Here’s an uncomfortable question for recruitment business owners.
When did you last deliberately increase your average fee?
Not because salaries went up. Not because you got lucky with a particularly lucrative placement.
Because you made a conscious, commercial decision to earn more from the work your business does.
Can’t remember? You’re probably not alone.
According to the ONS, average weekly earnings (excluding bonuses) have risen by around 30% since August 2021.
Meanwhile, your own costs have gone in only one direction. Salaries, employer NI, advertising, technology, compliance. And quite possibly a bigger slice of every fee going to consultants whose commission depends entirely on invoicing, regardless of how profitable the business actually is.
So here’s the real question.
Are you running a more valuable recruitment business than you were five years ago? Or just a more expensive one?
Of course, the market has been difficult. Clients are cautious. Vacancies are harder to win. Competition is fierce.
But that’s precisely why you need to stop confusing more activity with better performance.
Here are five things I’d be doing.
- Know what you’re actually earning
Compare your average fee, gross profit per consultant and operating profit with 2021.
Not just your turnover. Not just your number of placements.
Look at individual clients, consultants and services. Where are you discounting? Where are rebates eating your margin? Which apparently successful consultants are actually contributing very little to the bottom line?
You might not like the answers. But you need them.
- Permanent recruiters: stop selling the same thing, the same way
If you’re still selling contingent recruitment at much the same percentage fee as five years ago, why?
Review minimum fees, discounting and who has authority to agree terms.
Then look at what else your clients would pay for.
Retained assignments. Exclusive recruitment campaigns. Hard-to-fill roles. Better-defined, packaged services offering more certainty and less wasted time.
Stop competing purely on your ability to send a CV. That’s a very crowded market.
- Temp and contract recruiters: pennies matter
An extra 50p or £1 per hour might sound insignificant.
Multiply it by your contractor hours over a year.
Now does it sound insignificant?
Review your margins properly, including employment costs, compliance and the cost of servicing accounts.
Negotiate regular rate reviews. Improve redeployment. Look at managed contractor solutions and workforce planning.
And stop congratulating yourselves on growing contractor numbers if the return isn’t improving.
- Develop clients. Don’t just service vacancies.
This is one of my recurring frustrations with recruitment businesses.
They have established client relationships, sometimes going back years, yet know remarkably little about those clients’ future plans.
They wait for a vacancy. Then compete to fill it.
That’s order-taking, not account development.
Find out where your clients are growing, where they’re struggling and what workforce challenges are coming.
Then proactively sell solutions. Not simply individual placements.
That’s how you grow average deal value, reduce wasted effort and make your business harder to replace.
- Stop rewarding the wrong behaviour
If your consultants earn commission solely on invoiced fees, guess what they’ll prioritise?
Invoiced fees.
Not margin. Not payment terms. Not account development. Not the long-term profitability of your business.
You designed the scheme. You can’t blame them for responding to it.
Reward the behaviours that build a genuinely profitable business, including improved fees, retained business, stronger margins and repeat revenue.
Here’s my challenge.
Set a measurable target to improve your average fee or hourly margin over the next 90 days.
Make someone accountable. Review progress every month.
And don’t simply tell your consultants to make more calls.
More of the same isn’t a growth strategy. Particularly when the same is becoming less profitable.
Over the years I’ve helped recruitment businesses across dozens of sectors double their average fees, improve payment terms and increase net consultant contribution.
It’s achievable. But rarely by accident.
About the Author: Alison Humphries Hon (FREC) is the founder of Recruitment Leadership Ltd, a strategic consultancy for the recruitment industry. With 40 years of experience, including leading teams, launching divisions in listed companies and personally negotiating global contracts worth over £120 million per year – Alison has helped hundreds of recruitment businesses maximise performance, enter new markets and prepare for sale. Learn more about Alison.
If you’d like to make more money from the business you’re already winning, get in touch with Alison to discuss how she can help.
