Traditional recruitment is broken
Where traditional businesses operate at 5-10% EBITDA, recruitment and staffing businesses who evolve to be tech-enabled could expect to see 10-20% and tech led could achieve in excess of 20%.
Recruitment and staffing businesses operate on thin EBITDA margins, for traditional staffing businesses this is around 5-12%, with high-sensitivity to market conditions leaving them highly susceptible to economic downturns, hiring freezes and sector slowdowns. Recruitment product offerings often lack diversity and therefore placements are their primary, if not sole, source of revenue. Staffing can be very financially fragile. Achieving a higher EBITDA and EV isn’t solely about driving higher NFI. With people costs as the largest expense, ratios of NFI per head need to be higher.
Sales heads are required to increase revenue. As a default strategy for revenue growth, this isn’t scalable:
- Attrition rates run at 25-40% introducing significant risk and inefficiency
- Time to productivity is months, not weeks.
Back office heads are required to service increased business:
- Compliance and onboarding is very manual with little automation
- Complex order to cash processes suffer from lack of automation and increased manual efforts
Recruitment processes are out-dated and labour intensive:
- Manual sourcing and screening is the norm
- Sourcing is still via networking and job boards, not data-driven
- Admin tasks remain incredibly high, time could be spent relationship building and closing deals.
