Staffing Industry Gross Margin: How Your Business Can Improve

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Death and taxes may be inevitable, but low margins don’t have to be. In fact, there are many methods you can take to improve your bottom line. The catch? It usually isn’t easy. But it’s worth it.

If you want to increase your margins you’ll likely need to charge more (up your bill rate) or do more (grow your business or increase your volume of placements). But there are countless ways to approach either method. Here are some top ways to improve your staffing industry gross margin.

Charge More

Are you charging enough? Study up on the industry numbers

Staffing is a competitive industry, which can make it hard to charge what you deserve. In fact, staffing firms say pricing pressure from competitors is one of the biggest challenges they face, second only to the talent shortage.

But has the competition-driven your price too low? Look at the data. Industry stalwarts like Staffing Industry Analysts (SIA) report regularly on margin and bill rate trends. A recent report found that both margins and bill rates are on the rise for many staffing firms.

Justified or not, any price hike can result in lost customers, so it’s important to balance the risk when considering any significant increase in your bill rate.

Evaluate your current clients

Are you in any one-sided relationships with your current client base? High revenue, low margin clients don’t just eat at your bottom line, they eat at the precious time your firm has to focus on new and existing clients.

Use your ATS/CRM to run a report on your most (and least) reliable and valuable clients. Which clients are always late with their invoices? Which has the worst gross margin/gross profit? This can be a great way to identify clients that are hurting you more than they’re helping you.

Up your service

Want to be more profitable with your existing clients? Bring more to the table. You can accomplish this by investing in improvements to your firm’s performance, or you can do it by offering services your competitors aren’t.

One huge opportunity: reskilling—the process of helping workers transform skills that are outdated to be ready for the modern world. The talent shortage represents a huge obstacle for employers, especially those in tech. By investing in the reskilling of your candidates, you can literally create new qualified candidates for your clients. Major players in the industry are already seizing this opportunity—Adecco invested heavily to acquire the education organization General Assembly.

The recruitment industry loses half a billion dollars in annual turnover. Imagine if we took employees from lower-wage jobs and reskilled those people. This could be a trillion-dollar industry with a very different profile. This isn’t a crisis, this is a huge opportunity for all of us.

Art Papas CEO, Bullhorn

Do More

Automate everything

Time is money for your firm, and there’s no better way to save time than through automation.  The more manual processes you eliminate, the more time your recruiters and salespeople have to spend on clients and candidates.

There are so many areas of your business ripe for automation—data-entry, onboarding, background checks, and more—and every hour saved can yield $130 in gross profit.

Pursue VMS business (and automate it)

Your eyes don’t deceive you. We really are recommending VMS as a way to improve your margins. Yes, low margins are a classic complaint about VMS business, but the idea that you can’t be profitable with VMS is a myth. After all, there’s a reason why 100 percent of surveyed staffing firms with a revenue of $100 million dollars pursue VMS business.

If you want to increase your margins by growing your business, VMS offers an incredible opportunity to expand. And if you can be efficient with VMS business, you will likely turn a profit. Sixty-percent of staffing firms submit candidates manually into their VMS. If you automate the process, your firm will be in a great position to improve your revenue and your margins.

We’re answering your most common staffing questions! Want to learn how you can win more job orders? Check out these tips.