Contractor Introductory Fee from an Agency
A reader sent us this article about how much to charge for a contractor introductory fee.
Dr McLaughlin, I am looking for some advice as I’m sure you have been in this position before, yourself.
I’m introducing an agency to the client I’m currently contracting at. I am wondering how much I should be asking the agency for the introduction?
Would you work on a flat fee on placement of a candidate on the client’s site or a percentage of the fee on x number of candidates placed?
Dr McLaughlin’s Reply
There are lots of moneymaking opportunities with agencies and this is one of them.
Most agencies give contractors a set fee for an introduction of a contractor which ends up in a contract at a company.
It’s usually from £250 – £500 per introduction. At the low end this is a bit cheap as they can usually earn that from a contractor in a couple of days or so.
Even at the top end it is very much a bargain for them. If they are adding on 20% to a contractor, that would mean they were making £80 a day for him.
Over a month that would be £1600, For a 3-month contract that would be £4,800. For a 6-month contract that would be £9,600.
So, giving you £500 is pretty good value for them.
Usually contractors are not very good businessmen when dealing with agencies.
Indeed they usually just accept whatever fee that the agency offers them without negotiating.
Introducing Agency to Client
However, your question is slightly different. You’ll be introducing an agency to a client. This could result in future business for them. They could get many contractors in there in the future. This could be very lucrative for them.
Don’t just take a contractor introductory fee.
Also, why try to work out what you should charge them?
The normal thing to do in business when you have something that others want, and is financially good for them, is to have a competitive tender.
Contact at lest three agencies. More would be better.
Tell them that you would be happy to introduce them to your client in return for some kind of businesses deal where you profit from any future business that they do with the client.
You are the one with something that others want. Let them try to work out how to do the best deal that they can with you, so that they win the business.
You are in pole position here.
Looking for Recurrent Income for Each Contractor Placed
Give them a clue though. Tell them that you are looking for recurrent income from any contractor they place there so that they don’t just offer you £500 for the introduction.
Tell them, also, that you will be their representative on site and will keep them in touch with any future requirements that the client will have.
It would be very good if you managed to get a sole supplier agreement with the client. It would be good, also, if the client contacted you first rather than the agency when they had a requirement. That way, you would keep control of the business.
Owning the Customer and the Business
Whoever owns the customer, owns the business.
It would mean that you could dump that agency in the future and partner with another one who gives you a better deal. You could also set up your own agency in future to supply the client.
It also means that it is likely that the agency will be able to do the dirty on you and cut you out.
Another thing to remember is to make sure you have a proper contract with them and not a loose agreement.
Renewal of Contract
Make sure it also covers renewal of contract. You’ll want to keep getting money for contractors even after they get renewed.
Make sure, also, that it applies to the whole of the company and not just this one manager or one project.
Indeed try and get it so that it is for all of the company’s sites where they hire contractors and not just that one building.
Agencies are very wily and very greedy. They will not hesitate to walk through any loophole you leave and cut you out.
Deal that Agency Can Offer
So, what sort of a deal could an agency offer you that you would like?
The best you could get would be where the agency cuts you in and gives you a percentage of what they get. That would be for all the time the contractor is at the client’s site.
What would be good, also, would be a lump sum for each contractor that they take on from that client at the start of the contract. Make sure that you also get another lump sum each time the client is renewed.
Tell them before they bid that both of these would be acceptable to you.
Competitive Tender for Contractor Business
Then let them bid against each other for the best deal.
Let them know, also, that they are in a competitive tender situation.
Then you just sit back and let the bids come in.
Then you will help the winner to get as many contractors in there as possible.
Try to insist that you will be agency’s representative on the site.
If you handle this well you can really cash in.
Don’t just take a contractor introductory fee.
Don’t do as most contractors do and just trouser a £250 cheque from he agency from the introduction.
It is worth a lot more to them than that.