Building a successful staffing business isn’t just about growth – it’s about scale.
Growth means adding costs at the same rate that you’re adding revenue. While the company is technically growing, it's not scaling.
Scale is about adding revenue at a rapid rate while adding costs at an incremental rate. Learn how to build a scalable growth model for your staffing business.
The most successful companies to emerge over the past twenty years have demonstrated that repeatable and sustainable growth is all about possessing the capability to scale. These companies have proven that by building a scalable growth model, significant profit margins can be generated without the burden of traditional overhead and budgetary restraints that stunt the growth of traditional, linear growth models.
A business with a highly scalable growth model is one that can grow exponentially without being weighed down by the same revenue to cost model associated with a linear growth model. Instead, as sales revenues increase, costs remain relatively flat enabling higher profit margins. Highly scalable businesses can grow faster at higher profit margins and with less investment requirements, making them more efficient and more attractive to investors.
Many SaaS (Software-as-a-Service) companies, like HubSpot, Salesforce.com, Microsoft and Google have perfected the scalable growth model. Their initial costs for developing their platform or operating system is high, but once it is available for the market to consume, they can sign up users and grow revenue exponentially with relatively minimal cost increases thereafter.
But that is for software companies. How does a scalable growth model apply to service providers such as an IT staffing business? Having a scalable growth model is about capacity and capability. Achieving scalable revenue growth for staffing firms is all about developing the capability to systematically increase revenue growth while only incrementally increasing costs. Achieving scalable growth or “scalability” requires service providers to develop internal organizational systems, processes and capabilities. Revenue growth is the output of those systems, processes and capabilities.
With linear growth business models including staffing firms, we see a vicious cycle of inefficiency and waste that is fostered from a lack of capability and capacity resulting in increased costs, high employee turnover and poor NPS scores; in order to grow these firms must add costs and overhead at practically the same rate that they’re adding revenue growth.
Benefits to Scalable Growth Model
Staffing firms who adopt a scalable growth model can deliver their service and increase their customer base without having to increase their overhead at the same pace.
Why Achieving Scale is Difficult for Staffing Companies
So why don’t all staffing firms including all staffing CEO’s and business owners adopt a scalable growth model? Heck, why even bother with the linear growth model? The answer is simple. PEOPLE. When two founders start a staffing business, they begin by writing up a simple business plan and they go to work. One begins selling and the other starts recruiting. But when they add the third employee, their headcount only increases by 33% but the degree of complexity triples from two to six. When they hire the fourth employee complexity quadruples to 24. That is a 400% increase in complexity.
As the business grows and the original founder or founders add staff, the company must focus on developing the internal organizational systems, processes and capabilities to manage this complexity. Most founders and staffing business owners SKIP THIS STEP. Below I highlight five components required for staffing firms to build a highly scalable growth model.
The Five Components to Building Scalable Growth Model for Staffing Firms
As the team and business grows, leaders must learn to let the day-to-day decision making go and allow others to make decisions. Leaders need to learn to let go and delegate decision making to other leaders within the organization. When it comes to building a leadership team and developing the capability of leadership within your organization, there are two things you need to get right; hire right and train well.
We find that staffing owners and CEOs often feel so desperate for talent that they hire the first person they like rather than the best person. The reality is, the right person needs to embody the values of the company and possess all the competencies required, not just be likeable and have relevant experience.
An even bigger mistake is the lack of quality training for developing future leaders. For your staffing business to grow and to grow at scale, your leaders must grow and develop faster than your company. However, we see CEOs and business owners spending tens of thousands of dollars on their own education and participation in networking groups like EO, and YPO among others, while only spending an average of $1K on education for their leaders.
Your people and your company can only go as far as your leaders have been. To grow your business, leaders must invest in developing their current leaders and the future leaders of the organization. The bottleneck for holding back company growth always starts at the top.
Scalable and Automated Systems
In order to scale up your staffing company, you must invest money in the right systems to grow the business. You need scalable and automated systems for accounting, project management, customer relationship management (CRM), employee and candidate communication, applicant tracking system (ATS), marketing automation including lead nurturing and email marketing and more. Without scalable, automated systems your execution will falter, and you’ll experience customer churn and frustrated employees. This will cost lot more money in the long run.
Having automated systems that can scale with your business such as a solid CRM or a powerful marketing automation platform will save you countless hours of frustration untangling mundane time-consuming details and free you to focus on the more strategic aspects of building your business.
It’s O.K. If you can’t invest in large-scale automated systems immediately. That is why there are great services like Zendesk, Slack, QuickBooks, Salesforce.com, HubSpot, and Sense to help you take the first step in adopting scalable and automated systems before you’re ready to build or purchase your own. Business process automation is the small business owner’s best friend.
Review your business to see what aspects are repetitive or monotonous and make it your goal to automate as much as possible so that your attention remains focused on strategic, scalable growth-related activities.
Marketing is key for any staffing company aspiring to achieve scalable growth. Marketing is essential to attracting the right customers, the right candidates, the right employees and the right partners and investors. Marketing also about capacity. Your marketing engine is what enables recruiters and sellers to have enough quality leads to follow up on and nurture. Let’s face it, many salespeople struggle because they don’t have enough quality sales leads. And how many recruiters do you have on your team who exceed their weekly candidate submittal goal? Marketing is the engine that drives scalable growth. All salespeople and all recruiters should have the same amount and quality of leads to work. Too often staffing companies view and treat marketing as support for the sales team. Or, they invest in a marketing tool and mistake the tool for their marketing strategy. When done properly, effective marketing keeps the company focused on exponential growth and profitability.
Improving Sales Effectiveness, Recruiting Effectiveness
For staffing companies to truly scale and grow exponentially they need to develop the internal capability of improved sales effectiveness and improved recruiting effectiveness. Improving sales effectiveness and improving recruiting effectiveness refers to selling more in a shorter time frame. It means generating more revenue and gross profit per sales rep and recruiter. Improving sales effectiveness and improving recruiting effectiveness requires staffing leaders to identify and define which selling behaviors and processes and which recruiting behaviors and processes are most effective for enabling sellers and recruiters to produce the best results most efficiently.
Put simply, sales team effectiveness or recruiting team effectiveness equals average gross profit output per team member.
For example, imagine the sales quota for each of your five sales reps is $500K per rep. Let’s assume output is as follows:
Your sales effectiveness rate is $268K per sales rep. This simple definition makes it possible for staffing companies to measure sales effectiveness and recruiting effectiveness over time, and thereby determine the impact of actions taken to improve sales effectiveness.
Improving sales effectiveness and recruiting effectiveness is the most powerful way for staffing companies to scale their business because it reduces customer acquisition costs and increases sales revenue without adding additional overhead cost (adding headcount).
Consistent, Systematic Employee Training
The best indicator of a staffing firm’s ability to scale is how independent it is of any one individual. In short, a staffing firm’s ability to scale is tied to the de-emphasis of one, single individual. For a staffing business to scale it must have the systems, processes and training that enable ALL sellers and all recruiters to be highly effective. This is a big part of what makes the revenue model highly scalable and exponential growth possible. It’s the training system that makes people successful.
For all sellers and recruiters to become “highly effective,” staffing leaders must provide and deliver the same, consistent, systematic employee training for all recruiters and all salespeople. This includes all team members being taught, adopting and executing the same sales and recruiting skills, behaviors, messaging and activities. Having a consistent and systematic employee training program is what enables all recruiters and sellers, regardless of experience or talent level, to consistently meet and exceed quota year-over-year. The consistent success is rooted in following a formulaic process, not relying on a top performer or a key customer or last-minute negotiations and guessing. Following this systematic process is what enables staffing firms to replicate or 'clone' success across the organization. It is also what enables staffing companies to achieve scalable and sustainable growth and even predictable revenue growth.