A different way for recruitment agencies to drive greater profits
In a relatively buoyant economy, your recruitment agency is probably focused on growth. Intuitively, this means generating greater revenue. But what if there was another, easier way to increase profits?
There is! Very simply, it’s controlling your operational costs. Assessing and honing your costs not only generates a quicker bang for your buck, it also sets you up for further growth – ensuring your business is operating at an optimum level before growing your team.
When it comes to managing expenditure for small and medium size recruitment agencies, we asked our friends at Staffing Industry Metrics (SIM) to shed some light. Some interesting trends have recently emerged with a number of factors influencing results for recruitment agencies in Australia.
To maintain a sustainable business, keeping a close watch on expenditure is paramount and SIM recommends doing this by viewing operational expenses as a percentage of your gross profit.
Firstly, what are the main operational expense benchmark groups?
- Variable expenses – that is, anything that you can turn on or off with reasonable notice.
- Marketing expenses relating to candidate and client acquisition.
- Occupancy expenses relating to rent and utilities.
- Management and staff expenses relating to all remuneration, recruitment and training costs.
- Corporate expenses relating to insurance, legal, IT etc.
Knowing what industry best practice looks like should help guide you in making better decisions about how much you spend and where.
To see how your recruitment firm stacks up, we reveal the total operational costs for the two most common recruitment agency sizes in Australia. Here’s what the data shows over the past five years.
5-year operational costs for agencies with a team of 1 to 10
5-year operational costs for agencies with a team of 11 to 20
So, why not take a look at your expenditure and see if you need to consider cost reduction as part of your strategy to boost your profits? You’ve got nothing to lose and everything to gain.