Find out how your agency compares, plus learn the 3 key factors impacting recruitment agency profit
Every recruitment agency aims to make a profit – and the overwhelming majority in Australia and New Zealand achieved this in 2018. According to Nigel Harse of Staffing Industry Metrics, who analysed data from 102 A/NZ recruitment agencies, 95% of recruitment agencies made a profit in 2018. That leaves only 5% of recruitment agencies who traded at a loss – the best result since 2011.
Profitable recruitment agencies improve on 2017 performance
Data from 2018 shows the recruitment industry had an exceptional year – and many agencies have continued their upward trajectory from 2017.
Of the 95% of recruitment agencies who made a profit in 2018, the majority (51%) increased their profit compared to 2017. A further 14% achieved similar results compared to 2017. The remaining 30% reported a decline in profit compared to 2017.
Overall, the average profit improvement was a healthy 24%. However, the top performing recruitment agencies increased their profit by 58% in 2018. That’s more than double the industry average – and a truly impressive result.
The 3 key factors impacting recruitment agency profit
Despite finishing the year in the black, not all recruitment agencies went from strength to strength in 2018. The 30% who made a profit, but fell short of their 2017 figures, were impacted by 3 main factors:
1. Staff churn – Staff churn continues to plague A/NZ recruitment agencies, particularly with the rising millennial workforce. However, agencies with staff churn of <40% in 2018 felt the biggest impacts to their bottom line.
2. Decline in perm revenue – 2018 was a record breaking year for permanent sales. The recruitment agencies who didn’t ride the wave failed to capitalise on peak conditions – and the chance to increase profit.
3. Management and staff costs – Some A/NZ recruitment agencies blew out their budgets with management and staff costs <65% of gross profit. Even with healthy sales, these costs made a significant impact to overall results.
Funnily enough, these were the factors that top performing recruitment agencies nailed.