Don't you hate negotiating on markup all the time? When I first started in the staffing industry, we always talked about how we needed to stop selling on markup - 17 years later nothing has changed.
Why do prospects and clients always want us to quote a markup? Well the issue really doesn't lie with the prospect - our industry has created this monster. We're the ones that started quoting markups decades ago, and as much as we complain about it, we immediately go to markup every time there is a question about price. But it doesn't have to be this way.
Sure, some clients will refuse to negotiate on any thing other than markup. But my experience has been that if you are talking with an educated buyer, they are more concerned with meeting greater goals such as overall cost savings or improved productivity than they are with markup. So the next time your big client is up for contract negotiations, or you are in the middle of an RFP, or inevitably when a customer comes to you to lower your rate, here are 10 negotiating points to consider other than just your markup.
1. Conversion Length/Fee Consider increasing or decreasing the days or hours needed to hire an employee for a reduced or no fee. Or modify the conversion fee.
2. Background Checks/Drug Screens/Credit Checks Are you passing these along to your client or eating the cost. Are you marking them up to cover your other administrative costs or even charging a premium for the service?
3. Payment Terms Is your standard term Net 10 days? Do you actually enforce it? What is the cost of stretching payment terms from 30 to 45 days, and how does that compare to the markup reduction they are asking for?
4. Volume Discounts Conceding markup only if they hit certain volume levels can actually incent your clients to give you more of their business, while preserving your existing margins.
5. Value Adds Are you providing on-call service at no additional charge? Do you provide added levels of screening or testing?
6. Contract Length Ask for a longer contract length in return for margin or other concessions.
7. Exclusivity You want me to drop my rates, then give me all the business.
8. Bill Rate Maintain control of your margins by only negotiating bill rates, thereby giving you flexibility to dictate pay, training wages, etc.
9. On-site Coverage We tend to approach on-site coverage as all or nothing: the business is big enough to warrant a full-time on-site at no charge or it isn't. Explore opportunities for part-time on-site coverage or charging your client for coverage, even tiering the charges based on volume.
10. Direct Hire Fees Don't do any direct hires with them anyway? Then why not give them a great rate instead of conceding your margins.
These aren't pie in the sky options - I've used every one of them successfully at some point in negotiating with clients and prospects. The key is for you to understand and be able to show the client that there are other ways they can achieve the results they desire without going straight for your margins. Try one or more of these out the next time you are asked to drop your mark-up.