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.