5 tips to make your recruitment business even more profitable in 2015

From the outside looking in, the recruitment industry can sometimes be seen as a fairly simple business and one where it’s easy to make money.

Indeed, in the past couple of years I’ve come across a number of people who decided to venture in, for precisely the above reasons.

However, for anyone experienced in recruitment or running a recruitment company, we know that unfortunately the above is simply not the case. The recruitment industry at any level or across any discipline is highly complicated and hard to predict. In my opinion this is due to one overriding reason:

In recruitment you not only have people on both sides of the transaction, you have people in between, who need to be there and on form to make it happen.

Anyone who spends any length of time with other people (I’d imagine that’s most of us as we live on a heavily populated planet) will know that people are ever changing, emotional and often irrational beings who often rely on perception over fact and feeling over truth.

Talk about a tough industry to be in – it’s probably one of the toughest and as a veteran of some 10 years, which included jointly founding my own recruitment company in 2008 shortly after Lehman Brothers collapsed, I have some war stories of my own.

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The recruitment industry can be and still is a great place to be, providing you know what you’re doing and get the right advice.

What follows are my top 5 tips for making your recruitment business even more successful in 2015. Sure, these things may be something you’ve never thought about or be a pain to implement, but in my personal experience if you invest the time to get these right, then you’re already well on your way to being a happier and more profitable recruitment business owner.

1) Hire the right Non Executive Director – imagine you arrive at base camp at the foot of Mount Everest and are given two options:

Option 1 - Take a map and climb alone.

Option 2 - Hire an experienced climber to go with you and show you the way.

Which option would you pick, or possibly the better question is – which option would likely get you to the top safer and faster?

A good Non Executive Director (NED) can be a huge asset to your business, they will have seen what you’ll undoubtedly experience at some point and bring a fresh perspective on all aspects of your business and where it should be headed.

Many recruitment businesses are started by very good and capable consultants who realise they can potentially make more money by doing it for themselves. Being a consultant however is completely different to being a recruitment company owner, where you and you alone are responsible for every aspect of your business.

This is where a good NED can be invaluable and quite literally worth their weight in gold.

But what to look for in an NED, where to find one and what to pay?

What to look for:

Before you even think of hiring an NED here a few essential questions you should ask yourself and / or them:

Do they have an impressive track record in your size and sector of business?

If the person you are considering is from a huge company will they really understand what it takes to run an entrepreneurial and dynamic SME?

Also, do they understand your sector? While not essential it’s certainly an advantage if you run a business in the accountancy space and your NED has a track record in this sector too. If nothing more it will mean they understand the terminology and will likely have some very useful contacts.

What do you want them to specifically do?

Drafting a brief role specification as to what you expect from your NED is a great starting point. If your expectations are very different from what they propose to come in and do, then things may not work out as planned.

A good NED will critique and make suggestions regarding your role specification and the resulting role profile will be a combination of what you knew you needed and things you never even thought to ask.

Do you want them to be purely strategic or also operational?

Do you want your NED to only help with the big picture stuff or when you have a problem with a staff member and need some operational advice, will you want their input?

In my experience the best NEDs come with a combination of both the strategic and operational. They’re still close enough to having actually done the job themselves to consult and advise on day-to-day operational issues, but also have extensive experience at the strategic level.

You might think you only need strategic, but when push comes to shove and you have an operational problem to deal with, having them in your corner can be a huge help.

Are they up to speed with technology and how this has impacted and continues to impact the recruitment industry?

Technology rules the world and if the NED you are considering knows only the old way of doing things, however experienced they are over a multitude of years their knowledge might not be future proofed.

Think about it – increasingly candidates are searching for opportunities on mobile devices, so if your proposed NED can’t even switch on his or her iPad you might want to keep looking.

Where to find one:

A quick search on LinkedIn will highlight a number of NEDs that could be right for your business. If they’re on LinkedIn then it’s likely that they also have a good grasp of technology and one of the most important tools in a recruiter’s arsenal.

You may have competed with someone in the past and now for whatever reason they’re available as an NED – the value of personal experience, recommendation and referral can never be underestimated.

What to pay:

Rates will vary from one NED to another, but in my experience can range from £500 - £2,000 per day. The real question is, what’s the likely return on your investment and to a large extent it’s not what you pay them, but the impact they have on your business that counts.

Finally – make sure you get your NED to sign a Non Disclosure Agreement (NDA), which protects confidential information you’ll need to share if you’re to get the most out of the relationship. A well-worded NDA will also protect you from your NED working with or advising your competition during their time with you.

A good NED will understand all of this and recommend an NDA is drawn up in early stage discussions.

2) Have a ‘simple’ plan and communicate it – complicated business plans don’t work. The bigger and more complicated the plan the less likely it is to be continually referred to or referenced and the more likely it ends up unread in a drawer.

A good business plan should be short (1 or 2 pages maximum) and easily understood by you and all of your team. It should take centre stage at every meeting and every member of staff should now where and how they contribute.

The old saying goes – ‘fail to plan and plan to fail’. Don’t leave your direction or velocity of travel to chance and construct a plan that everyone buys into and gets behind.

Your NED will be able to help with this and also be there to keep you accountable.

3) Be brave enough to be niche – many recruitment businesses try to be all things to all people. The theory goes that the bigger the market the more opportunity for financial gain, but this can be a costly mistake.

Running my accountancy and finance recruitment company it was always tempting when asked ‘can you find me a Sales Manager?’ to say ‘yes’, but despite the opportunity of a fee, ‘sticking to the knitting’ is always inevitably the best course of action.

Think about it and using the example above – with no track record in sales I would need to invest a higher proportion of my time in trying to fill this position with a lower probability of success against specialist agencies. Candidates I would engage with and invested the time to meet, having sparked their interest in my business and the opportunity, I would unlikely have need for again.

If you try and become a ‘jack of all trades’, you become known for nothing and it’s much harder to charge a premium for your recruitment services. Learn to say ‘no’ (see below) and stick to what you’re known for and good at. If you must say yes for whatever reason then get the position retained or broker it out to a specialist agency for a cut of the fee.

Without a specialism and clear value proposition you’ll end up competing on price. Starting to compete on price alone is the first nail in the coffin and the start of a very slippery slope.

4) Invest in your people – recruitment is an industry where your people are everything. They’re your sales team, the engine room, the pricing department and represent you and your business wherever they go and whatever they do. In a business that’s all about placing people, it surprises me how many recruitment businesses place little emphasis in training and developing their staff.

Investing in training helps your staff become better at their profession and being better means more fees and more profit overall for the business.

Training also keeps staff loyal and engaged. In recruitment the emphasis traditionally has been on salary and bonus as the key motivators for staff, but digging a little deeper it’s often found that responsibility, challenge and learning new skills are what keeps people in one of the toughest professions.

A good trainer should not only have an excellent track record in doing the job themselves (and doing it well), they should also have the ability to teach concepts in an interesting, fun and memorable way.

5) Learn to say ‘no’ – this can sometimes be the hardest word for a recruiter, but often the most powerful.

Managing my own team I’d ask each consultant how many live vacancies they had at our weekly meeting. On some occasions I was told, 10, 12 or even 15, but digging a little deeper there was a strong possibility that only 1 or 2 would ever be filled.

My question was always – ‘how can you possibly be and properly be working on 10 – 15 vacancies at once and have the time do all of the other things you need to be doing, including business development activity?’ In addition, ‘why are you working on vacancies you have such a low probability of filling?’

Shifting the focus from volume of vacancies to quality is a starting point to build happier consultants (they fill a higher proportion of the positions they’re working on) and a more profitable business.

Learning to say ‘no’ to bad business might be hard to do, but just as maintaining your niche (see above) is essential for success.

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If you have any feedback or comments too, I’d love to hear from you.

For more information on building a successful recruitment business in 2015, please visit pembridgegray.co.uk