Client wants a fee reduction for exclusivity and ongoing work.

Hi all

I would really appreciate your thoughts and experiences regarding fee reductions for ongoing exclusive work. After placing two canidates in the last 9 months with a new client, I have received the following email:

"Thank you for the excellent work you have done for ABC so far. Going forward, we are rationalizing the number of supplier we use for various services. We would be very happy for you to become our exclusive recruiter for ABC but would be looking for lower rates. Can you please give this some consideration and let me know?"

For the first role I worked on a contingent basis as they had already briefed another agency. The company was very impressed with the level of service and quality candidates I provided so the second role was again contingent but this time exclusive. They are a small (15 person) but growing business, so there will be multiple opportunities ahead............ I am thinking of negotiating on a retained basis if there is volume. What are your thoughts and how would you suggest structuring the deal going forward? I also think they would be great referers.

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Permalink Reply by Sandra McCartt on October 13, 2011 at 3:58am

Why ask for a retainer if they are offering you an exclusive. I would find out what rate they are looking for before you quote. The first guy who mentions a number is in trouble. If it is lower than you can live with because they are small now I would discount each invoice for immediate payment with the agreement that if volume reaches a named level you can give them the rate they want.

Another alternative would be to negotiate a monthly rate to handle all their recruiting for one year.

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Permalink Reply by Amber on October 13, 2011 at 11:41am

Sandra had some good tips, there are so many options you can choose. I like to find out why and what kind of discount they were thinking of. I have have some clients ask that, but in reality really wanted a more "flexible" payment schedule.

Some examples:

I have one client who does part of the estimated fee upfront, and then pays the balance in 3 parts over a total of 60 days. It's something that works with their A/P process, I guess!

I do have ONE long time client that we do placements for at a flat fee, it's worked out in that case because there is a certain amount of volume and overall the flat fee averages out each year to what we normally would have charged.

We just recently started recruiting for a new client who is paying a monthly fee that goes towards placements, and we did give them a small discount.

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Permalink Reply by Bill Schultz on October 14, 2011 at 12:47am

FIrst of all- kudos to you for doing great work for this client. Not only did you come through with candidates, but they obviously like your style.

Like Sandra alluded to, based on this you should ask them what they had in mind as far as exclusivity (I would start with a package of ~6 hires and see where you go from there). Also, this exclusivity should mean that you own these searches. In other words, regardless of the source, you get the fee. You don't want a candidate coming over the transom because of your evangelizing the firm.

If the fee makes sense to you, I would do it. We are always flexible to what works best for the situation and its served us well.

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Permalink Reply by Sharon Austin on October 14, 2011 at 10:51am

Thank you so much everyone for your feedback and advice.

Sandra, you are spot on about asking what they are looking for first. At the moment I am trying to second guess what they are thinking and wasting so much energy in the process. I need to put the ball back in their court. Depending on how they resond, your other ideas going forward are great.

Amber, thanks for sharing some of your experiences that have worked for you. I think they demonstrate that each situation is unique and needs to be negotiated and tweaked individually. It is great to hear how creative you have been and certainly has got me thinking!!

John, just loved your probing around how much I enjoyed working with them. A great reminder that it's not all about the dollars. They have been great clients to work with, although have needed a bit of prodding at times to keep them moving......I totally agree with you on caring for your loyal clients. I'm not a fan of cutting my fees to win business with new clients.

Bill, thanks for your encouragement and sound advice. Really grately for highlighting that I should own the searches regardless of the source. There is so much to consider when negotiating an agreement and I would have missed this.

Thanks to you all - I am in a much better space now to start having a conversation.

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Permalink Reply by lisa rokusek on October 14, 2011 at 11:28am

Here is a thought - I usually prefer to give a hefty sum of money back as a refund instead of reducing my placement fee.

Giving back 10K after 5 placements at 25% or 30% might be difficult but could make business sense. We, collectively, are too open to giving up our hard earned percentage points and when we have to be the best to win that is exactly when we should be the most reluctant.

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Permalink Reply by Sharon Austin on October 19, 2011 at 2:36am

Thanks Lisa. Great thought - I like the refund concept for volume.

lisa rokusek said:

Here is a thought - I usually prefer to give a hefty sum of money back as a refund instead of reducing my placement fee.

Giving back 10K after 5 placements at 25% or 30% might be difficult but could make business sense. We, collectively, are too open to giving up our hard earned percentage points and when we have to be the best to win that is exactly when we should be the most reluctant.