How to achieve economies of scale as a consulting recruiter
Updated: Jun 22
If you reduce the costs for placing and processing candidates, you can achieve an economy of scale that allows your new business to grow or your established one to transform.
When you have your business, you’ll be your own MD, CEO and CFO, never mind your own marketing manager, accountant and IT department. While not employing staff to fulfil these roles is saving you salary payments, it is also preventing you from growing your business.
This is where it becomes crucial to look at what economies of scale you can implement in your recruitment agency, so that your time is freed up to bring in new clients and find successful candidates.
What are economies of scale?
Broadly defined, an economy of scale means the more you make of a product, the cheaper it becomes. So, if you spend AUD100 on an ice-cream maker and make only 10 cones, you have to sell them at AUD10 each just to break even. But if you can make 200 cones, you can not only sell them faster as they’re more affordable, but you’ll break even more quickly.
How does this pertain to recruiting? If you have to place a hundred candidates but also have to do all their onboarding, contacts and timesheets yourself, not only will it take you much longer but you’ll likely present your client with an unaffordable invoice for your service, if you can even meet the placement deadline.
The more economies of scale you can implement, the more efficient your business will become and the more growth you will be able to achieve.
How to implement economies of scale for your business
There are a few simple ways of getting your agency on the growth path:
Aim for specialisation
Your speciality is client service, contractor care, recruitment and networking. If you can hand over crucial tasks like invoicing, payroll and reporting to a fellow specialist in these areas, you will work more efficiently on your core skills and the business will benefit.
You might not have the cash flow to pay more salaried employees to handle specialist tasks. That’s where automation takes over.
If you are managing contractors with about $1 million annual payroll, or you simply don't have the expertise to handle all legal governance yourself, it is time to upgrade your back-office solution.
Automate as much as you can
Automating vital back-office administrative functions like onboarding, contracting and invoicing is not only easy, it is also extremely cost-effective. Automation consists of integrated software that takes over tasks that would otherwise be extremely time-consuming to fulfil manually. Nowadays, there is no need to buy individual computer programs (that may not be compatible) or even your own server: modern SaaS (software as a service) systems allow you to essentially ‘rent’ whichever suite of complementary programs you need for your business, as well as space in the cloud.
Your back-office support will now be totally online, accessible anywhere in the world for remote working and produce exact records of contracts, timesheets, payroll or whatever else you need, when you need it. Furthermore, it will be unique to your business because your SaaS provider will tailor it to your needs.
Automation is imperative to economies of scale because it frees up time and money that can be more profitably spent elsewhere. Some recruiters worry that automation will weaken the relationship they have with clients: remember, automation is merely a tool and cannot replace you as a valued recruiter.
Contain your fixed costs as much possible
If you can keep the day-to-day running costs of your business under control, not only will you be able to budget better, you’ll also have more profit to plough back into marketing, staffing or other roles that are needed for growth.
Automation is a popular way of fixing a mandatory cost. You have to have backend technical support and if you choose a reputable SaaS provider, you’ll know exactly what your fixed fee is every month or quarter (some SaaS models have an annual subscription fee).
The more variable costs you have, the more expensive your business will be to run over time. For example, if you choose not to automate specialist or backend functions but to employ ad hoc staff when you need them (to handle onboarding a new raft of contractors or collating your records for the Australian Tax Office), you will have a variable cost that will diminish your ability to build economies of scale into your agency.
The more clients you take on and the more candidates you have to process, the more cost-efficient your fixed-cost back-office system will be. Like the ice-cream machine, it will cost you less per candidate the more you take on but also give you the ability to find them in the first place by freeing up your time.