Why recruiters need to stay in control of their margins now more than ever

The primary objective of any business is to make money and build a sustainable business. But while it can be tempting to look at net earnings to gauge the profitability of your recruitment business, that doesn’t always provide a clear picture of how well it is actually performing. Margins, on the other hand, do.

During the economic downturn the focus among recruiters was to stay afloat during what was the most testing economic conditions this country has experienced in a generation. As such, any notion of implementing a long-term growth strategy was indefinitely put on hold.

Today, things are vastly different. Positive employer hiring and record levels of employment have given rise to a number of new recruitment businesses opening their doors at an incredible rate. According to Companies House, more than 4,500 new recruitment businesses were registered between January and December 2016 - that's an increase of 13.7% over the same period in 2015.

In the face of increasing competition from other recruitment businesses, both new and established, agency owners need to be in control of their margins perhaps now more than ever. Simplicity’s Margin Calculator helps you to do just that.

Simply by inputting your pay and charge rates and the number of hours worked by your temps, you can see how much you can potentially increase your current margins.

The calculator provides you with a full breakdown of your workers’ pay and your potential margins, comparing workers under PAYE and as a contractor.

In some instances, you may find that some of your workers would be better off being a contractor, which could also mean healthier margins for you too – a veritable win-win for both parties.

Armed with this insight you can make better informed decisions over how you reinvest in your business in terms of recruiting new staff, increasing your PR and marketing, investing in newer and more effective technology or even relocating into newer, larger premises.

When it comes down to it, if you have a healthy margin you also have more working capital. But conversely, having reduced or falling margins can be a sign that all might not be as well as first thought.

This could result in budget cuts or downsizing and if you have your sights set on securing outside investment in your business, falling margins will tend to serve as a red flag for any would-be investor.

In January, CV-Library reported a 55% growth in job applications, while Adzuna reported that average salaries are finally on their way back up after a lull over the last few months. It’s a great time to be in recruitment, but there is no room for complacency in this increasingly competitive marketplace.

Recruitment business owners need to ensure they closely monitor the very heartbeat of the business. For a better insight on how your business in performing, take a look at the Simplicity Margin Calculator. Not only will you gain an understanding of your margins, you may also find out how to increase them.