When a recruitment agency first starts there is always a temptation to start with permanent placements as they appear easy to manage, give instant income and do not require any funding. However this should only be the short term plan as there are many advantages to an agency providing contract staff to their clients to help build a more stable and profitable agency
Below are six advantages for an agency to consider making contract placements:-
- REGULAR INCOME FOR LONGER
The main advantage of making contract placements is that every day the candidate goes on site your agency will make money. Whether this is for 5 hours, 5 days or 5 months your agency will generate profit during that time and on average most contract placements will be renewed at least twice which means that you can enjoy this profit much longer than a permanent placement.
2. INCREASE IN COMPANY TURNOVER
We all know that “Turnover is Vanity” but it is important for an agency to build up a strong turnover figures on the books especially when trying to win large scale tenders/PSL agreements or with a mind-set to sell the business in the future. Contract recruitment allows the agency to show the invoice value to the client offset against the candidate cost of sale compared to permanent placements which only show the profit generated on one placement.
3. EASILY BE FUNDED
There are many different methods on the market to fund contract placements and invoice finance companies love the contract recruitment industry as every invoice raised has a signed timesheet attached which makes the debt virtually guaranteed to be paid. Finding the right provider is important but these facilities can be set up very easily and are often based on the credit worthiness of the client being invoiced not the credit worthiness of the agency.
4. EXPAND AGENCY OFFERING TO CLIENTS
If your agency can only offer a client the possibility to find permanent staff then this could open the door for another agency who can provide contract staff to take away all the recruitment from your agency. By offering a client a contract staff member can often help a client who only has a short term need or who does not have a full budget for a permanent candidate.
5. EXTENDED CONTACT WITH CLIENTS AND CANDIDATES
When you have a contract staff member on site at a client this is the perfect opportunity for you to stay in regular contact with your client and candidate and hopefully use the opportunity to find other positions within the company. Using your candidate as a sales tool to find out if new manager, divisions or projects are starting or checking in with your client on the candidate’s performance can put you as the agency at the forefront of any future recruitment needs.
6. INCREASE IN COMPANY VALUE
If an agency has a future plan to sell then offering contract recruitment is a must. The multiples for a contract agency compared to a permanent agency are more than double due to the buyer knowing they have future income from placements that are ongoing after the sale (plus the renewal potential). Also as contract recruitment will increase the company turnover this is often a way of drawing in buyers looking for agencies of a certain size.
TBOS has many years’ experience of helping recruitment agencies to start making contract placements and we have various methods of providing funding and administrative support either using our TBOS Complete model (where we help to set up and manage invoice finance for the agency) or using our TBOS Freedom model (where we manage the contract placement through our funding facility). Both facilities ensure that the agency maintains their identity, the contract turnover and more importantly the profit from the placement.