Nudge Neil: Lowering Fees in a Bad Economy?

Q: Just like everyone else, I am constantly being asked to lower my fees to get an order. I know that once I lower my fees, I will have a hard time ever raising them again. Do you have any tips so that my clients know I am only doing this because times are tough right now?

A: In general, I am not a believer that lowering your prices will bring in more business. That is not the purpose of your question, but if you are thinking of trying it, then DO NOT.

Here is a brief video on that topic. If you get really good at selling contingency, then you should almost never have to discount it. If you haven’t seen this episode of Fordyce TV on perm fee negotiations, take time to watch it now!

Any time supply exceeds demand, it is reasonable to expect to see some element of pricing pressure. There are always times where we need to drop the fee on a particular order, but you are right to worry about your ability to raise fees later on. It is much easier to lower fees than it is to raise them! The same holds true if you agree to work with a client at any fee below your full fee.

Here is a great trick to ensure that your discounts are viewed as one-time only discounts:

NEVER, EVER, EVER, NEVER, EVER, NEVER (get it?) LOWER YOUR FULL FEE. NEVER!! BUT, feel free, WHEN YOU HAVE TO, to offer a special one-time or limited DISCOUNT to your fees!

For example, if you always do a 30% fee with a client and decide that you WILL agree to what nets out to be a 20% fee, here’s how you do it.

Simply KEEP YOUR FEE at 30%, but give them a 33% special “recession buster” (or whatever you want to call it) discount.

Thus, your invoice would show the fee at 30% less a special “recession discount” (or “agreed-upon one-time discount”) of 33% and then show the net fee. For example, on a $50,000 salary, you would invoice the client $15,000 and show a $5,000 discount, with a net fee of $10,000. Thus, your fee is really a NET of 20%, but you have invoiced them at 30%!

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The client gets what they want and you have made it clear what your fees are. Thus, you haven’t lowered your fees, per se.

This is also great because even many recruiters get stumped by how much of a discount you are offering a client (or what they are asking for). For example, a client may not think twice to ask you to go from 30% to 20%, because after all, that is a 10% discount. But we just showed that it is a 33% discount. Similarly, going from 25% to 20% fee is a 20% discount (and not the perceived 5% discount).

Twenty percent is a huge discount, so if you are going to do it, you might as well make your generosity obvious!

Do this even if you are happy to get a fee at 25%. Start your negotiation at 30% but as soon as you agree to do the deal at 25%, write it as a 30% fee with a 16.67% discount. This way, you may raise the fee one day. Even if you never plan on raising the fee, you can always agree to give your client a lifetime priority discount of 16.67%.

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Ask Neil any question that is vexing you! Have trouble closing deals or selling? Neil can help! To ask your question and possibly have it published online, email Neil at Neil.Lebovits@TheDynamicSale.com and put the words “Nudge Neil” in the subject.

Neil Lebovits, CPA, CPC, CTS, before taking the industry by storm as a trainer, was a global president for Adecco, where he sat on the global executive team. Previously, Neil was the president and COO of Ajilon Professional staffing for North America, where he oversaw over 100 offices. Neil has done it all in the industry: Permanent & Temporary Placement, Sales, Branch Management, Regional Management, COO, & President. He founded his industry training & development company, http://www.TheDynamicSale.Com, in 2009. Neil shares the secrets and systems that he has developed and harnessed while working himself up over his 20+ years in the industry. A renowned leader, motivator, trainer, and speaker, he has appeared on Bloomberg TV, CNN, ABC news, CNBC, the Wall Street Journal, Fortune, and Smart Money. Learn more about Neil and sign up for his free online training course at www.TheDynamicSale.Com.

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