Decrease in Your Staffing Firm’s Margins? How to Identify the Reason

When revenues are strong, it’s easy to be enthusiastic about your business prospects. However, closer examination of your metrics may reveal that while revenues are up, profits are down. If this happens, how can you identify the causes of margin erosion and take steps to remedy it?

Below are a few common sources.

Shifting business mix. Have the type of placements you’ve made changed at any of your locations? Margins are slimmer in light industrial staffing than IT or engineering. If you have recently increased the number of temporary production workers you’ve added to your bench, or if requests from your tech clients have dropped off, your margins could suffer.

Competitive market space. Are any of your branches located in a highly competitive marketplace? Lowering your markups to win business is a risky strategy. Analyze your ROI carefully to make informed decisions about which customers to pursue.

Local market variables. Compare metrics of various branches or locations against each other. Which ones are performing most profitably? Can you duplicate the business practices at your most profitable locations at those with lower margins?

Employee training. How well do your sales people and account managers understand the value you bring to your clients? Teach them to sell value rather than discount your services. They may get caught up in a “win-at-all-costs” mindset and give away margin needlessly to win a deal.

Attrition. Are you retaining clients? Acquiring new clients is substantially more expensive than keeping your current ones. Focus as much effort (or more!) on your retention efforts as you do on business development.

Back office. Administrative costs add up fast, and it’s one of the easiest expenses to get a handle on. With the right staffing software, you can automate many of your back office tasks so that you can focus on revenue-driving activities.

Keep your eye on your revenue and your margins to ensure that your staffing firm remains profitable and growing for many years to come.

About Avionté:

At Avionté, we provide solutions for staffing firms that help you to operate more effectively and keep your operational costs down. Our comprehensive staffing software delivers integrated software systems that make it easier to drive growth, maximize profitability and streamline your administrative tasks, so that you can focus on your serving your customers. To learn more about the many benefits of Avionté staffing software, contact us today.