Negotiating fees with recruitment agencies

Typical conversation with a client:

Me: Thank you for getting in touch with me about the Senior Accountant role. Tell me a bit more about what you’re after?

Client: We are after someone with 3-5 years experience in business services & tax in a similar firm to us, CA Qualified and with great communication skills. 

ME: (Great - another client that wants exactly the same as my previous 10 phone calls this week). That’s great to hear - and what else have you done to find someone?

Client: Well we’re speaking to 5 agencies plus put up an ad on Seek and we’re letting everyone know that we’re only paying 14% so if you can’t match then we’re not interested. 

ME: (Relieved to hear that - saves us time, after trying to educate them on the value of retainers and stupidity of their fee - all on deaf ears). Well, if we come across someone we’ll let you know.

So what’s really happening behind the scenes??? Well - very simple. They are looking for a unicorn that the entire country is after - Senior Accountant - 3-5 years experience, CA Qualified. What’s the issue with this, you ask? Sounds reasonable - sure! 

Except basic economics - on a normal day it’s hard to find these unicorns because after getting their CA (usually 3 years experience) - they all leave Practice to go to Commerce seduced by the higher pay, less hours, less stress and NO TIMESHEETS! But wait - there is more! We have COVID - our borders are closed - we have even less people in the market! So DEMAND is huge, poaching by firms and commerce is rife and supply is ever dwindling!

All of us being accountants, you might remember your basic microeconomics:

Demand > Supply = Higher Prices

In this instance it means higher salaries but it also means

why would I send a precious unicorn to YOU for 14% if I can call 20+ of your competitors and get my full fee (which is significantly higher). 

Now let's put this in your language and draw an analogy you can relate to: You are a respectable Accounting Partner with a solid and growing client base (i.e.: not desperate for business) and one day you have an SME Client called Scrooge Pty Ltd come to you and they say:

Scrooge: Hi I’m looking for a new accountant that can do my tax and financials, intensive tax planning and some business advisory so that my business can grow. 

You: (Very excitedly - thinking you’re going to show the lads in the office how easy it is to land new fees) Welcome Scrooge - you’ve come to the right place (you start rattling off all of your services and how many years of experience you have etc…).

Scrooge: I’m so glad to hear you have over 10 years experience in this and you can help me. However, I’ve gone to several other accounting firms to get quotes so unless you match it I’m not interested. 

You: (Heart sinking) Ok - what sort of quotes did you get and from whom?

Scrooge: Well everything I mentioned above is being quoted as $900 by ITP, H&R Block and the bloke with a table at the local shopping centre - his name was Johno or something - has a TAFE Diploma and he told me he had a big certificate from the IPA on his desk so pretty qualified just like you!

You: (Seeping with fury at the comparison of your Professional Year being compared to an IPA/TAFE Accountant): I really appreciate you coming here and enquiring but perhaps we are not the right firm for you at this stage and wish you all the best (obviously if you’ve had solid sales training you might be able to convert this client into a full fee paying client - but why would you bother, often these types of clients suck your blood out and want to pay you as little as possible with little appreciation).

This is exactly what you’re doing to us every time you want to negotiate fees. Now, since we’re all accountants, I will explain how flawed that thinking is. 

Senior Accountant Salary Package: $85,000

Multiple that you should be getting in your firm: 2.5

Likely Fees generated by Senior Accountant: 2.5 x 85,000 = $212,500

Average tenure in a firm: 3 years

Fees Generated by Accountant during his/her tenure: 3 x $212,500 = $637,500 

Recruiters Fee that you want to pay: 14% x 85,000 = $11,900

Full Recruiter Fee: 19% x 85,000 = $16,150

Difference: $4,250

So you are worried about a one-off extra investment of $4,250 to get someone that will deliver $637,500 in revenue to your firm over 3 years)?

A recruitment agency would be stupid to give you their top candidates at reduced fees in the current market, when they can call your competitor and get full fee. They will assign your role to their rookie recruiter that started a few weeks ago, who doesn’t know the difference between a Senior Accountant at Commonwealth Bank vs BDO and is sending Accounts Payable people - and you’re thinking these recruiters are absolutely useless!

They will keep sending you stuff and eventually something will stick. An experienced recruiter will simply oversell their candidate that they can’t place anywhere else to make an easy fee despite the reduced fee - but that candidate will leave within 6-9 months, and that’s if they pass probation (however in this market given the payment you’ve already made plus not wanting to be stuck with a credit you’ll probably suck it up and keep trying to train them and flog a dead horse...read out article why we give full money back guarantees).

Just think about it logically, it’s basic economics - YOU WILL NOT GET TOP QUALITY STUFF BY PAYING REDUCED FEES - it doesn’t make sense because we all have better clients than you. 

What does a better client look like?: someone that pays us full fees on time, promptly interviews our candidates, when we get Partner feedback and are quick to decide on whether they want to hire the candidate. Read our article on why it’s important to be a good client.

Some of our clients are so smart they are offering extra fees for bringing talent to them first! What do you think happens when you’re offering us 14% and they’re offering full fee or more and there is a star candidate with 6 years experience, Partner potential, bringing across $150k worth of fees - whose firm will we be calling first to see if they are interested?

The lesson is simple - your biggest asset as a professional services firm are your people.

Without the right people you cannot grow your firm, help your clients, increase your wealth, have more work/life balance etc...So why in the world would you not invest in building relationships with a few key recruiters that know the industry really well and provide a solid money back guarantee, and incentivise them to send you top talent first - after all the numbers stack up! 

Michael Edelstein:

I'm an experienced Recruiter, Business Coach, and a Qualified Accountant that understands the business of accounting firms because I come from an audit background myself and have been recruiting accountants for over 10 years.

I specialise in Senior Placements within Public Practice Accounting across Australia having placed people in every state and territory and have a proven track record in the identification and facilitation of firm mergers, practice group transitions, and/or lateral & vertical partner moves. I'm regularly asked to provide research, commentary, and strategic advice to my clients on the latest trends and movements within the accounting Public Practice market.

Are you struggling to find people? Can't scale your business? Give me a call on 0421 892 145 or email me at michael@recruitmentexpert.com.au because I'm sure I can help you.