Rule #1: Research The Market
The first rule of negotiating rates with clients is to do your homework beforehand. Before you go into any negotiation, you absolutely have to research:
- Typical recruitment agency fees in your town/city
- Whether a flat fee or a percentage fee works best for your business model
- Whether other agencies offer a refund if a candidate isn’t kept on, and whether this refund is full or partial
- The time frame within which other agencies offer refunds, i.e. one month, six months or a year after hiring a candidate
With these notes in your back pocket, you can choose whether you’d like to be a budget or a premium option, and what that entails in terms of service on your part. That’s the ground floor basic rule of any negotiation.
Rule #2: Never Break Your Bottom Line
No matter whether you’re in sales for a big corporation or you’re running a market stall, you have to have an absolute bottom line. In a negotiation, each party has a little leeway, and you’ll normally meet in the middle. Great! But some clients negotiate hard and will want to push prices lower than you can afford to go. You have to have an absolute bottom line, even if it means saying no to extra business.
Now, that doesn’t mean you can’t offer a discount. Sometimes that’s precisely what you need to do in order to bring a client on board. The trick is not to dive right in as soon as it’s suggested, but to hold out just enough that the business you’re negotiating with feel that they’re getting a good, hard-won deal.
Rule #3: Justify Your Value
All of that being said, there’s no need to offer a discount if you can justify your value.
Let’s say that your rates are higher than most. That’s a great way to do business, so long as you can justify the value of your work. No doubt you’ve had many-a-client that’s come to you and said:
Hey- I’ve been looking at [competitor] and their rates are almost half of yours. I really think you should give us a discount!
No doubt that if your rates are that much higher, there’s a good reason for it. Explain to them that your rates are what they are for a reason: you find candidates quicker, or you find higher quality candidates for the roles they’re offering. You could consider replying with the following:
We’ve put a lot of thought into deciding our rates, because we wanted them to represent the value that we offer. We have:
- A 98% candidate success rate with ABC Corp. and XYZ Inc.
- A 100% client satisfaction rate with HMD
- An average candidate sourcing timeframe of [X] days
- A robust refund policy that covers the first 6 months of a hire’s stay at your business
If we were to charge less or more than we do, we really feel that it wouldn’t properly encompass the value of our service. Would you like to know more about how we would source candidates for you?
Rule #4: Manage Rate Rises
Whether you’re switching from a flat fee to a percentage, or simply raising prices, doing it correctly will help you keep more clients on board. Nobody likes price rises, no matter what the reason, so make sure to explain the reasoning behind them to your customers. For example:
Thank you so much for your repeat business. So far, we’ve loved helping you find hires that blow your socks off! But so far, because of limited staff numbers, we haven’t been able to help every client that comes our way. From June 1st, a modest rate rise will help us expand and bring more agents on board. This will allow us to continue improving our service to you, so that we can help you find the very best hires faster than ever before.
Crucially, don’t apologise. Business is business, and sometimes you have to make a difficult choice. Your clients understand and respect that.
Rule #5: Don’t Give Up On ‘Lost Causes’
No doubt you’ve come across plenty of potential clients who, when you tried to justify the value of your work, baulked at the price anyway. That’s their right: maybe they’d be happier with a budget option, or they were just shopping for prices. But there’s often a way to get them back on board. Emphasise how your candidates have a 99% success rate at their new businesses, or that you can find candidates quicker than your competitors.
Now, they might still not be convinced. This is what we mean when we say a ‘lost cause’! If all else fails, write them a parting email a little something like this:
It’s a shame that we couldn’t move forward together in the end. But if you do ever change your mind, feel free to contact me at [phone number]. That’s a direct line to me. I’ll be able to negotiate a special deal just for you! Thank you again for your time.
You never know… After they try a budget option, they’ll finally realise why you charge what you do!
Rule #6: Use Objection Handling
Finally, we have a little tip from our colleagues in sales. It’s called ‘objection handling’. The trick is to approach every negotiation with one aim in mind: to figure out what’s preventing the other side from accepting an offer, and to address that concern. Here are a few examples:
- Your client is concerned that your prices are too high. Justify your fee, or offer them a discount.
- Your client is concerned that your service isn’t worth what you’re asking. Show them a deluge of facts and figures, showing how much better you are than your competitors.
- Your client is concerned that the candidates you’d offer wouldn’t be good enough. Show them who your other happy clients are and tell them ‘If it’s good enough for them, it’s good enough for you too!’
The trick is active listening, even going so far as to ask a client what’s holding them back. Sometimes they might be unwilling to say, but even just by telling you that there’s a problem, they’re giving you a way to win them around.
And there you have it: the six top rules for any recruitment agency negotiating with a potential business client. There are a few more tips: always be prepared to compromise; starting high and working down; building a rapport before you go in for the kill, and always staying flexible. The main thing you have to remember? One lost client isn’t the end of the world. If they really don’t want to do business with you, and you’ve done everything you can, then move on to the next one!