What to say when your client drops the “C” word in a fee negotiation.

Last week I blogged about how you need to move the focus away from dollars and percentages when clients negotiate fees, and on to your value and your differentiators.

One of the comments on my blog from Matthew Lancey raised the point that sometimes clients keep pushing, and they say something like “but your competitors charge less”.

And it’s this use of the “C” word that often scares recruiters.

The “C’ word? Competitors. I love it when clients use that word. If they do start to talk about competitor’s low fees, your response is to ask…

“Can you tell me about a situation, Ms Client, where you were charged less than the fee I am suggesting today, where you got the level of service and the calibre of talent you want – on a regular basis?”

True, this is a gamble, but the fact that you are there, in the client’s office, taking the order, or even on the phone taking the order, means that it is most unlikely the client is happy with their current supplier. In fact it amazes me when a client spends 20 minutes bagging another recruiter, and then when I quote my fee – he says, but the other recruiter only charges 15%!

That’s is the time to remind the client that a low fee, quoted by a supplier who does not deliver, is not a benchmark you will measure your fees against. And nor should the client.

Sometimes the client pushes hard for a reduced fee. When that happens, don’t feel pressurised. It’s a purely commercial decision – and it’s your decision to make. Is this client and this order so attractive it is worth taking a lower fee for?

Remember this before you discount next time. Don’t think of the fee only as dollars gained or lost – think of the fee as what your service is worth. A discounted fee means a discounted you – never forget that.

But sometimes you feel it is worth a compromise to secure a particular opportunity. In these cases I emphasise one golden rule.

Never reduce your originally quoted fee without extracting a concession from the client.

In other words if you say, “My fee is 20%”.  And the client asks for a discount. And you quickly respond with “OK how does 15% sound?”. You have just signaled to the client that you never believed in your value proposition and your service in the first place. You will struggle with getting his respect ever again – and you will never get your fees back up.

So if you reduce your fee, always ask for something in return – exclusivity maybe, client paid advertising maybe, client gives you multiple orders maybe, or maybe you waive the guarantee.

Make sure the negotiation involves both sides giving. This way the equal partnership is in tact.

So is your self-esteem by the way. And in our business, that’s crucial.

About Greg Savage

Over a career spanning thirty years, Greg Savage has established himself as a global recruitment leader. Greg is a regular keynote speaker at staffing and recruitment conferences around the world.

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8 Responses to What to say when your client drops the “C” word in a fee negotiation.

  1. Stephen O'Donnell October 26, 2010 at 8:59 am #

    My dad used to tell me this story.

    A driver visits a local scrap yard to find a replacement headlight for his van.
    “That’ll be £50 sir”
    “£50? The yard across the road said it would only cost £30”
    “Did they have any in stock?”
    “No”
    “Well when we don’t have them in stock, we only charge £30 too”

  2. Stephen O'Donnell October 26, 2010 at 9:21 am #

    Additionally, I find that clients who press for discounts are often slow payers too. As a result, I always bill the full amount, and display any discount on the invoice as conditional upon prompt payment. The discount is void after 2 weeks unpaid.

    I also never rebate any fee. My job is done, once a candidate has commenced employment. I may discount a subsequent fee, but never ever repay one honestly earned.

  3. Navid Sabetian November 8, 2010 at 9:18 am #

    Those are some great tips and also what Stephen says about conditional discount is also useful.

    When I deal with clients that ask for discount is I talk about value and why our fees are higher but I also give them a small discount (not as much as they say they want but only a fraction of it) and I stop there. I find that by giving that small discount they feel better in dealing with me and they find it easier to trust me because I seem to be doing something that is in their interest early on. It just seems to tone down a highly sales approach.

  4. Alconcalcia May 15, 2012 at 9:42 pm #

    I’m reminded of the day when me and my wife took a boat trip out from Valentia Island, County Kerry to the Skelligs, a group of rocks nine miles out in the Atlantic Ocean off the western coast of Ireland a few years back.
    I don’t know what we were thinking, possibly that this boat would be double decked with a nice cosy bar below which we could shelter ion should the weather turn. In fact, it was an eight seater fully exposed rowing type boat with a small cabin up front – and the weather did turn!. One moment I was looking a the sky, the next down at the sea from about fifteen foot above the waves, plus, because I was on what was effectively the wrong side, every time the boat dipped on my side I got showered with water, like you see in thos old movies where they throw buckets over the actors to make it look like a choppy sea. This WAS a choppy sea!
    Anyway, an hour and a half later we disembarked for a while to explore the rocks before clambering on board again for the return journey, which was just as arduous. Lots of green faces and everyone was soaked through. My jacket took two days to dry!
    As we got off, an American couple who had been buffeted about by the wind and rain like the rest of us wnet up to to the boat owner and organiser of the trip and said “In view of the weather, I don’t suppose there’s any chance of a discount is there?” In that lovely southern Irish brogue the captain of this particular ‘ship’ replied “You know when you came over on the aeroplane from America, tell me, did you experience any turbulence at all?”. ‘Why, yes, we did!” cried the American discount seekers “And tell me, did you go up to the pilot and ask HIM for a discount?” “Er, no, we didn’t”. ‘Well there’s your answer then!”

  5. Shaun Windram May 15, 2012 at 9:54 pm #

    Good advice for a difficult situation Greg, I’d be interested in your thoughts on this situation:

    Agency takes in job and has track record with client at an acceptable informally agreed rate, rates are attempted to be discussed at the outset and client (who is a new employee with company) says not to worry we’ll sort them out later, (remember, we have a decent relationship with the business here) we’re under pressure to get someone on board and don’t want to waste time negotiating for something irrelevant if you fail to deliver.

    Agency fills the job (obviously) and client offers a fee at around 7.5%, take it or leave it, that’s all we can offer you due to our budget constraint.

    Do you a) Take the money, lose credibility and learn that you should have nailed the rate at the outset accepting that you have misjudged your relationship with the business b) Walk away from the work you’ve already done and get paid nothing c) Grudgingly negotiate for the middle ground or d) something else?

    Shaun

    • Greg Savage May 16, 2012 at 6:36 pm #

      The key here obviously is NEVER do the work without terms of business agreed and signed. Its the cardinal rule. But having got in that situation I would definitely NOT accept a).
      b) is a real possibility but only after you have stuck to your guns on the the “informally agreed rate”. Your position is that this was an implied agreed rate, there was a precedent and you did the work on that basis. Of course that has no legal standing, but that is the way to go. If the client does not budge , sure, b) walk away. Life is too short

  6. Shaun Windram May 17, 2012 at 1:13 am #

    Hey Greg, thanks for your reply and thoughts on this.

    In the end, we negotiated for the middle ground as the candidate was in an insecure position and didn’t want to jeopardise his opportunity as much as anything else, though walking away was the only real alternative if this was unacceptable to the client, which is a real grind given the work has been done….the balance, we attributed to a “learning experience”

    Learning can be expensive.

    • Greg Savage May 17, 2012 at 8:03 am #

      Fair enough too Shaun, you are put into an untenable position when the candidate is going to suffer. Seems like the best outcome in a bad situation

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