Patty DeDominic, CEO of $19 million PDQ Personnel Services, in Los Angeles, knows how tough it can be to run a profitable business. PDQ's original pricing model was simple: Charge a recruitment fee for permanent employees, and charge by the hour for temporary placements. When the job market shrank a few years ago, however, PDQ negotiated each contract individually. Its clients were hiring less frequently and were more likely to use contingency workers for projects, whether they lasted a few weeks or several years. Here's DeDominic's advice about pricing for that market.
Set parameters. DeDominic provides guidelines, not inflexible rules. The 13 employees who price contracts know that costs are about 30% above direct labor, and so they add a markup of 30% (for breakeven) to 80%--depending on length of assignment, risk factors, and client.
Get a second opinion. When she hired an accounting firm to do a top-down review of PDQ's strategy, DeDominic found that too often her company was pricing long-term projects at the same level as short-term. Now PDQ discounts the rate on its longer-term, more lucrative services and increases their value to customers.