I love the Temp and Contract recruitment business.

I was a Perm recruiter, but as an Owner or Manager, ‘Temp and Contract’ gives you annuity revenue, stability and protection against a downturn.

It is also very profitable when well run.

You may be looking for a way to grow your Temp and Contractor numbers.

Or maybe you are planning to build a Temp business from scratch.

That is a vast and diverse topic, which I ‘summed up’ in the 15-hour ‘Temp and Contract Masterclass’ at the Savage Recruitment Academy.

There is no quick and easy way to build a Temp business.

But it is worthwhile putting in the work because the rewards are juicy sweet!

But for now, let’s strip things back.

I want to break down your focus points to work on.

There are four levers you or your team can pull to increase the Gross Profit you or your team generate from Temp and Contract activities.

Gross Profit?

Gross Profit means net temporary contractor margin. All clear? OK. Bill rate to client, less pay rate to temp, less statutory on costs like payroll tax, superannuation, workers comp insurance (or whatever is applicable in your market).

So, it is the (Temp and Contract) income of the agency before the general overheads.

Not sales – but Net Margin = Gross Proft

Sorry to get all technical on you, but you must know what income really is. Otherwise, you will get people talking about percentage margin when they mean percentage markup or ‘sales’ when they mean ‘margin’.

Lost? Subscribe to the Savage Recruitment Academy and do the Temp and Contract masterclass asap.

15 Hour Temp and Contract Masterclass

Anyway, let’s dive in.

I am not talking about sales and candidate sourcing actions, although they are obviously crucial. I am talking about the intrinsic components of $ growth—things you can measure, improve, and act on.

To make it clear (or as clear as mud), two recruiters sitting next to each other in the same company, both with 30 contractors out working, can generate totally different $ returns, right?

It will sound obvious when I spell it out, but 90% of people cannot name these four levers when asked. And I mean people in the Temp and Contract business.

It may be a case of not seeing the wood for the trees.

You can’t manage what you don’t measure, so it is no surprise that this is all about breaking down the critical components of delivering revenue for a temp/contract business.

If you are looking for a way to increase GP, focus on these

1)      Numbers of temp paid (weekly or monthly): This is the classic age-old metric for Temp growth. You can hear the cry ring out in today’s hurly-burly world of temp and contract recruitment, and for the last 60 years. “Mate, how many Temps have you got out this week?”. Some agencies get funky with what they call paid temps. ‘Runners’ is the vernacular in some shops, or even ‘timesheets’, which is a bit clinical, I feel, especially as in most countries, temps on your payroll are your employees under the law.  But it is a very raw number because you could have 100 temps being paid this week, and I could have only 60 temps, and yet I could be generating far more margin than you. So, it would help if you looked at the other levers in tandem with ‘Temps out’.

2)      Number of Temp/Contract hours billed:  I said the number of temps paid is a blunt measurement, and it is because you could have 100 temps paid, but they only average 15 hours per assignment (the average assignment length is a couple of days). And I could have 100 temps being paid and the average hours worked per week is 35. I will generate much more than you, yet I have the same number of temps out. (We haven’t even factored in 3 and 4 below yet!)

3)      Percentage Margin: Of course, what is our ‘markup’ and, therefore, what is our ‘average margin‘? Can you define how to calculate the margin in a temporary business? There is a good chance you will struggle, so let me help. Your ‘margin’ is that percentage of the bill rate to clients that ends up as net temporary income. Oh, OK, that did not help? Sorry. Try again. You bill your client $50 an hour for your temp. You pay your temp $35 an hour. You have direct oncost on the temporary rate of 5 dollars. $35 plus $5 is 40. (the total  ‘cost’ of the temp). And 50 – 40 is 10. Your $ margin is $10.  10 as a percentage of 50 is 20%. That’s a 20% margin. Now, if you have 100 temps out working. And they each work 35 hours a week. That’s 3,500 hours of temporary work. If my margin example was the average and you lifted your margin from 20% to 21% (that’s 50 cents an hour, BTW), your weekly billings would increase by $1,750. A week! (For no more work!). Multiplied by 52 weeks means a 1% increase in margin, which means an extra $91,000 in gross profit a year in $ margin ($1750 x 52). Not a bad return for a 1% squeeze, right?

4)      $ Margin: But % can be tricky too. You don’t put percentages in the bank; you put dollars, pounds, euros, and yen in the bank. And so, it is true that you can have 100 temps out at a 20% margin, and I can have 100 temps out at a 17% margin, and yet I can generate more dollars in terms of margin than you do. “How?” you cry. Well, if your hundred temps are assistant accountants billed out at $50 an hour at 20% margin, and my 100 temps are Finance Managers billed out at $200 an hour at 17% margin, I have a lower % margin, but I will generate far more money than you. So unfair, huh?

So, there are four levers you can pull or push to increase your Temp and Contract GP;

1)      Increase the number of temps you have ‘out working.’
2)      Increase the number of hours your temps bill a week
3)      Increase your average temp margin
4)      Increase the seniority of your temps, which increases your bill rate and the chance to negotiate higher dollar margins per hour

Of course, many other activities, skills and action points are required to grow your business. But all of them ultimately impact one or more of these levers.

Understand them

Measure them

Act to improve them

All of this and much more on the Savage Recruitment Academy

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A free online masterclass from Greg Savage

A Marriage Between Art and Science

The future of recruitment

Thursday 21 November
12:00pm – 2:00pm AEDT
Click here to register

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