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Agency Margins v Your fees

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    Agency Margins v Your fees

    This is a bit of an old chestnut but worth puttin gup again.

    Has anyone found an techniques useful in flushing out the margin that agencies charge on top of the fee paid to the contractor?

    I've had a bit of a debate recently with an agency. I agreed to drop my daily rate by 15% to be 'competiitve'. When I asked them what they were intending to charge the client you would have thought that a bomb had gone off. The reaction made me very suspicious of this particular agency so I was hoping for soem guidance on successful interactions on this issue.

    #2
    Plan A. You could ask them. Then ask them why they won't tell you. Then walk away from the role. Not really very helpful, though!

    Plan B. Ask them. They still won't tell you. Then ask the client when you get there. You still won't be told. Hmmm...

    Plan C. Ask them. They tell you. You don't know if they're telling the truth.

    Plan D. Stick to original quotes. Lose work. Not much better than Plan A really...

    Plan E. Don't worry about it. You get the money you've asked for. (but please let's not go through that argument all over agian... )

    Comment


      #3
      On a couple of occasions, I asked the client if they could let me have a look at the CV that my agency had obviously redrafted for the client, and lo and behold! To my CV the rate was attached, that the client had forgotten to un-staple, so that told me how much the agency were charging the client.

      You rely on the client forgetting to unstaple the rate though.... it has worked for me 3 times in the past!!

      Otherwise, agreed with the other, they won't tell you and, in theory, it's none of your business really.

      Comment


        #4
        I only take contracts when the agent discloses the fixed rate margin. Last contract was a low 3% (sole supplier etc). Usually it's 11-15%

        I do not take rate reductions. I have only been asked to once, In April 2003 at a major Telco. All four of us (Contractors) said no and said we would not renew. The rate was not reduced!

        Comment


          #5
          The agency margin is the sole concern of the client and not the contractor.

          There is a common myth.

          That myth goes something like this:-

          Contractor on £30.
          Agent on £20.
          Client billed £50.

          Contractor believes the £20 is "out of his pocket" and laughably believes he would have got all £50 had he gone direct.

          Reality is that going direct (had the contractor had the gumption to work out how to pick up a phone and cold call hundreds of clients to get just one interested, as agencies do), the contractor would probably not have dared ask for more then £35.

          The only person losing out when an agency overbills is the client and frankly when the client is ripping off his own customers, he is unlikely to be concerned at the agencies margin.

          As I have said many times before:-

          1)There is a reason why agencies are used.
          2)There is a reason why clients do not insist on certain margins.
          3)There is a reason why the client sees the agency as a legitimate business but the contractor as a temp.

          The agency margin is based on whatever he can get away with and that is because the financial risk of placing contractors is way beyond that which a contractor would ever face.

          Here is a comparison.

          Against my best judgment (and for the last time ever) I placed 2 contractors recently.
          The first contractor was paid by MyCo but the client has not paid me and probably never will.
          The second contractor decided to ask the client for payment direct to himself neatly cutting me out of the loop - how professional. Sadly the client agreed and now I have to work out how to collect many thousands of pounds of unpaid fees.
          The comparison?
          Ah yes, an esteemed contractor who posted here worrying about the "financial loss" he suffered when he travelled nearly 100 miles and did not get offered the job.
          Some if you guys have absolutely no idea:rolleyes .

          Comment


            #6
            The agency margin is the sole concern of the client and not the contractor.
            Not really. Of course it's not as simple as your example, but contracting is a 3-player co-operative game (contractor-agent-client), and while it is non-zero-sum, the strategies of all players affect the other 2.

            This is a market, and there will be a market rate for the agency margin, as there is for the contractor rate. It is the contractor's business whether the agency's margin is in line with this, because he is part of this transaction too.

            To take another simple example, if the agency's margin is too low, they may be in danger of collapsing. That is something the contractor has an interest in knowing about.

            Comment


              #7
              Thanks for these inputs - useful.

              The particular example that I'm looking to have influence upon is where the end client puts out a role at say 400 per day. ie that is the TOTAL it will pay.
              The Agency then decides on the MARGIN it will take and offers the role out at say 325. If it is successful it then takes 75 margin which equates to adding 23% onto the contractor fee rate.
              As many have said already a MARGIN of 15% would seem to be 'reasonable' - so it is this division of the TOTAL fee that I'm looking to influence. This is obviously based upon my view of the contribution of the contractor v the agency - others may have a different view!!

              Comment


                #8
                If they want you, they'll pay you what you want.

                Comment


                  #9
                  As usual this comes up. Oaksoft always raises some interesting points but as usual I will always disagree with him concerning the margin.

                  Oaksoft. Why did you not have a contract in place with the contractor who want direct?

                  Some people.

                  Amateurs.

                  Comment


                    #10
                    I did

                    I most certainly did have contracts will all parties.

                    The question is, do I risk another pile of money chasing the unpaid debt or do I live with it?

                    I need to make a dispassionate decision about that.
                    My immediate decision is come out of "agency in the middle" business and now only "sell" contractors to clients.
                    That way, it is easier to trace debt.

                    In terms of disagreeing with the margin it really is a no contest.

                    An agency will be paying out around £1600 per week to a contractor with a client who might take 3-6 months to pay up (if at all).
                    This is about £6500 per month or £20k+ over the 3 month period.
                    Now multiply that by 10, 20 and 50 contractors and the risk is absolutely huge.
                    10% non-payment of debt is quite typical and will cripple your business overnight unless you compensate with your margin elsewhere.

                    I'm sure someone will show me where a contractor stands to lose anywhere near that amount.

                    Comment

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