“We have more sales than ever, but we don’t seem to be making any money.”
Getting more margin per placement or overall is more than just making more placements or giving less to the employees. Any recruiting firm concerned about increasing its gross margin knows that the best way to do so is to provide more high-quality candidates, submittals, and placements on the smallest available budget. Moreover, increased profitability includes ensuring that your business’s level is aligned with your goals through careful planning, communication, and control. This article goes beyond the sales or pricing structures and considers what else you need to know to make more profit as an intermediary company.
Evaluate your current customers
If you’re constantly struggling with margin pressures, your customers may be an issue. Some companies will always want better prices. Some people only want services “at the commodity level.” Others can choose from multiple seemingly identical staff vendors, so the low price wins. Finally, some companies may be operating in industries that cannot afford to pay more for better quality or service.
Use ATS/CRM to generate a report on the most (and least) credible and valuable clients. Which customers are always late with their invoices? Which has the worst margin/gross profit? This can be a great way to identify customers who are hurting you more than they help. Identify companies in your market that are willing to pay more, understand why they will pay more, and then redesign your business to deliver people, serve consistently, and value customer demands.
Change the business direction.
Do you want to increase profits with existing customers? Bring more to the table. You can achieve this by investing in improving your business’s performance or offering services that your competitors don’t have. It is no secret that the margins in low-skilled positions are smaller than in high-skill positions. To increase margins, change your business direction. Focus on niche-skilled jobs.
Changing your goal requires a significant shift in your business. It may include entering new niche markets, expanding your range of services, or hiring new folks, or training existing people.
The most challenging thing about changing the business mix is that it often means changing your business. For success, you must commit to the business changes necessary to sell and operate higher-margin services.
Control Employee Compensation Claims
One way to influence profitability is to control what you can when it comes to workers’ compensation claims directly from your bottom line. A profit margin of 10% has long been a benchmark in the IT industry, but 12% or more is now absolutely achievable when the technology can be used across the entire company, from sales and recruiting to back-end.
The best, disciplined companies recognize this and work hard to keep their organizations lean and mean.
Have an employee compensation policy, conduct general health and safety training, and have an application process that includes tracking and aggressive monitoring. This may include reporting to the insurance company promptly, communicating with the applicant and the insurance appraiser regularly, and reinstating the applicant in a different capacity.
Automate processes.
Time is money for your business, and there’s no better way to save time than automation. The more manual processes you eliminate, the more time your recruiters and salespeople will have to spend on clients and candidates. For most recruiting companies, automating and accelerating the recruiting and recruiting process ranks first on the recruiting priority list. Research has shown that forty percent of companies hiring employees indicate that they do not use any automation to select, verify, or educate applicants.
In addition to increasing recruiters’ performance, the right solution can provide you with a strategic advantage over your competitors. There are so many areas of your business ready for automation – data entry, background checking, onboarding, and more – and every hour you save could make you $130 in gross profit.
Get the right communication tools.
Communication with clients and candidates is crucial in many respects and a particular way to improving profitability. If temporary assignments change mid-assignment, you need to know if new duties require a higher fee rate or a higher employee compensation category.
You can lose more money simply because you were not communicating
with your candidate or client! The vast majority of companies with employees indicate that SMS is the fastest-growing communication channel, noting that Generation Z employees prefer to communicate through images and multitask on multiple screens. Millennials, on the other hand, prefer to communicate on two screens and via text. Creating proper communication channels is the key to keeping employees engaged and ready to work.
Focusing on profitability improvement strategies helps you increase margins and ensures that your business processes are as efficient as possible. When it comes to managing pressure on margins, there are no easy answers. Whatever path you take will require significant strategic changes in your business, and not making those changes could be the most crucial strategic risk of all.
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