The UK Recruitment industry saw a total revenue of £32.2 billion in 2017. 87.6% of that was achieved through temping and contracting – that’s a huge £28.2 billion. In contrast, only 12.4% of the total was generated through permanent placements.
With this in mind, here are three key reasons why you should add contracting to your recruitment agency’s portfolio.
1. Contracting brings your business a continuous revenue stream
A big difference between perm and contracting is that, whilst permanent placements are a one-time deal, contract offers the scope for ongoing work.
What’s more, contracting complements perm and provides your recruitment business with a forecastable revenue, for example:
- You place one contractor with a day rate of £350
- You have a £400 charge rate in place for this contractor, which is a margin of 13%
- You receive £3,000 in gross profit (not accounting for the tax and commission on this figure)
The more candidates you have on your books working in contracting roles, and the longer the placement durations are, the more profitable contracting can be for your recruitment business.
Contracting also offsets peaks and troughs in perm recruitment as well as during seasonal lows.
2. Contracting can increase the value of your business
Whilst perm still definitely has its place in recruitment, it falls short if you want to sell your business.
This is where the addition of contracting will help you in the future.
Because contracting gives an agency a source of ongoing revenue, unlike perm, which offers a fixed revenue. So your business is worth more in the long run.
When the time comes that you decide to sell your business, you’ll be able to ask for a higher price if you can show that your agency is worth more.
Following on from the last point, if you are able to show that you have ten contractors on your books that bring your business a total of £30,000 in gross profit, you can use this to sell your agency for a higher amount.
This podcast gives a lot of advice on how to calculate the value of your business. And we also wrote this article on ways to increase the value of your recruitment business.
3. Contracting develops stronger trust with your clients and candidates
Businesses can be reluctant to increase their headcount as adding another perm salary would make their fixed cost higher. Having the ability to turn around to potential clients, as well as your existing ones, and offer contracting as a solution to this will result in the following:
- They will appreciate the effort you are putting in to coming up with a solution to their problem and filling the role
- They will consider using you to fill other contract roles across their business
- They will be more likely to recommend you to other businesses looking to recruit
- They will ask you first for contract and perm candidates moving forward
Contracting means you can also create ongoing relationships with both your clients and candidates. Keeping in contact during and after the recruitment process shows you care, keeps them motivated and, most importantly, reminds them that you are there. We recently shared some great advice on how to use your customer service to create the best relationships with your clients and candidates.
You’ll also be able to offer more recruitment assistance within businesses, as you can cover both their perm and contract roles, which means your business is more versatile.
Finally, contracting brings with it the opportunity to do extended business with your clients, which means one contract role can generate even greater profit for your business.
The freelance and contract industry is continuing to grow. Last year (2017) alone, the UK economy saw the following:
- 15% of the working population were self-employed, which, in numbers, is an impressive 4.88 million people.
- Between August and October, the number of self-employed people increased by 50,000 to 4.81 million, which equals 15% of all people in work.
- The number of people who chose this way of working increased by over 47%
All of these stats highlight just how popular this way of working is. The recruitment agencies who take advantage of this first will be the ones leading the industry. Include contracting in your agency’s offering and you’ll see your business grow.