Drive Down Expenses in These Three Areas to Drive Profits

Driving profits is key to your staffing firm’s success. The greater your revenue and the lower your costs, the more your firm is able to grow. One way to increase your bottom line is by driving down expenses. Three ways you can accomplish this are by examining your customer acquisition costs, margins, and profit and loss statements. Reducing costs in these areas contributes to increased profits.

Learn how lowering your staffing firm’s expenses in three areas can result in greater profits.

Customer acquisition costs. The cost of acquiring a new customer is high. So, be sure you build and maintain relationships with the customers you have to encourage repeat business. For instance, maintain direct, effective communication. This includes finding out whether each customer prefers to be reached by phone, email, or text. Also, be a trusted resource. Let your customers know about the trends you see, what the hiring landscape is like, and how your business is doing.

Margins. Your gross margin is the percentage of your total billable revenue that is available after the direct cost of each revenue dollar that is available to contribute to your indirect cost and ultimately for profits. This is one metric that shows how much money your staffing firm is on track to making. When you include this and other financial data with data from your applicant tracking system (ATS) and customer relationship management (CRM) system, you can start to calculate your profits at the level of each contract or placement. This lets you rank and determine how profitable each line of your staffing firm will be approximately, how your margin differs by candidate source, and what your estimated profit per requirement is for a specific team or segment. Understanding the levels of success of each segment and activity of your staffing firm lets you prioritize your strategies and set goals to decrease costs while increasing growth and profitability.

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Profit and loss. Your P&L statement shows how your staffing firm’s revenue becomes its net income. Because profit and loss are the key factor in the health of your firm, they have a substantial impact on your business decisions. This includes whether you have enough profit to launch another brand or service line or whether you need to focus more or less on a certain segment. When analyzing your P&L statement, pay close attention to your mark up and direct costs, which represent approximately 75% or more of your revenues. Find ways to drive down these costs for the greatest return. Also, focus on ways to reduce indirect costs. They, too, have an impact on your bottom line just not as dramatic.

Hold onto more of each dollar by analyzing where you lose margin. Study every line of your P&L monthly, at a minimum. Pay attention to small items that add up on your P&L. Left unchecked, indirect costs will add up and affect your bottom line. Customer acquisition costs are high. Focus on relationships to retain customers.

Lenny Tierney

Lenny Tierney
Lenny Tierney is founder, president and CEO of Madison Resources.

Lenny Tierney

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