So you’re in demand… but are you profitable? Part Two

Published on

April 6, 2022

Written by

Alison Humphries
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In Part One of this two-part series, I wrote about the distinction between sales success and profitability. Managing costs is the obvious place to start. In Part Two, I want to focus on the areas that very few recruitment business leaders have a grasp of…

Efficiencies

If you run a perm recruitment business, you might think that retainers will solve all your problems. However, that’s only true if you can deliver on a role efficiently. Otherwise, you are writing a blank cheque of your time to your client, and if you spend 80 hours filling that job then that’s 80 hours when you are not building your candidate network and your pipeline. So start drilling down on actual time spent on a role and how it can be better managed.

Can you automate some of the process? Can you make your research more targeted?

One business I worked with had been averaging 10% placement fees pre-pandemic. This was not unusual in their sector. They undertook to raise the minimum fee to 15%, after training. Three months later, however, they had only increased their average fee to 12%. Why? Because staff just found it easier to say yes to a client than no. The business owner wasn’t checking. Remember, if you want to make a change permanent, people need continued support.

The same business had a major issue with dropouts, which was undermining their sales. On careful investigation, we realised that they were just recognising sales too early. They were very good at the counter-offer speech, but actually, the issue went back to their first interview with the candidate.

They were so keen to sell job opportunities that they failed to investigate the candidates’ true motivations and constraints. So when the offer came in and the candidate explained that his partner was a teacher who couldn’t move, the recruiter was taken by surprise.

Payment terms are stretched and are likely to get stretched further as your clients experience their own inflationary pressures. If your clients have a lot of buying power, you may not be able to change this, but you can manage it. Can you invoice for the interest that your terms allow you to charge? Can you negotiate a more favourable fee to the client for prompt payment?

If you run temps/contractors, you are almost certainly making use of an ID facility. But how closely are you managing your temporary workforce? For example, the cost of attraction, engagement and compliance is substantial for many sectors.

Having made that investment, are you redeploying these contractors regularly? Do your consultants actively seek extensions for them, or just accept that the assignment is ending? In one business we were able to extend assignments by 50% on average just by highlighting what the contractor had achieved and reminding their line manager of other skills.

Are your workers putting in timesheets for the hours expected? If they don’t hear from the recruiter, it’s alarming how many take several days off, don’t send in their timesheets or even disappear to another provider. In one case, just writing to contractors in advance of the May bank holidays, advising them how to protect their earnings by making other arrangements with the hirer, brought May GP back up to match June.

Finally, have a look at business development. I expect very few of your staff are doing it. They are waiting for the ‘magic day’ where all their job-filling work is done and they can draw up a list of targets.

The thing is, at any point your brilliant client can disappear. A change of key staff, a board-led review of TA, and it’s all gone. At the same time, you can’t have expensive staff doing basic market research instead of filling live jobs.

The answer? Make the activities they are already doing into BD activities with a few extra questions. For example, every candidate interviewed can yield one candidate referral and one potential job lead. Every failed assignment where the client fills it through other sources can provide a lead as well.

Alison Humphries (Hon FREC, MA Oxon, CIPD, Dip T&D) is an experienced board advisor and NED specialising in the recruitment industry. She has built and grown multiple businesses, including leading them through successful trade sales. To discuss how your business can benefit from advice from one of the most respected leaders in the business, book a call with Alison here.

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