Money Pit: Two Big Financial Mistakes to Avoid in 2016

ruin-540829_640It’s a remarkable time to be in our industry:

  • Since the recovery from the recession began in July of 2009, staffing employment has grown three and a half times faster than the economy and seven times more rapidly than overall employment.
  • According to the “U.S. Staffing Industry Forecast April 2015 Update,” the U.S. temporary staffing industry will grow 5 percent in 2016 to reach a record size of $121.6 billion.

With talent shortages reaching critical levels, businesses re-entering growth mode, and unemployment continuing to decline, you have unprecedented opportunities to succeed in the coming year – IF you’re vigilant about staying profitable, that is.

Though opportunities abound, threats to your company’s bottom line are equally as plentiful. Stay out of the money pit – and ensure your company’s success – by avoiding these two major financial pitfalls in 2016:

Pitfall #1: Absorbing ACA costs

You just can’t do it! And if you try, you won’t be in business for long.

The Solution? Be smart and proactive about passing on increases in your direct healthcare costs:

  • Choose your best option. Run a variety of scenarios to determine which option makes the most sense for you and your clients. A few to consider are: increasing hourly bill rates, including an ACA “surcharge” on an invoice (similar to a sales tax), or adding a per-employee surcharge to each invoice.
  • Educate your clients. Every business owner knows that ACA is driving up healthcare costs, but not all understand the impact it’s having on our industry. Train your account managers to speak intelligently with clients about the topic. Supplement these conversations with printed or online materials that explain the importance of compliance (for you AND the client) and the financial impact that creates.
  • Be transparent. Explain to your clients exactly why your costs have gone up, by how much, as well as how you determined required increases. Customers will be comparing what you do to what your competitors do. If you’re honest and proactive, you set the stage for candid conversations that yield the best results.
  • Provide notice. Never implement a pricing change without notifying customers. Use a variety of communication forms including personal conversations, or printed materials to announce the specifics and timing of the increase.

Finally, know that you’re not alone in facing this challenge. In an American Staffing Association study conducted by Towers Watson, 91 percent of staffing firms polled planned to pass on their ACA costs through across-the-board increases in bill rates.

PREMIUM CONTENT: Global direct hire market

Pitfall #2: Competing on price.

Tired of being judged solely on your bill rate? Frustrated with being perceived as nothing more a “vendor”?

Being the low-price vendor is one of the toughest (and most vulnerable) positions to occupy in your market. Unless you consistently have massive amounts of volume, you won’t add enough to the bottom line to survive.

The Solution? Get out of the commodity game.

Price is one factor in evaluating your staffing firm, but it shouldn’t be the sole consideration your prospects use. To move out of the role of “vendor” and into the role of “partner,” train your sales teams to:

  • Get in front of higher level decision-makers. This is no small challenge, but one that’s critical to elevating your role and moving from transaction-based interactions to building real relationships.
  • Refocus conversations about price or margins to the strategic value your services offer.
  • Provide solutions that improve a client’s profitability by increasing revenues, decreasing expenses – or both!
  • Explain how your recruiting, screening or selection processes enable you to deliver higher quality talent (which is exceptionally important in today’s candidate market).

Then, even if your price is a bit higher, you’ll be delivering a greater return on the client’s staffing investment – and a better total staffing value. You’ll get out of the commodity game, and into the business of building long-term, high-value, mutually successful relationships.

Final Thoughts

As opportunity increases in the year ahead, so will the importance of keeping an eye on your company’s bottom line. PrideStaff offers a unique franchise model that ensures profitability in any market condition. We make it possible for our Strategic-Partners to leverage the resources and support of a national organization, while delivering a customer experience that consistently exceeds expectations.

MORE: Is it time to invest in new tech?

Tammi Heaton

Tammi Heaton
Tammi Heaton is COO of PrideStaff. She can be reached at theaton (at) pridestaff (dot) com.

Tammi Heaton

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