Reply to: Offered new contract! Rate increase methodology

[XLMonkey]

No, that's called profit.

Example : Contractor paid £300 from agent. Customer buys contractor's services through agent for £350.
The mark-up/margin, gross profit, whatever you want to call it, is £50. That's clear.
However, when expressed as a percentage, things change.
The mark-up is £50 on £300 which is 16.66%
The margin is £50 of £350, which is 14.29%.

Ooops, I should have added "expressed as a percentage of total sales" onto that definition.... (my thanks to Wikipedia for confirming that I wasn't totally losing my marbles)

However, the margin in your example is not 14.29%

Mark-up is £50 on £300 = 16.66%
Margin is 1 - (total costs (£300 plus the agent's own cost of business, say £30/day) / total revenue (£350)) = 5.7%

My point being that ... since you don't know what the agent's cost of business is, you can't calculate what the actual margin is. Could be any number lower than 14.29%, including a loss.

[Fleetwood]

Mark-up = difference between the price paid for services/unit and price obtained for the same services/unit
Margin = difference between total costs (fixed and variable) and total income/year?

No, that's called profit.

Example : Contractor paid £300 from agent. Customer buys contractor's services through agent for £350.
The mark-up/margin, gross profit, whatever you want to call it, is £50. That's clear.
However, when expressed as a percentage, things change.
The mark-up is £50 on £300 which is 16.66%
The margin is £50 of £350, which is 14.29%.

[XLMonkey]

It isn't margin!

I think I know the answer to this already, but....... I'm going through this process at the moment. My Agent is on 17% and having been offered an extension, I am trying to negotiate a reduction in that margin. One quote from the Agent is that "17% is about average". I would have said 10% was about average, am I right/wrong?

I know I'm being picky, but it seems very few contractors actually know what margin is. .

Since you don't know what the agent's fixed costs are, then you have NO idea what their margin is. You only know what the mark-up is. I've come across (admittedly not many) agents that are charging a mark-up of over 30% but are still losing money (i.e. negative margin).

Mark-up = difference between the price paid for services/unit and price obtained for the same services/unit
Margin = difference between total costs (fixed and variable) and total income/year

How can you negotiate with them if you don't understand the nature of their business?

[kookachoo]

You're very right. Hadn't thought about that!! Too many bloody conference calls have hurt my brain today!

[malvolio]

If you got the work yourself, then they're just acting as a convenient invoicing point for Barclays (and, of course, getting you paid several weeks before the client pays them, which is worth a few bob to you I suspect) and 4% is more than fair. If you get bored, work out the bad-debt liability on an agency with 100 contractors at average rate - it's about £2m a month and someone has to pay the lost interest...

[kookachoo]

Interesting someone said Barclays is 4% through preferred agencies. I've been at Barclays for 18mths and my agency takes 8% in the first 12 months, then down to 4% thereafter.

Considering I got the contract and was forced to use the agency to process it, that's a hell of alot for them to be taking, and upon my impending renewal I will suggest they lower their cut and pass it on to me.

[boredsenseless]

17% leaves a lot of room for movement on their part. I refer you to my post on page 1 of this thread. Set your rate and be willing to walk...


addendum: I'd be after 5% of that margin personally.

I agree with the whore that I'd be after some of the margin, but 17% is about normal but its really up to you how much you let them keep

[ratewhore]

17% leaves a lot of room for movement on their part. I refer you to my post on page 1 of this thread. Set your rate and be willing to walk...


addendum: I'd be after 5% of that margin personally.

[MikeB]

Margin

I think I know the answer to this already, but....... I'm going through this process at the moment. My Agent is on 17% and having been offered an extension, I am trying to negotiate a reduction in that margin. One quote from the Agent is that "17% is about average". I would have said 10% was about average, am I right/wrong?

[DodgyAgent]

I wasn't saying that most agents work at between 5 and 10%. I was saying that, once you negotiate to a mark-up in that range, then you have reached the limit and are unlikely to get any further.

Clearly, agents will take as much as a mark-up as the market will bear (just as the contractor will take as high a daily rate as the market will bear).

thanks all to the various posters with rates between 5-10%, it's always nice to have some corroboration.

I claim my £5 for pro-agency spam from IT Contract Agent there

Everything is negotiable

[XLMonkey]

I don't know any agency who will work at 5% - if you think that most agencies work at between 5% and 10%......you're wrong!

I wasn't saying that most agents work at between 5 and 10%. I was saying that, once you negotiate to a mark-up in that range, then you have reached the limit and are unlikely to get any further.

Clearly, agents will take as much as a mark-up as the market will bear (just as the contractor will take as high a daily rate as the market will bear).

thanks all to the various posters with rates between 5-10%, it's always nice to have some corroboration.

I claim my £5 for pro-agency spam from IT Contract Agent there

[ratewhore]

mine takes 8% and I am happy for him to do so as a) my invoices get paid before they get the timesheet and b) I'm very happy with my rate...

...he also got asked to do a referral for 2%. Rightly so he told them to feck off!!!

[ChimpMaster]

Citibank 6% margins
M&S 5%

there's two clients who have agencies supplying to them at low margins to start with

Barclays 4% through preferred agencies ....

[DodgyAgent]

I don't know any agency who will work at 5% - if you think that most agencies work at between 5% and 10%......you're wrong!

Citibank 6% margins
M&S 5%

there's two clients who have agencies supplying to them at low margins to start with

[PerlOfWisdom]

Ermm - mine takes 4%...

Luxury! The best I could manage was 9% at BT.