Agency margins

[richy]

Hi all. I often get agencies telling me how they need a 15% or 20% margin when I ask them why it so so high, but for what they do it must be a pretty similar (or even less) amount of admin each week/month to process timesheets/invoice.

Often I just need to get an agency intermediary because a client I have found insists upon it. Which means the Agency isn't even doing any recruiting to find me.

Giant charge £28 per week for processing timesheet/invoice, that works out at £1,456 per year. If the contract rate is at 40 per hr that works out at Giant getting 2%.

Even for just hosting a contract as an intermediary I have never managed to get it down to 2%, even with a single monthly invoice.

Does anyone here manage to negotiate a more reasonable margin or fixed price to process each weekly invoice?

What do people feel an agency deserves (they do deserve something for recruiting)? I think over a 6month contract £3000 is enough for an agency to make.

Thanks for any replies, richy

[malvolio]

What you have to remember and mostly never see is that roughly 90% of an agent's work does not convert into a sale. And for some reason, the guy behind the phone still wants paying at the end of the week.

I got into this whole are a while back, when looking at how to switch from the current model to one where we pay the agents*. Rough numbers are that invoice factoring is profitable at 4% margin, once you've lclosed the sale and thigns are in steady state. Otherwise, you can run at 5%-7% margins if you have a good PSL agreement and firm payment terms, otherwise you can't run at less than 11% and make a sensible profit (which is what you're there to do). Also, if you do the sums, an agency running 100 average-paid contractors is holding a rolling debt of around £1.5m for each week they pay you before they get paid themselves. That costs money as well.

*out if interest, we would pay them a percentage of the total contract value for the gig, plus a rolling service fee for factoring (unless you do that elsewhere of course). Won't work for a lot of contractors, but it might work for some, especially the specialists.

[BolshieBastard]

Hi all. I often get agencies telling me how they need a 15% or 20% margin when I ask them why it so so high, but for what they do it must be a pretty similar (or even less) amount of admin each week/month to process timesheets/invoice.

Often I just need to get an agency intermediary because a client I have found insists upon it. Which means the Agency isn't even doing any recruiting to find me.

Giant charge £28 per week for processing timesheet/invoice, that works out at £1,456 per year. If the contract rate is at 40 per hr that works out at Giant getting 2%.

Even for just hosting a contract as an intermediary I have never managed to get it down to 2%, even with a single monthly invoice.

Does anyone here manage to negotiate a more reasonable margin or fixed price to process each weekly invoice?

What do people feel an agency deserves (they do deserve something for recruiting)? I think over a 6month contract £3000 is enough for an agency to make.

Thanks for any replies, richy

Its called the market rate. If you dont like it, better get out of contracting. Otherwise just use clients who dont need you to use an agent.

[richy]

Its called the market rate. If you dont like it, better get out of contracting. Otherwise just use clients who dont need you to use an agent.

This is one of the best industries though, I'll be hear for many more years to come The thing is to improve conditions, and work out "win win" rates and margins where Agencies can operate in profit and we can too as contractors. All the agents I meet drive Mercs and Porches, their margins are too high at present.

Agency tip: Penta Consulting do 2% margin processing contracts, Optimus, Barclay Anderson and WA Consultants also offer sub-5% rates for processing a contract (dropping in their lap as they didn't have to recruit for it).

thanks richy

p.s. Thanks to the other poster, a good post.