Looking for a quick profit boost?
Let's be honest, in our bouyant economy we would all like our business to be more profitable and many try to achieve this through growth alone, but experience and data suggest it's sometimes better and often easier to control your costs than it is to generate greater revenue.
What happens if you don't keep your costs in check?
It's no secret that cost is often a major concern for a growing company, and in the world of recruitment the cost is often in place well before your sales start to rise.
One of the reasons for growing a recruitment firm is to find economies of scale, so that operational business expense can be dispersed over greater revenue. However, according to SIM data, this rarely happens. And, in fact, quite often many of the firm's operating efficiencies deteriorate as they grow, an unintended and unwelcome consequence.
What's more, poor expenditure habits which may be ingrained in your business can place greater pressure on your cash flow. And, without good cash flow you can't grow your business.
To help see how your recruitment agency stacks up, we reveal the operational costs for the most common recruitment agency sizes in Australia. Here's what the data reveals for the past 12 months.
Recruitment agencies with a team of 1 to 10 FTE staff
Agencies of this size tend to be the most efficient, with costs running at an annual average 78% of gross profit, the best and lowest % cost of any team size. If your total operational costs are 56% or less you deserve a big pat on the back.
Recruitment agencies with a team of 11 to 20 FTE staff
Data relating to teams of this size reveal that economies of scale haven't kicked in with costs creeping up to an annual average 81% of gross profit, the second lowest % cost of any team size.
So, if your costs are below 70% you need to know you are doing a great job in keeping costs where they need to be.
Recruitment agencies with a team of 21 to 30 FTE staff
Agencies of this size have seen their costs escalating to an annual average 89% of gross profit, the HIGHEST of any team size. Growing beyond 20 staff has always been a tough gig and one which many fail to conquer.
Recruitment agencies with a team of 31 to 40 FTE staff
Agencies of this size are starting to find some economies of scale with costs running at an annual average 82% of gross profit.
Recruitment agencies with a team of 41 to 50 FTE staff
Agencies of this size are struggling to retain economies of scale with costs running at an annual average 85% of gross profit.
The top 3 areas where you can save and boost your profit
There are three main areas where recruitment firms can tighten their purse strings, regardless of team size:
Marketing - you should aim to spend 4% to 5% of your gross profit on this activity.
Occupancy - you should spend less than 6% of your gross profit on rent and rates.
Management and staff - you should spend less than 50% of your gross profit on keeping a healthy team together.
If you found this article interesting you may enjoy Profit growth opportunities for recruitment agencies in the Asia Pacific
|Tags: Business Profitability Operational costs Team Size Staffing and Recruitment|