The cost of sink-or-swim recruiters

I ran a poll on LinkedIn and found that around 60% of new recruiters are expected to find new business and negotiate fees in their first 6 months.

So what’s the cost of throwing price and negotiation in a sink-or-swim strategy for new recruits?

Let’s do the maths…

Your target price is 20%, but your “sink-or-swim” newbies get 15% for an average fee of £4.5k. You get them billing from day 1, and they make one placement a month.

12 placements in the first year at £4.5k = £54k.

What if you trained your consultants for the first 3 months and start them billing in month 4. They make the same number of placements a month.

Thanks to the training they’re hitting your target price of 20%. 9 placements in their first year at a higher fee of £6k = £54k.

So both approaches get the same outcome.

What happens next?

Let’s say they both make 18 placements in year 2. The sink-or-swim consultant makes £81k. The wait-and-learn consultant makes £108k.

How do you think year 3 goes?

Meanwhile in the real world…

Of course I’ve used hypothetical examples and rounded the numbers to keep things simple for us.

But if we were to look at this in real life, I think we’d see an even bigger difference between the two approaches.

A well-trained consultant would come across as more confident – and their successes would lead to even greater (justifiable) confidence.

Clients buy confidence, so I’d expect a higher win rate, more engagement through retainers and exclusive roles, a better fill rate (due to better job control), and more repeat business.

All at higher fees, of course.

Highlighted article: Better Negotiation in Recruitment

Better negotiation by Rhys Jones, MD of Davidson Gray

Davidson Gray funds, supports and partners with start-up recruitment businesses. MD Rhys Jones personally coaches and mentors all the business owners on how to build high profit businesses to withstand the inevitable bumps in the road that every business will encounter.

As part of this, Rhys is a big advocate of how increasing the average fee rate can transform a business’ profit and recommends The Value Advantage to all his owner managers. You can find out more about how Davidson Gray helps recruiters become business owners here.

Rhys has written a straight-to-the-point blog post about the value of negotiation, including tips on how to negotiate more effectively and an example of the difference good negotiation can make to your bottom line.

You can read the full post on the Davidson Gray website.

The Path to an Effective Recruitment Pricing Strategy

Pricing effectively has a huge impact on the value of your business. For a typical recruitment agency, a 1% improvement in price creates a 10% increase in profit.

By adapting strategies from other industries, you can confidently set your prices in a way that communicates the value you create and encourages customers to pay more…

Read the full article at the Staffing Industry Analysts website here.