Recruiting firm owners, like most business owners, spend a lot of their time thinking and worrying about cash flow. A profitable business with poor cash flow can’t always survive, especially during an unexpected downturn in business. And let’s face it, with increased time-to-hire, slow-paying clients, and more fall-offs / counteroffers than we’ve seen in a long time, cash flow from recruitment fees isn’t getting *easier* to manage. This is where contracting can be a huge benefit for your business.
Contracting helps even out cash flow cycles by creating a steady, stable income stream. You don’t even need to have dozens of contractors to make a big difference. If you make $10 per hour worked by a contractor, just 5 contractors means $100K of additional revenue each year. ($10 per hour x 40 hours = $400 x 5 contractors = $2,000 per week x 50 weeks = $100,000). How would an extra $100K, delivered in steady increments every 2 weeks, change your business or ease your stress?
Contracting creates other benefits for your business as well. Consider the following:
- Contracting builds a tangible asset that has sales value. What is your exit strategy for your recruitment firm? Many owners don’t realize that there is limited sales value in a direct-hire recruitment firm, especially if you are responsible for most of the production and/or the business is named after you. Contract revenue is a saleable asset, though. If your retirement plans include the eventual sale of your recruitment firm, adding contracting is a great way to increase the sales price because potential buyers will be purchasing, in part, an existing book of business.
- Contracting gives you more ways to say yes to clients. Depending on timing, budgets, or other factors, your clients may not be in a position to make a direct hire, even if they have a pressing need to fill a role. A contract hire can solve their dilemma by giving them a “try before they buy” opportunity or simply by outsourcing the employee liability (wages, withholding, taxes, etc.) to a third party for some period of time.
- A contract partner can help your clients hire compliantly in other countries. If your clients are newly open to hiring remote workers from other countries, or are looking to staff a facility in another country, they may not be aware of the various payroll and HR laws in that country – from taxes to PTO to superannuation and more. Mistakes can be costly, so it’s best to leave this to the experts.
- An added bonus – even if you’re already doing enough contract work that you’ve brought the back-office function in-house, you may still want to engage a third-party provider for one-off hires in other geographies. For example, if you’re in Texas and occasionally need to place a contractor in Oklahoma, it may not be worth your time to to payroll that on your own.