When I was 29 years old, a team of intrepid colleagues and I founded Recruitment Solutions. We were ambitious. We opened with 10 people on day one. We had two offices and big dreams, and we grew and thrived, in three years reaching $13 million in revenue, five offices, 75 staff and 250 active perm job orders.
But then, Australian economy collapsed into a deep recession, and we were hit hard. Our revenue fell to $9 million. In a year. Staff numbers dropped to about 30 — all of whom took a 10% salary cut. Admin staff were eradicated, with consultants shouldering the load. And open perm job orders were a scant 18., from a high of 250 only 12 months prior
I could go on.
But for four key facts working in our favor, we would have failed.
- We had a strong temporary business, which kept us afloat.
- We had no debt, so we were not crippled with repayments when revenue dropped.
- We had some great recruiters who saw the thing through. Recruiters with character. Recruiters who were not just boom-time show-offs. Recruiters who could win business in a declining market.
- And we cut our expenses fast and very deep, early.
When the market recovered, we found many of our competitors had disappeared, leaving a clearer playing field.
Meanwhile, our clients valued that we had persisted and felt bound to us as ‘fellow – survivors’. We found the consultants who survived had been burnished by the fire of true battle and were tougher, more loyal and far more skilled.
In two years, our revenue grew to $18 million. Five years later sales were over $40 million and the business was so profitable we could list it on the ASX at a value of over $60 million at its peak.
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And so, some massive lessons were learned. I don’t want to scare anyone, and I have no special knowledge, but I feel another massive downturn is not too far away.
In fact, I need to tell you if you didn’t know: We will have a recession.
And it will be big. I just can’t tell you exactly when. Sorry.
As a result, I currently ask my clients to consider the following question at board level. And it always shocks them.
“What would happen if your permanent Gross Profit (Net fees) dropped by 50%, and temporary/contract GP by 25%? And the drop occurred in a month and did not recover for two years. Would you survive?”
And I usually raise it when the going is good, and profits are at record levels. Like right now, for most of them. Because that is precisely the time companies can get complacent. We start to believe in a world of never-ending fat years. No thought is given to surviving the lean ones.
The point of that question and the ensuing conversation is to test your company’s fitness to adapt to a new world and to ensure you are making decisions and building structures that allow for much lower revenue.
So, I challenge you to ask yourself those questions. And look for my follow-up posts, where I will discuss typical vulnerability points for staffing firms.
