Top 3 Ways to Optimise Your Recruitment Business Profit

Are you looking for tips to augment your income and increase your recruitment business profit? Do you feel your business’ income is high enough yet stagnant and unprogressive? Well, it could be because you have followed every conventional method in the book but not yet tried any novel ideas to make your business grow. Having your own website, a regularly updated blog, marketing your services to target businesses are certainly important to acquire new clients. However, it’s the inventive ideas that could add value to your business operations and bring in more money.

There are some people that hopped on the recruitment bandwagon with a hope to grow their venture into a successful recruitment firm. Some of them made it, some of them didn’t. It’s the way they set their priorities that separated them. Today in this article, we are going to give you some great pointers on how to increase the profitability of your recruitment business and have it aiming for the stars.

Get Someone to Guide You

Recruitment agencies involve a lot of people on all sides. In order to sustain and grow in an industry that deals primarily with so many people, it is necessary that you have both solid knowledge and experience in the industry and also that you consider taking on the services of a non-executive director.

An ideal non-executive director is someone who is able to advise on both operational and strategic aspects of your recruitment business. Since the methods of job hunting are ever evolving, a tech-savvy person, possibly with some financial acumen would be a well-suited runner for the position. It goes without saying that having a non-executive director onboard would be another fee you have to pay. However, it is the returns they can bring your business that matter in the end.

Before you get started, make sure your non-executive director signs a confidentiality agreement. It will prevent them from associating themselves with your competitors while they are working with you.

Niche vs. Diversification

Up until now, owning a niche recruitment business has made sense. It’s simply not feasible to help your clients find potential employees to fill the positions that are out of your specialty. As a manager, you had to say ‘no’. Imagine you are a specialist marketing recruitment agency and your client asked you to find them a finance manager! It would be tough to decline their request, but you have to say no because you do not have a track record in finance. If at all you do oblige, you would have to commit your time and resources, engage in networking, go through a new set of applicants and get them interested in the opportunity etc for filling just one position. Once the position is filled, all your painstaking efforts wouldn’t reap any long term benefits whatsoever.

The current scenario has been changing and it’s only wise for a recruiting business to diversify. We know that diversification could mean a lot of work. It has become incredibly easy to operate across multiple specialties and be a jack of all trades with the advent of the dedicated professional services businesses. For example, you could entertain all kinds of clients and help them fill positions right from housekeeping and cafeteria to sales & marketing, finance and administration. You can simply associate with professional services businesses that specialize in housekeeping, accounting & bookkeeping, engineering, finance, etc. You could broker it out by recommending any of these professional services businesses to your clients depending on the kind of vacancy they want to fill. This strategy would not only help you diversify efficiently and cost-effectively but also earn you twice as much. Your clients will still pay you a recruitment fee and the professional services businesses pay you a referral fee depending on what you agree. a win-win situation for everyone. This concept is fairly new but we are sure it will catch on soon. We have a referral programme set up that can work excellently with recruitment agencies. If you want to know more about how our referral agreement could increase your income, please get in touch by emailing us at Info@sanaybpo.com. You could also call us on +44 1624 616620.

Identify and Eliminate Non-Profitable Clients

In the recruitment industry, the quality of clients matters way more than the number. As a manager of your business, there will be times when you have to deny service to certain clients, i.e., the businesses with a bleak prospect. The probability of filling all the available positions is usually very low. Your consultants would give their best to fill up 15-20 vacancies simultaneously. However, only 2-3 vacancies get filled in the end. You need to concentrate on quality rather than just the number of vacancies. Committing your staff to work on all the proposals would prove futile, that is why you need to sift through all the available live vacancies and pick those having the best change of actually being filled. It’s difficult to turn down customers, but with time, you would know how important it is to have a base of genuine with robust businesses.

Apart from all the other activities such as marketing your services to potential and existing clients, attracting the best talent and consistently training on your own staff to keep up with the changes, the above three ideas would certainly do a lot of good to your recruitment business. It will not only wider your market, but also reduce cost and enhance revenue and profitability to a considerable extent. We hope you found this article helpful. If you need to contact us with any queries please get in touch, we’d love to hear from you.

Cash Flow

Many business owners I talk to don’t have a problem growing their business, they have a problem managing that growth.

Often when a business grows rapidly without being prepared it can lead to strains on the owner’s time, stretched resources, unhappy and disengaged employees and pressure on the finances of the business.

Put simply, sometimes high growth businesses are too successful for their own good, or should I say that’s how they appear, when in all reality this can be managed before getting into cash flow difficulties.  Sometimes the peculiar situation arises whereby a successful business appears to really be struggling financially when they don’t need to be.

What follows is some practical guidance for businesses of all sizes and in all industries for managing their cash flow.

Cash Flow Fundamentals

First and foremost it’s crucially important to understand how the cash flow of a business works.  This is not the same as the profit a business makes.  It is absolutely possible for a profitable business to go bust if they don’t manage their cash properly.

At the most basic level, cash flow is the difference between cash coming in to the business and cash going out of the business. It’s that simple right?  Well, not exactly, some attention is required to maximise cash inflow and minimise cash outflow.

To ensure that cash flow is optimised we can concentrate on 3 key areas for maximum effect.  These being Inventory, Accounts Payable (or Creditors) and Accounts Receivable (or Debtors).  Let’s have a look at each in turn.

  1.    Inventory

The purchasing of stock which will be re-sold at some time in the future, possibly as it is or possibly after some adaptation, has the potential for tying up your cash.  If a business has its money invested in stock sitting in a warehouse then this can’t be spent on other things which may be of more immediate benefit to the business.  Not to mention that the longer that stock is held increases the risk of waste, theft or obsolescence.

Only enough inventory should, therefore, be kept to fulfil firm orders unless the item is something which can be used in many product lines as this could increase response time to customer orders.  The management of stock will require an effective supply chain but only that which is required imminently should be kept on hand.  Keeping large amounts of inventory can mean increased costs associated with storing, managing and securing that inventory.

  1.    Accounts Payable

As a general rule of thumb, paying suppliers as late as reasonably possible will positively impact cash flow.  Businesses large and small can take advantage of maintaining an effective and lean accounts payable function.

Where suppliers invoice on credit try to pay as close to the due date as possible, if you have a good reputation for paying on time you may also be able to negotiate extended credit terms meaning that your money stays with you for longer. Occasionally suppliers offer discount incentives for early payment, you should weigh up the benefit of the reduced cost against the benefit of extended payment terms at a higher amount.  It very much depends on each individual situation and would need to be balanced against how much cash you have and whether your cash receives any interest invested anywhere else.  If you’re short on cash you would probably be better not paying earlier than necessary.

A cautionary note, however, would be that not paying suppliers on time regularly can lead to reputation damage, supply chain interruption and withdrawal of credit facilities.  This is not a position you want to find yourself in if you already have cash flow worries and will certainly make managing growth harder than it should be.

  1.    Accounts Receivable

If selling to a customer on credit the first step before anything would be to determine the risk of selling to them by checking their credit history, whilst no guarantee it should reduce the risk of default on invoice payments.  If a prospective customer has a history of non-payment then you need to determine whether you want the sale more than you want the money in the bank…the two are not the same thing.

Quite the opposite of accounts payable, the aim in accounts receivable is getting paid as quickly as possible.  One way of doing this would be to reduce payment terms for as long as your customers will accept this.  Another very effective way of getting paid on time is making it as easy as possible for customers to do so. There are a variety of ways that this can be done from electronic invoicing to accepting other payment methods or offering incentives.

In addition to all of the above, consideration should also be given to the selling price of products based on how complex they may be to create and deliver, so that you charge commensurate with the complexity involved.

One of the larger costs that businesses often incur is staffing, it’s always important to review workload and determine up to date and realistic staffing requirements- perhaps hiring staff to work in support functions is not the best option, that’s where specialist professional services companies come in.

On a final note it’s important to realise that often the business owner’s time is not best spent managing the day-to-day cash flow, that’s where accounting and bookkeeping businesses such as Sanay can help.

Business Success

For many business owners who are trying to keep costs down, they try to do their accounting and bookkeeping themselves.  But these areas that can make or break your business success.  They are critical in managing your cash.

Here are some reasons you must not do it all on your own if you wish to be successful in your endeavour.

1.       Challenges in growing business

Starting up your own company will have several challenges.  You will need to come up with the right business plan, budget, and methods to manage cash flow, among other things.  But engaging with a professional bookkeeper or accountant can make life easier.

You may think that doing it on your own can help you save money.  But is it a good idea to use your time doing taxes or other accounting tasks?  Or are you better off spending your time focussed on growing your business?

How much is 10 hours of your time worth? During this time, you could already be driving new sales, winning a lucrative contract or developing your business in other areas.  It probably doesn’t pay off doing it yourself when you think in these terms.

And what if you make errors?  You are likely to do your accounts all over again, which can double the cost.

Getting an accountant to take care of your finances will actually cost less in the long run.  You will not only have the extra time to think about how to generate revenue but you will also have peace of mind knowing that an dedicated professional is already looking after your accounting needs.

2.       Getting back on track

It is easy to lose track as your business grows.  Outsourcing all accounting jobs can help you avoid losing control of how much is owed and from which customers.

Outsourcing accounting jobs will also help you with measuring key business metrics.

They can also help you manage your payroll and produce great reporting that lets you see periodic comparisons.

If you outsource your accounting jobs to a company that utilises cloud-based accounting software, you can easily and quickly look at your business accounts to better understand your current financial situation at any given time.

Overall, these can help you in monitoring your business and keeping track of your cash flow.

3.       Delegating tasks

It is natural to feel reluctant in allowing others to handle any part of your business.  But your inability, however well intentioned, to handle everything can ultimately damage your business.

Therefore, you have to let go of some responsibilities and allow others to handle some of the support functions of your business.  In that way, you’ll have more time to look after the core functions, support your customers and concentrate on what you do best.

Delegating accounting and financial affairs to others is a good start.  Successful business owners are delegating their work to the right people.

Getting the help of an accountant can help your business every step of the way.  Your job is to run your business.  Leaving the financial details to someone more qualified is a positive step in the right direction to helping your business grow.

Sometimes it can feel like you spend more time keeping the business going than actually developing it, improving it or adding any value.  The points below will highlight that while some form-filling and record keeping is necessary, much of the rest of it is either needless or can be outsourced.  Lightening the burden of bureaucracy can bring a host of benefits.

Necessity

Some of the more mundane aspects of business are necessary, in every industry, at every level, no matter who you are.  You can’t avoid it.  The truth is that some things just have to be done in order to maintain the status quo of the business or to fulfil important legal requirements.

Shift focus

There are, however, a multitude of tasks that many businesses (typically the owner, in small businesses) are taking care of themselves that don’t add value, but they still need to be done and take time to do.

This is where it’s important to shift focus, concentrate on the things that are core to the business and outsource the rest.  Activities like Marketing, Recruitment, IT and Accounting are considered support functions for many businesses (unless you happen to have a business specialising in any of these areas).  Maintaining these functions in-house, particularly for a small business, detracts from what the real focus should be, namely delighting customers and growing the business.  Outsourcing will help you focus your attention in the areas you know best.

Take control

So, you know where your skills lie, you know which things you need to be done (even if you don’t always like doing them) and you know the areas of support that a professional could help you with.  Outsourcing enables you to take control of the direction of the business by ensuring that you give less to the time sapping activities that, frankly, you might not be that good at.  It allows you to focus on setting the strategic directions and choices of the business without the administration or unwelcome distraction of your support functions.

Take bookkeeping for example, if it takes you 10 hours a week you could be using this time doing something else more ‘value adding’, not to mention that a professional will do it more efficiently.  Moving these duties to a specialist provider ultimately gives you greater control over the success of your business.

Enjoy the benefits

Rather than sitting back and enjoying the benefits you can now enjoy the benefits by working more smartly.  Being in business is not about sitting back, it probably will, however, eventually afford you the time for the lifestyle you’re working hard towards.

Outsourcing to a professional, skilled and passionate bookkeeping and accounting provider will bring with a number of benefits.  To name just a few…it will be cheaper than employing someone directly, it will give you more time to focus on your business and it will lighten the burden of responsibility.  You will have someone else doing the work that you once found a disturbance but it’s what they do; it’s their core business.  They will provide a simple process for you that will keep everything up to date and all of the information you require available whenever you need it and from wherever you are, particularly if they use cloud accounting software as we do.

Of course these are not free services but they are great value and it’s a very effective way of freeing up time to grow your business, especially if you’re a small business or a start-up.  We all know that things can be tight financially in the beginning but don’t ask yourself how much it will cost to outsource, rather how much it will finally cost you not to outsource.

Are you a small business struggling to get to the next level and deliver sustainable growth? Here are 10 keys to unlock your growth phase.

  1. Get a growth mind-set

It might sound obvious but you can only grow if you want to. Get a growth mind-set and change the status quo.  To grow, small businesses need to challenge their processes, look for opportunities to exploit existing resources and learn from mistakes. The growth mind-set comes from the top and the vision of the successful business needs to be shared by all. Make a conscious decision to grow, and sell your vision with its benefits to your staff. Go ahead have that first staff meeting. It is just the beginning, to quote Lao Tzu, “A journey of a thousand miles begins with a single step”.

  1. Have courage

In a recent TED talk in Vancouver, Simon Sinek stated that the only common trait amongst great leaders is courage. Growing a small business takes significant time commitment and financial resources, but above all it will certainly take courage. Courage to make that bold decision, lead from the front or implement a new key process, whichever it may be.

The key is to have conviction in your decisions, and stand by them. If it works out then great, if not then learn and move on without dwelling on it.

  1. Take advice, listen and lead

Ok, so this is 3 rolled into 1 but the point is that they’re interlinked. People don’t expect everyone to know everything, not even the Managing Director or the CEO. The important thing is to know who to ask when you don’t know the answer, to trust their judgement and lead people in such a way that they are inspired and driven by your vision.

“Working with an external finance partner, an expert in bookkeeping and accounting enables improvements in many areas of the business.”

You’re really only as good as your team. If you work on your own you may need to look to others for guidance or outsource just to lighten the workload but we’ll look at this a little further on.

  1. Be open to opportunity

This is important because the key is the skill to recognise opportunities and act on them quickly before they disappear. These opportunities could be income producing like a new potential customer, a new market segment or taking a loss leader for a new future source of income. Cost reduction opportunities could be a new low cost supplier, new more efficient premises or outsourcing services. Collaborating with outside parties to assist with your marketing or managing your bookkeeping and accounting can not only reduce your staffing costs but result in resources being redirected to income producing activities – these are also opportunities.

“The really great thing about outsourcing bookkeeping and accounting during periods of growth is that an outside company can easily flex its service provision to meet your business needs as and when needed; it can quickly scale up in such a way that you won’t notice the additional workload.”

  1. Know your customers

Being in tune with your customers and what they want is crucial for business growth.  Knowing what they want or what they might want means that you can adapt to their needs.

Good relationships with customers are vital.  This value to enhance the customer experience needs to be shared top down in the business.

Customer knowledge is also about knowing how profitable your customer is to your business. You should not be afraid of increasing profitability, if necessary, by reducing service offering, finding more efficient ways of managing the current workload or increasing the prices.  If you can’t make a customer profitable you should consider letting them go.  Yes that’s right – letting a customer go if they are not profitable.  Don’t forget to consider other business they may bring.  If they are an unprofitable customer but still provide a number of good referrals or complimentary business they may not be that unprofitable.

  1. Focus spending

Realistic cost budgets are critical to financial planning and focusing expenditure.  Often during start-up or in times of rapid growth, a business can become a victim of its own success, struggling to pay bills before revenue has been collected.  Cash flow can become a very real problem and so it becomes especially important to control your limited resources and review spending in terms of return on investment.

Decisions should be framed by “will this spending improve/ increase revenue or reduce costs?” Consider the purchase of new capital equipment, will this save production costs?  Will it open up new markets?  Will it increase capacity without increasing floor space?  These are all valid questions when making decisions, for instance you may have to choose between buying new equipment or re-painting your building. I can imagine which of these options are likely to have the greatest return.  Bear in mind of course that some costs are necessary…insurances, taxes, certifications etc.

Sometimes these decisions are difficult especially with a limited budget. For example, deciding between customer satisfaction/retention or marketing to attract new customers; ideally you should be doing both. For a cash strapped business a short-term compromise would be developing sales and up-selling to existing customers.

HR costs also need to be budgeted. Should you hire, manage and motivate an in-house bookkeeper at a higher cost or outsource to a dedicated virtual bookkeeping organisation at a lower cost requiring less time commitment?  Both have benefits but which has the greater return on investment?  Which makes your bookkeeping simpler?

  1. Monitor cash flow…very carefully

This seems almost too obvious to include, but it can be the critical success factor for a business as it struggles to balance payments out with payments in.  Let’s look in more detail at some areas where gains can be made.

Accounts Payable.  Pay your suppliers as close to their due date as possible, negotiate extended credit terms with established suppliers, request electronic invoices to improve budget planning and control – these are all actions to improve your cash flow.  Occasionally suppliers offer discount incentives for early payment, you should weigh up the benefit of the reduced cost against the benefit of extended payment terms at a higher amount.

A word of caution, regularly not paying suppliers on time can lead to suppliers putting your account on credit hold or stop supplying you altogether.  This opens up many wider issues around your supply chain and can affect your reputation.

Accounts Receivable.  The starting point for managing accounts receivable (otherwise known as debtors), for credit sales, is to reduce the risk of default on invoice payment and check the credit history of the prospective customer.  If there is a history of non-payment then consider whether you need the sale more than the money in the bank.

Contrary to accounts payable, the aim is to expedite the payment of invoices, reduce payment terms if possible and minimise overdue payments.  Making it as easy as possible for customers to actually pay your invoices helps and there are a number of practical things that you can do to achieve this.  Contact us if you wish to discuss this further.

Inventory.  Try not to tie money up in too much stock, after all money sitting in a warehouse in the form of stock can’t be spent on things which will move the business forward.  Only enough inventory/stock necessary for firm orders (unless it’s standard and can be used across various product lines) should be kept on hand. This requires effective supply chain management. Investing large amounts of cash in holding large inventory increases the risk of obsolescence and theft. Moreover it can increase the costs associated with storing, managing and securing the inventory.

Managing cash flow can make or break a business.  An experienced bookkeeper should be able to assist with cash flow management.

  1. Outsource your support functions

Identify your core business.  Maybe you are in engineering, manufacturing, online retail, recruitment or medicine, the list is endless, the point is that your core business is what you provide your customers and it earns the revenue. Therefore all other functions are support functions.  Many small to mid-sized business owners keep all support functions in-house which can be time consuming to plan, learn and execute. Ultimately this detracts from the energy used to drive the core business forward and hinders growth.

Indeed managing these support functions in-house can save money but is this a false economy?  If in fact your customers get less attention, sales either don’t grow or are lost and the real cost to the business is the lost revenue. You could outsource to a service provider who would do the job quicker and more effectively because your support function is their core business.  This may be Customer Service, Graphic Design, Recruitment, Legal support, Marketing, IT, or Bookkeeping and Accounting.  Any of these areas are prime candidates for outsourcing.

Take Bookkeeping and Accounting as an example. The really great thing about outsourcing bookkeeping and accounting during periods of growth is that an outside company can easily flex its service provision to meet your business needs as and when needed; it can quickly scale up in such a way that you won’t notice the additional workload.  It is not the same for an in-house bookkeeping system where increasing resources takes time and money.  Outsourced accounting not only gives a simpler bookkeeping system, it saves time and best, it presents valuable information and reporting in a manner that you may not previously have considered. Indeed working with an external finance partner, an expert in bookkeeping and accounting enables improvements in many areas of the business. Ultimately, it will take the headache of accounting away and give you more time to focus on growing your business.

  1. Embrace new technology

It was only the early 1990s when the World Wide Web found its way into wide stream usage, by 1995 there were an estimated 45 million users, just 0.8% of the world population. Today there are approximately 3 billion internet users, around 41% of the world population. Potential for further significant growth remains on the cards as the types of devices used to access the internet increase as users look for more convenience and mobility, moving from laptops to tablets and smartphones and now to smart watches. Cloud based technology, as a result, is gaining more users daily. The market is estimated to grow from around $58bn in 2013 to $191bn in 2020.  These are the high technological advances that have changed the way the world works and does business; not adopting this could leave you behind.

Advances in other areas are also more than noteworthy; consider nanotechnology, RFID’s, CNC machinery, robotics, automated production lines, predictive analytics.  More than enough for an entirely separate post.

It is fairly likely that most businesses have embraced some change in technology, with the more successful companies being either early adopters or in the early majority.  There are few businesses today that don’t have a PC or phones, have manual accounts or use steam to power machinery.

Identifying and adopting new and useful technology can help give your business a competitive advantage. It can reduce costs, production time and improve service delivery and the customer experience – all leading to a healthier business.

  1. Tie it all together

Do all of the above as part of a defined and deliberate strategy and give your business the best chance to grow to its true potential.

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