Do you know where your profit growth opportunities in recruitment are?
Knowing where the profit growth opportunities lie for your recruitment agency can mean the difference between 2018 being a year of success or you experiencing a period of volatility.
To help you understand where profit growth opportunities in recruitment agencies in the Asia Pacific Region identify profit growth opportunities, APositive and Staffing Industry Metrics analyse the results from February’s HHMC Business Intentions Survey.
The survey led by HHMC quizzed 202 agencies in the Asia Pacific Recruitment Industry. These were the top four profit growth opportunities listed:
- Upselling into existing customers;
- Implementing social media marketing;
- Providing more training for consultants; and
- Hiring additional experienced consultants.
To investigate further, we look at the inherent cost of running your team with Staffing Industry Metric’s standard metric: management and staff expenditure as a per cent of gross profit (NFI).
This will always be your greatest operating expense and, in ideal circumstances, the percentage cost of your team should decrease over the longer term. However, given the views of the survey respondents, this cost is set to increase in 2018.
Put simply, management and staff expenditure include:
-Recruitment and training costs.
According to SIM data, shared with APositive today, teams with a headcount of one to 10 averaged an annual spend of 54 per cent of gross profit over the past three years. Interestingly, the spend in this area during 2017 was slightly lower than average.
Teams with a headcount of 11 to 20 staff have seen this cost creeping up year-by-year and recorded an average annual spend of 59 percent of gross profit over the past three years.
Teams with a headcount of 21 to 30 saw this cost start to climb in 2017 with an average annual spend of 63 percent of gross profit recorded over the past three years.
Teams with a headcount of 31 to 40 staff saw this cost fall in 2017 and averaged an annual spend of 58 percent of gross profit over the past three years.
Here is an overview comparing all team sizes average over the past three years.
So, how much management and staff expenditure is too much?
Reducing your percentage cost will have a positive and significant impact on your profitability.
What’s more, to achieve industry best-practice, your management and staff expenditure should be less than 45 per cent of your gross profit.
If your results sit at 60 per cent or more you should actively address team productivity as a priority because it’s almost impossible to make a healthy profit when costs exceed 60 per cent.
Try to focus on productivity rather than spending – settle new staff in quickly and always keep an eye on your metrics.
In case you missed our analysis last month of the key results revealed in the HHMC Business Intentions Survey, read our post Staffing industry survey results are in.