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Open Letter to the Industry Regarding Pricing
This is an open letter from INTELLECT CEO Jim Barge to the staffing industry: clients,
peer service providers and consultants.
Do you realize that in a good economy, the average staffing firm makes 3
cents to 5 cents on each dollar of revenue? And that in difficult
economic times such as today, the average staffing firm makes one penny
- yes, a mere one penny - on every dollar of revenue. One only needs to
review the quarterly financial statements of any publicly traded
staffing firm to see these numbers. Take a minute and do so.
As an industry, we need to be cognizant of these numbers and behave, and
work together, accordingly.
Quick story. When I was a server in the restaurant business many years
ago, I had a manager that put it best. My manager explained that every
decision that I made on the floor of the restaurant impacted (3) people:
the customer, the restaurant, and myself (given that I worked for tips).
The key to this story was his suggestion that any decision that had a
positive impact on ALL THREE parties was a good decision. Anything less
than that, was likely a poor decision. For example, giving away free
desert was great for the customer, perhaps great for my tip, but
irresponsible to the restaurant in managing food costs and profits. On
the other hand, delivering excellent food and service, at a fair price,
was optimal. The customer walks away satisfied and coming back for
another great experience, the restaurant makes a fair and equitable
profit and I leave work fairly compensated. Everybody wins.
That is how INTELLECT approaches the staffing business. We will service
the heck out of you (our clients) and deliver better-than-expected
results, but at pricing that is fair - never excessive, nor ever working
at pricing levels that simply don't make sense. That is the basis of a
partnership that is built on a solid foundation and fair to all parties
engaged in the relationship.
I'd like to make the following suggestions to those in our ecosystem:
| Clients: |
There is a real cost to delivering our
services, and (for consultant labor) this goes far beyond the payroll
taxes associated with our consultants' pay rates. These costs include the
salaries of our able recruiting staff that are necessary to deliver our
services to you, office rent, back office staff, business insurance
including very expensive professional liability policies, job board
licenses, technology to run our branches and much, much more. The main
point: Revenue (the amount that you see on an invoice) does not equal
profit. Not even close. Is it fair that we make a net, bottom line
profit of 1 penny to 3 pennies of every dollar that we charge you for
the business services that we provide? If so, please stop asking us for
35% markups and 15% placement agreements. These take fairness out of the
relationship.
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| Competitors: |
For CEO's, field managers, and sales reps:
stop selling on price. You have more than that to offer (well, some of
you anyway). When you complain about client pricing, remember three
things. First, every time you've dropped your pricing in the past, you have
set a new floor for that client to begin negotiating lower in the
future. Second, respect and value the hard work and effort that is
absolutely required to deliver our services to clients. We simply don't
"whip up" top 10% candidates; hiring great people is brutally hard and
you should value your part in helping clients accomplish this difficult
task. Third, if price is your value proposition, and another firm comes
along with lower pricing, you no longer have a value proposition that
matters to your client - so come up with something better, anything. The
quality of your process to vet great new hires? Reduction in your client
wasting time interviewing poor candidates? Retention of the right new
hires and the subsequent cost and time savings? Then, work hard with
your recruiting staff to back it up.
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| Consultants: |
I can only speak on behalf
of INTELLECT when I say that we pay fair market wages and do not take
advantage of our consultants with low pay rates nor our clients with
excessive markups. We do, however, mark up your labor according to fair
industry standards and that mark-up allows us to pay our corporate
expenses that permit us to deliver services to our clients, as well as a
fair profit margin of 1 cents to 3 cents on every dollar that we invoice
our customer.
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Fairness and equity for the client, consultant and staffing firm
delivering services. That is the foundation of our pricing, and we
encourage the same by all participants in the market.
Thank you for allowing me to share these thoughts and taking a moment to
absorb them.
Sincerely,
Jim Barge
President and CEO
Intellect
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