#2 Why Go Solo?

The motivations and benefits behind starting your own staffing firm.

Author

Alex Papageorge
February 07, 2024

Personal Thoughts: We all understand the lucrative side of recruiting, but more importantly the flexibility the profession offers is unique.

Think about it… we can recruit anyone, from any part of the world.

That’s cool.

In this email 👇

What now, boss?

First off, enjoy the freedom.

But secondly, recognize the accountability being your own boss requires.

The autonomy can be a blessing, and a curse.

Why? Working for a company inherently offers structure to your life.

Example:

👔 You have to be in the office from 8:30 - 5:00.

That’s structure. Being in the office is an important part of your daily routine.

That does not exist here.

As an entrepreneur, it’s your responsibility to create your own structure.

Stay disciplined, not motivated. Motivation comes and goes, discipline is here to stay.

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It’s all about the margins.

To start a recruiting business, you need a:

✅ Computer
✅ Phone

You don’t need:

❌ Inventory
❌ Office Space
❌ ATS

The cost(s) of running a recruiting business are relatively low considering the monetary upside 📈

Speaking of upside…

🍰 More of the pie.

95% of staffing firms make money two ways:

  1. Direct Hire. 15-30% finders fee, for the employee’s 1st year salary.

  2. Contracting. Hourly margins; bill rate - pay rate = hourly profit.

Now, let’s look at 2 scenarios 👇

Example: $100k salary @ 20%; fee = $20,000.

💰 Staffing Agency Option 1 (higher-split)

  • Sales: 25% of the total deal

  • Recruiter: 25% of the total deal

  • House: 50% of the total deal

💰 Staffing Agency Option 2 (lower-split)

  • Sales: 10% of the total deal

  • Recruiter: 10% of the total deal

  • House: 80% of the total deal

Recruiting is a MASSIVE industry.

The House Always Wins 🃏

Let’s now break down the splits into an actual dollar amounts…

💰 Option 1 (higher-split)

$100k salary @ 20% fee = $20,000

👉 1 Placement

  • Sales: $5k (25%)

  • Recruiter: $5k (25%)

  • House: $10k (50%)

👉 5 Placements:

  • Sales: $25k (25%)

  • Recruiter: $25k (25%)

  • House: $50k (50%)

👉 20 Placements:

  • Sales: $100k (25%)

  • Recruiter: $100k (25%)

  • House: $200k (50%)

💰 Option 2 (lower-split)

$100k salary @ 20% fee = $20,000

👉 1 Placement

  • Sales: $2k (10%)

  • Recruiter: $2k (10%)

  • House: $16k (80%)

👉 5 Placements:

  • Sales: $10k (10%)

  • Recruiter: $10k (10%)

  • House: $80k (80%)

👉 20 Placements:

  • Sales: $40k (10%)

  • Recruiter: $40k (10%)

  • House: $320k (80%)

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Contractors 🚀

👉 Example: Pay Rate = $60/hr with a $85/hr Bill Rate = $25/hr of margin

6 month contract: $25/hr x 1040 hours = $26,000 profit
12 month contract: $25/hr x 2080 hours = $52,000 profit
24 month contract: $25/hr x 4160 hours = $104,000 profit

Now let’s say you add a few more contractors…

5 contractors, 12 months = $25 × 2080 hours x 5 = $260,000 profit
20 contractors, 12 months = $25 × 2080 hours x 20 = $1,040,000 profit

A contractor (could) be worth 2-5x more than a direct hire placement 🤯

Doing the math.

That said…

🚨 Make sure you have enough capitol to support contractors on YOUR payroll.

This is money you will need to front for ~60 days since the contractor will “technically” be your employee or sub-vendor.

✌️ (Awesome) Payroll & Timesheet Options:

  1. QuickBooks Time (what we use)

  2. Deel

What’s Next…

I’ll share 3 things anyone can do right now, while still employed to push your recruiting business forward so when you do ✌️

You’re that much farther ahead.

P.S. I wish someone told me these… 😅

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See you next week, friends!