Dear Barb,
For years we charged 1% per $1,000 for direct placements, but that seemed to confuse our clients. As a result, we have several different fee options. We also charge a lower fee percentage if a client does not request us to conduct reference checks.
Our normal fee is 25%, which we will lower to 20% if a signing bonus is included in calculating our fee. When we place someone at the executive level, we charge a 30% fee, unless they make multiple hires from us and then we reduce the fee to 28%. For positions that pay under $20,000 we charge 20%.
We made these changes based on the requests from our clients to have a graduated fee schedule. Is this the type of fee schedule you would charge? I know we are being beat out by the first competitor who only charges 15%, but I don’t want to reduce our fee that much. I also find us negotiating on our guarantee more than I care to admit. We’ve now come up with six different guarantees based on the fee charged. How do you handle fees and guarantees?
Frank B., Ft. Worth, TX
Dear Frank:
I’m 100% totally confused, and I’m in your profession. One thing you need to keep in mind, “A confused buyer does not buy.”
Providing the lowest prices is a totally unsustainable advantage. Furthermore, if you aren’t the absolute lowest, you have no competitive or marketing advantage. A few years ago The New York Times had an article headlined, “High End Retailers Report Strong Profits, but Wal-Mart Still Struggles.” If Wal-Mart, which actually guarantees the lowest price, was struggling while the premium retailers were doing well, isn’t that a reason to stop competing on lower pricing or extended guarantees?
My advice would be to adapt the KISS method: Keep It Simple, Stupid. We charge a 25% flat fee to all clients. If there is a signing bonus, it is included in the annual earnings and our fee. Our guarantee is a 12-month pro-rated replacement guarantee. If we have a fall-off up to one year after our placement, our client can hire someone at a reduced fee, based on how long our candidate worked. If you’d like a copy of our guarantee, please email me and put “12-month guarantee” in the subject line.
If you provide a consumer with too many choices, they often will not make a choice. Your fees are just way too confusing, so my advice is to simplify. Have the same fee percentage for every placement.
Barbara J. Bruno, CPC, CTS