Look Beyond Markup in Your Negotiations

Last September I offered some negotiation advice drawn from my eight years as head of sales for a regional staffing agency:

“Here’s one of the most important lessons I learned during that time: if you want to win new business (or retain your current business) in the temporary staffing industry, don’t ever—ever—share your pricing in terms of a markup.”

I think that’s pretty sound advice. And many industry experts agree with it. But guess what? Over half a year later, most staffers are still talking about markup!

That’s understandable, of course: the industry has been buying and selling staffing services for decades, and during that time markup has been front and center in most negotiations. So it’s not easy to make the transition to a different approach.

But you can do it—and you should, if you want to strengthen your business. Moving away from markup is a lot easier if you know what you’re moving toward. So here are some suggestions for other areas of negotiation you can explore.

Guarantees
What’s your policy for handling a mismatched temporary employee? Do you give employers a certain amount of time (one day? two days? one week?) to decide whether to keep the temporary placement on board? And if an employer decides to cut a temp loose, do you charge your full fee?

If you’re confident in the screening work you’re doing on the front end, consider offering some form of guarantee to your clients. For example, if an employer decides that a temp isn’t working out, replace the employee free of change and don’t bill for the first 24 hours worked.

Conversion fees
If you allow employers to hire as permanent staff the temporary employees you place with them, at what point do you waive the conversion fee? At 480 hours? At 720 hours? Or longer?

Remember, not all of your temps will be hired as permanent employees. So offering a deep concession (a threshold of 160 hours, for example) in this area can add a lot of perceived value to your services—without having too great of a negative impact on your bottom line.

Added value services
Shift the conversation away from price by developing a
unique value proposition that sets your company apart from your competitors. Cover costs for outplacement or training, for example, or offer education sessions for your clients on topics such as recruitment, orientation, and management. Let your services—rather than just your markup—distinguish you.

Payment terms
Your options in this area depend on your company’s financial stability and cash-flow situation. But if you have some flexibility and find yourself negotiating with a CFO, consider modifying your usual payment terms. Extending them to net 45 or even to net 60 could go a long way toward winning a client’s business.

Background checks and drug screens
Do you absorb these costs or pass them on to the client? If your company’s finances permit it, consider covering these expenses yourself.

Volume discounts
If a client
still insists on making markup a focal point of negotiations, consider offering volume discounts based on weekly billable hours. Dropping the markup to 55% at 40, 50% at 200, 48% at 400, 40% at 800, and so on can satisfy that client’s need to negotiate a “good deal.” This arrangement can win you a new client—and because the discount kicks in only at high volume, it won’t hit your bottom line too hard.

 

 

 

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