Once you’ve established a viable company, the next step is to find a way to make it more profitable. In the recruitment sector, placing more candidates isn’t the only way you can increase your profit.
The recruitment industry is very complex and the structure of the work and payment models will vary depending on the role. This means that returning to your business plan and working out new deals could be the best way to boost your profits.
If you run a recruitment agency and you’re looking for more ways to squeeze profit out of your company, read on to learn six proven techniques.
Choose a profitable niche
You might be drawn to a niche sector in pursuit of profits, but this isn’t always a winning strategy. Placing lots of entry-level candidates or entire teams of candidates on lower pay scales can be more profitable than placing a single high-earner.
Don’t shut off any industry because you think it will be harder to turn a profit. Instead, be open to new niches, particularly if they can be highly profitable. The best recruitment agencies stick to a niche that they know they can deliver outstanding value in, and this helps them in the long run.
Secure retainer agreements
If your current income structure relies on commission from placements, you could ease some of the pressure and increase your profits by securing retainer agreements. A retainer agreement will entitle the company you are working for to a certain level of HR support every month.
This will give you a steady stream of income that may help you to budget for new team members and business expansion plans. Retainer agreements will also have a minimum notice period, so you can be sure of your minimum income for a finite number of months.
Renegotiate contracts
If you’re still working with the same contracts you used when you started your business, it might be time to increase your rates. You don’t have to limit yourself to just the new contracts, you could renegotiate existing contracts, particularly with clients that appreciate the value of your relationship. Asking for a bigger piece of the pie shows that you know your worth and the best companies will appreciate your taking this risk.
Cut your costs
A simple way to increase your profits is to cut your costs. This could mean moving to a shared office space to cut down on spending on your business premises. Or it could mean getting rid of things like company cars. Staff are often the biggest expense in your business, so think about if you need your whole team or if you could cut back.
Anyone who isn’t pulling their weight or delivering value to the company could be holding you back. Remember that there are always downsides to cutting costs, including lower staff morale. Keep a close eye on your bank statements so you can spot any discrepancies throughout the month.
Work on a commission model
When you hire new recruiters, think about whether you want to offer a higher starting salary or a higher level of commission. Recruiters working on commission will often work much harder, as they feel like they are invested in the business. However, this doesn’t always work out. Some workers will be so stressed about their financial position, that they are unable to do a good job. Finding the balance is key.
When workers are on a commission model, you can save money if they aren’t performing. But if they have a good month (and your business thrives) you’ll have to hand over a larger chunk of your profit.
Expand into new sectors
When you’ve reached a saturation point in an industry, it can be difficult to know where to go next. Exploring new sectors alongside your current niche can help you to realise new profit opportunities. If you are the sole director in a company, going into a partnership or merging with another company can be a great way to expand your reach and increase your potential.
This will also lighten the load as you won’t be solely responsible for your business growth. If you are concerned about the impact expanding your business will have on your work-life balance, then merging with another company in a different sector is a great way to manage this.