There are many ways to skin a cat (apparently) and there are also many ways you can go about scaling your recruitment business so in this article I wanted to share some thoughts I’ve picked up along the way!
The important thing is that wherever in the growth cycle your business is, from starting up to migrating from being a lifestyle business to a growth business or even if you’re consolidating to get more from your existing team you need;
· A HEADLINE PLAN
· A WORKING METHODOLOGY
· A BUDGET & CASH FORECAST
This forms the basis of your strategy and don’t leave home without one!
Now there are, and always will be, those who thrive by trial and error but it’s hard going being the exception rather than the rule. The propensity to waste a huge amount of time, effort AND CASH by doing so is immense.
That is cash that could be used on tools, staff or advisors to help you grow faster. If you create a winning formula derived from people in the know who are ahead “down the road a bit” and especially if you admire, trust, respect or even just envy them it’s a smart short cut! So get a strategy and don’t be an island about it!
So, like the Mercedes F1 team who have been enjoying a stellar period of overall dominance, I’d like to share a simple model that can help give most businesses clear foresight and galvanise the top team from billing manager upwards. For as long as Lewis has been winner in a Silver Arrow and the Merc’s winning consistently, this has been the soft science behind many, many Recruitment Business transformations and growth!
I think simple wins this race and you don’t get much simpler, and easy to understand than the £5/10K model which defines triggers for hiring as well as key hiring moments.
5/10 is as the name suggests…
Keep your cost per desk (that’s everything, including the bosses regular draw, divided by the front-end team of billers and resources only!) at circa £5K a month whilst keeping your average billings at £10K per person per month (for the same number of heads).
That means you are making £5K net profit x12 months = £60K per person per annum
10 heads = £600K Net Profit
100 heads = £6M Net Profit
This is on a flat year, a straight-line performance year. In reality of course, a flat year won’t ever happen. You will be investing; in new people, in new tech and in fresh opportunities. But, the maths holds water! It means if you use £10K average on perm or £2500 a week on contract (never manage contract on anything but weekly GP, of course) as your hiring triggers you can scale aggressively AND PROFITABLY!
This is the holy grail!
Currently I’m driving brands on £12K a Month NFI but reducing hiring triggers to £8K/£2K a week in some cases where they are doing really well and have a strong cash position (to add heads faster but profitably), but we wouldn’t do that without sight of a recruitment savvy cash forecast.
It is key here that you don’t use your mum’s mate Steve the accountant to do your books – use one of the good guys in our space. (Happy to advise).
Hiring experienced talent is a lottery and often fails due to a mismatch of methods or culture or just that the hire is burnt out. So not only is this a lottery, it’s an expensive one (remember, you’re always keeping one eye on your cost per desk).
Ideally you are looking for PHD’s (Poor, Hungry and Driven 2nd jobber sales rookies) for your driving academy (remembering my F1 analogy). Always try to bring 2/4/6 on board together assuming an element of early churn, this mean that the business is still growing even when some fail! THIS IS REALLY IMPORTANT.
Getting the next generation to £10/£2.5K a week ASAP is your driver – it’s key!
If you manage on activity, using the best techniques out there you can get newbies doing the right effort and the right level in 12 weeks so hiring 4 every 16 weeks can mean you are adding at least 6 in a year all generating another £60k net profit!
This is with a 50% churn!
Add 8 at a time and it’s another £720k profit pa (less the investment burnt in those who failed).
It really doesn’t get simpler than this as a plan. I wonder if it would help you?
We talk about various methods and processes, planning and forecasting a lot at the RDLC. We also help to make these plans, that are all well and good on paper, a reality – it’s easy to say and harder to do I know but that’s why the Pirates was created.
Thanks for reading – happy to answer and Q’s on or off line.
Come to an event soon!
Race hard but fair!