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Contract Employee's Newsletter
Helping Contract Professionals
Manage Their Careers
Vol. 3, No. 5
February 28, 2003
Edited by James R. Ziegler
A Companion to:
The Contract
Employee's Handbook
www.cehandbook.com
Sponsored by:
P.A.C.E. - Professional
Association for Contract Employment
www.pacepros.com
About The Contract Employee's Newsletter
The Contract Employee's Newsletter is a free online publication
for technical and professional contractors containing news, commentary,
tips, links to useful resources, nuggets of wisdom submitted by
readers, and anything else that seems appropriate at the time. The
CENewsletter is published bi-weekly or whenever issues warrant and
time allows. The subscriber list is confidential and will not be
disclosed outside this organization.
In This Issue
Read recent
issues of The Contract Employee's Newsletter.
News and Views
DICE.com Files Bankruptcy
DICE.com filed
for bankruptcy protection on 1/28/03. This is just one more indication
that the staffing vendor industry is a dead man walking.
Dice Inc. claims to be the leading online provider of online recruiting
services for technology professionals. It is certainly the oldest.
Started by two computer professionals over ten years ago, DICE
began as a simple online bulletin board. Several years later, in
1999, DICE.com was purchased by EarthWeb Inc. for $35 million. In
2000 EarthWeb changed its name to Dice Inc. after selling certain
content business assets (including earthweb.com) to internet.com
Corporation. The new Company currently generates over 90% of its
revenue from DICE.com.
While the NASDAQ grew steadily during 1999, EarthWeb shares initially
stalled and then dropped from a high of $55 per share in early 1999
to just $10 per share in early 2000. Today EarthWeb (now Dice Inc.)
is trading at under a dime. The precipitous slide in the value of
EarthWeb shares began a full year before the collapse of the dot
com economy, presaging the overall decline in corporate staffing.
The past two years have been a nightmare for the staffing industry
(temp agencies and recruiting firms) owing to the fact that companies
have not been hiring staff. Agencies that were used to picking the
low hanging fruit are starving for business. They can no longer
afford to pay the high fees to DICE.com and similar resume/job boards.
Moreover, companies are learning how to direct source their contractors
using online services that mine the entire Internet and the thousands
of job sites. Now they can automate the resume acquisition and evaluation
process. Companies can search and review thousands of blinded (contact
info concealed) resumes for just pennies, and unblind the resumes
they want to pursue for as little as $10 each. Other services are
offering resume evaluations, background testing, tech interviews,
and short-list creation for as little as $250 per placement.
More and more companies like Documentum and Extreme Networks are
adopting a "direct sourcing only" policy that completely
shuts out staffing vendors.
DICE.com is too expensive and too bloated to survive without a
major overhaul of its business model. Unfortunately for DICE.com,
they seem to be locked into the staffing vendor recruiting model,
which, as I said, is a dead man walking.
To survive in the current economy vendors must show companies how
to save money on staffing. This approach is the only viable
business model moving forward. For this reason ordinary staffing
vendors and staffing vendor management services are doomed.
Ordinary staffing vendors and vendor management services (a.k.a.
gatekeepers, vendors on premise, preferred vendors) represent the
the most expensive way to acquire talent.
In today's market companies are looking at direct sourcing methods
that represent the least expensive way to acquire talent.
Case in point. Look at the Direct
Employers Employment Search Engine. A former executive at Monster.com
formed a nonprofit organization that companies can join by paying,
as I recall, $6,000 to $60,000 per year (at most, the dues equals
the cost of just two full-time placements if the company were to
use an outside recruiter). In return, member companies can post
all of their jobs online for a fraction of the cost of posting on
DICE.com, Monster.com and the other job boards. Who would not
want to join such a nonprofit organization if they could save $600
to $900 per job listing?
In short, I do not see the "DICE.com model" surviving
in the current economy. The DICE.com business model needs staffing
vendors to survive, and traditional staffing vendors are soon to
be a thing of the past.
In contrast to the staffing vendor model, P.A.C.E. operates on
the principle that independent contract professionals and the companies
that use their consulting services will both benefit from
an open, ethical, and evenhanded alternative to traditional staffing
vendors. Vendors with a similar mission will prosper, while the
DICE.coms of the staffing world will go away, and deservedly so.
Here is a
link to a page on the DICE.com Web site that gives the Dice
Inc. "party line" regarding the company's plan for restructuring.
It's good PR, but I don't for a minute trust that Dice Inc. will
recover. The traditional staffing vendor business model is dying,
and so is DICE.
Return to Table of Contents.
Kudos and Testimonials
What People Are Saying About The Contract Employee's
Project
Such an interesting newsletter. I have been a subscriber for more
than a year, and the information has helped me to market my services
more successfully.
Do you ever offer workshops on the east coast, specifically in
the NYC area?
Regards,
Barbara B.
[Editor's comment: I am glad you find the information and personal
commentary in the CENewsletter useful. Regarding workshops in the
NYC area: I have given a few workshops, which I have enjoyed immensely,
but I have found that personally staging local workshops in different
parts of the country is too difficult to do it on a regular basis.
I have been working (it seems forever) on an e-book about self-marketing,
and when I get around to completing it I will offer on-line workshops
so that I can reach more people. In the meantime I will salt the
CENewletter with marketing tips. JRZ]
Return to Table of Contents.
Marketing Tips
Sales Skills - Your Most Important Skillset
I am occasionally asked, "What's the difference between finding
a consulting job and finding a full-time job?"
Well, first of all, let me say that the term "consulting job"
is an oxymoron - a contradiction in terms. And, it is a contradiction
that goes to the heart of the problem when we are talking about
landing consulting gigs in today's economy.
You see, looking for a full-time job is very different from selling
your consulting services to potential clients.
Finding a full-time job is a lot like convincing a company to adopt
you into their family. It's a long-term proposition. Selling your
consulting services, on the other hand, is a short-term proposition.
Your "fit" in the overall corporate culture is not nearly
as critical as whether you can do the job on time and under budget.
The operative term here is "sell". Whether you like it
or not, if you are a consultant you are above all and foremost in
the sales business.
There are lots of books out there on how to find a full-time job,
but for the most part they don't apply to consultants. I recommend
that consultants purchase and study books on how to become a successful
salesperson.
I am absolutely serious when I say this. Finding work as a consultant
is all about:
- Getting sales leads,
- Getting through to the decision maker,
- Presenting a compelling value proposition, and finally,
- It's about closing the sale.
Actually doing the work for which you will be paid is merely a
formality after the fact. You will never have a chance to do your
magic as a consultant if you cannot sell your value to the decision
maker.
Does this mean that any good salesperson could get a job as a COBOL
consultant doing, let's say, transformation of legacy systems?
The answer is "Yes" and "No". An experienced
salesperson would undoubtedly do a better job at selling the consultant's
services than could your average COBOL consultant, but there is
no way that a sales professional could actually pull off the project.
And this leads to my point. Consulting shops hire salespeople
to sell their capabilities to potential clients. Then
they have one or several "captive consultants", that is,
full-time consulting firm employees, actually do the work.
Recruiting firms and temp agencies also hire salespeople to sell
the services for Contract Employment to client companies.
But as an independent consultant, you are in business
for yourself, and hiring a recruiting firm to place you with a client
can cost anywhere from 35% to 50% of the billing rate.
So here is my point. As an independent consultant you have to be
a good salesperson, and in my opinion a consultant with a little
sales training and an understanding of the Internet can do a better
job of selling their own consulting services to clients than can
your average recruiter - and also make a lot more money in
the process.
I recommend that you search Barnes
and Noble using the keywords < sales sell consult >
Your search will uncover a long list of books on selling. Here
are some books that I thought looked promising as good sources of
information on how to sell your consulting services to prospective
clients.
Getting Started in Computer Consulting
by Peter Meyer, Paperback, November 1999
Stop Telling, Start Selling: How to Use
Customer-Focused Dialogue to Close Sales by Linda Richardson,
Paperback, September 1997
Clients for Life: How Great Professionals
Develop Breakthrough Relationships by Jagdish N. Sheth,
Andrew Sobel, Andrew C. Sobel, Hardcover, September 2000
Power of Consultative Selling by
Bryce Webster, Bruce F. Webster, Paperback, June 1987
Creating Customer Evangelists: How Loyal
Customers Become a Volunteer Sales Force by Ben McConnell,
Jackie Huba, Foreword by Guy Kawasaki, Hardcover, December 2002
Selling Services: A Marketing Book for the
Consulting Professional by Paul O'Neil, Paul O'Neill, Paperback,
September 2002
Contract and Fee-Setting Guide for Consultants
and Professionals by Howard L. Shenson, Paperback, November
1989
Making Rain: The Secrets of Building Lifelong
Client Loyalty by Andrew Sobel, Hardcover, January 2003
Keep in mind that selling is just another skill like balancing
a general ledger or designing a database. If a prospective client
told you that they liked your skillset and credentials, and would
hire your consulting services if you had just one more skill,
I am certain that you would run right out and learn that skill in
order to close the consulting deal.
I am telling you that whatever your current skillset, that "one
more skill" is the basics of selling.
Return to Table of Contents
Contract Employee's
Glossary
Terminology For Contract Professionals
More terms from Appendix
B: Glossary of Terms for Contract Professionals of The
Contract Employee's Handbook.
Margin
The margin is the spread between the pay rate and the billing rate
expressed as a percentage of the billing rate. The margin represents
the fee charged by a contract employment agency (recruiting firm)
to place you with a client and then payroll you as the agency’s
employee. Margins charged by recruiting firms are almost never lower
than 35%, and too frequently they exceed 50%. If a recruiting firm
pays you $60 per hour and bills the client $100, then the margin
is [($100 - $60) / $100] = .40 or 40%.
Do not be fooled by agencies that calculate their margin based
on the loaded labor rate (pay rate plus taxes, benefits, and administrative
overhead). This approach makes the margin appear to be much smaller
than it really is. Calculate your own margin by asking the agency
or your client for the billing rate. When you know the billing rate
you can subtract your pay rate to arrive at the true margin.
Markup
The markup is the spread between the pay rate and the billing rate
expressed as a percentage of the pay rate. Retail merchants buy
at wholesale and sell at retail. They “mark up” the wholesale
rate to arrive at the retail rate. Temporary help agencies and recruiting
firms operate like retail merchants. In the contract employment
industry the wholesale rate, or pay rate, is what the recruiting
firm pays you when they buy your contracting services. The retail
rate, or billing rate, is what the recruiting firm charges when
it resells your services to the client. Contract employment agencies
make their money on the spread between the pay rate and the billing
rate. All things being equal, the greater the spread the more the
agency makes.
Typical markups for contract employees are generally between 55%
and 100%. If a recruiting firm pays you $60 per hour and bills the
client $100, then the markup is [($100 - $60) / $60] = .67 or 67%.
Mediation
An informal, voluntary process in which a neutral third party, a
mediator, helps negotiate a mutually-acceptable resolution between
disputing parties. Unlike arbitration or litigation, mediation does
not impose a binding solution on the parties of the dispute. If
the parties cannot agree on an acceptable settlement they may still
arbitrate or litigate their dispute.
Microbusiness
Microbusiness is an informal term referring to a business entity
consisting of one to ten employees, partners, or members.
Return to Table of Contents.
The Contract Employee's
Project
The Contract Employee's Project is the larger context under which
the following interrelated vehicles operate to promote and defend
the interests of Contract Professionals:
Copyright and
Publication Info
Copyright (c) 2003, James R. Ziegler. All rights reserved.
You may copy or forward this free publication provided it is left
intact with all links and this notice unchanged. Any unauthorized
duplication, including republication in part or in full for commercial
use, is an infringement of copyright.
Published by:
P.A.C.E. - Professional Association for Contract Employment
1355 Willow Way, Suite 244
Concord, CA 94520
USA
http://www.pacepros.com/
Editor:
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
(925) 680-0200
CENewsletters@pacepros.com
Return to Table of Contents.
Disclaimer
The Contract Employee's Newsletter is designed to provide information
in regard to the subject matter covered. Use is granted with the
understanding that the publisher and authors are not engaged in
rendering legal or financial advice. If expert assistance is required
you should seek the services of a competent professional.
The purpose of this information is to educate and entertain. The
publisher and contributors shall have neither liability nor responsibility
to any person or entity with respect to any loss or damage caused,
or alleged to be caused, directly or indirectly, by the information
contained in this Newsletter or by information contained in any
web site or resource referenced by citation or hypertext link within
the pages of this Newsletter.
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Sign-off
I hope you have found the information in this newsletter to be
interesting, informative, and provocative. I encourage you to share
the CENewsletter with your friends, colleagues, coworkers, clients,
and agency recruiters.
Why clients? Because you need every ally you can get. Why agency
recruiters? Because they need to know the jig is up.
Wishing you success in your contracting career,
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
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