staff or yourself!! Remind them always that 25% to 20% IS NOT a 5% discount (but rather a 20% discount!!!)
Marilyn Laurence
Some very good ideas and ones that do not devalue the service we give – much better than those giving it away
Nick Rawlins
Thanks for the tip. It is good to have the opportunity to share ideas and in my opinion any tips that can maintain the core level of margin in our industry is great; I just wish more recruiters would do this rather than just offering crazy low rates in order to ‘buy’ the business, which in the long term devalues the service and makes it harder for us all!
One of the methods we use is rather than discounting the current invoice is to invoice at the full rate and send a discount voucher which the invoice for the client to use within a six month period, this can be used against the cost of their next placement. The sales pitch is that they know our fees and have budgeted this into the cost this time, but maybe they will need to fill a position of a higher salary in the next six months, after all 5% of £50k is more than 5% of £30k!
With this method we have actually increased perm business through repeat orders, in particularly clients hold off to use their voucher until they get a high earner vacancy, in the meantime we continue to fill at full fee.
Hope this is useful?
Chris Hofstetter
This sounds like a really good idea. Right now I am just trying to find a job to work on and have a chance to try out this negotiation tactic.
Anonymous
You can even write in the contract that the discount expires after X # of placements or on a certain date, thereby eliminating the need to circle back and raise the fee down the road…the standard fee is triggered automatically.
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