Permanent or Contract? How to Make Money Doing Both - Jennifer Viley


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One of the key spaces in staffing sales is to know when to lead your client toward a contract placement or a professional placement decision. But before this happens it’s important for you to know what it will mean to your bottom line, and how your organization can transition between both worlds.

Being able to offer contract staffing is a wonderful option for clients – but is it wonderful for you? This workshop will go over:

the basics of how to incorporate contract staffing into a professional placement firm
the who, what, when, where and whys of adding in contract staffing
the sales techniques you will learn if you decide contract is just what your client needs, even if they don’t know it yet!

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  • Permanent or Contract? How to Make Money Doing Both - Jennifer Viley

    1. 1. Permanent orContract?Can a direct hire firm do both?
    2. 2. Workshop Goals• A little about me• Understanding the difference between Contractand Direct Hire… fees, profit, and cost• How many contracts do I need to make a profit?• Contract – where’s the most revenue?• Is the recruitment process different?• Is the sales process different?• Hidden pitfalls of hiring contractors?• Q & A
    3. 3. A little about me• Staffing industry over 10 years, starting as a technical recruiter with Volton an Apple Computer account and quickly moving up into a selling role.• Began working with Strategic IT Staffing in August 2007 as an AccountManager and moved through the ranks ultimately being promoted to VicePresident of Sales.• As Vice President, serve as the critical link between company and client byhelping to turn concepts into tangible services.• Currently lead a team of 11 AEs and recruiters. Provide leadership andcoordination of company sales and marketing functions andstrategies, develop and implement sales methods, and mentors anddevelops Account Executives.• Spearheading the growth from a $650,000 company to a $7mill companyin 5 years.• Fun Fact – Sold Kirby vacuums door to door for over 5 years beforestarting in staffing.
    4. 4. Some Excitement!!• Last Wednesday whilewrapping up thispresentation I got somevery exciting news!• Closed 1 contractposition worth $93,000in profit• 12 month contract• $45.00/hr margin
    5. 5. Show me the MONEY!!!• The staffing industry generated approximatelyin sales in 2012!!from temporary and contractstaffing!!in search andprofessional/perm placement services!!
    6. 6. What contractor business will look liketo you…Provides a different type of income – long termProvides a different employment opportunity for yourapplicantsWill allow you to use your Star candidates andpipelines differentlyWill give you the opportunity to close more businessby having more optionsDifferent overhead and cost factors for contractContract requires a different level of businessattention and possibly more staff to manage.Can spur hyper-growth with large contract clients
    7. 7. How both options benefit employersContract vs. Direct…the basics• A company can use contract employees to fill in forabsent persons or for positions in which no one has yetbeen hired.• If the hiring process is delayed, then a contractemployee can fill that position without remaining fulltime.• Direct hire employees may be more committed to thejob, especially since it is considered more permanentfor them.• Direct hires are fixtures in the company and are chosenspecifically to fill a need in the company.- Temp vs. Direct Hire Jobs | eHow
    8. 8. How both options benefit the candidateContract vs. Direct• Career contractors move around from job to job.Thus, they often gain a lot of experience in differentareas of work and expertise.• The changing of work environments can make findingnew jobs more exciting.• Direct hires often receive more benefits and jobsecurity than contract hires.• Direct hires are permanent employees and thus arenot faced with the possibility of losing their jobssimply because their allotted employment time hasrun out.- Temp vs. Direct Hire Jobs | eHow
    9. 9. Can a contractor create income?• Can be a steady source ofincome or supplementalincome• Ex: Small 3-5 person firmwith 20 contractors onbilling can make $530,000profit a year just on asmall team of contractorsRevenue Outline• $35.00 hr. pay rate,keeping the margin at$18/hr.• $53.00 hr. bill rate,burden is comfortably15%• $12.75 hr. profit, aftersubtracting burden andpay rate• $44,000 avg. profitmonthly, minimalmaintenance once onassignment• $530,000 yearly onminimal maintenanceusing current pipeline
    10. 10. • The average time on assignment is 13.2 weeksor 3.5 months – ASA 2012 4th QTR Survey• Our company average over a 2 year span(2010-2012), is 4.5 months with a 5%conversion fee at the end.• Last year, 87% of ours converted and of those62% were charged a conversion fee of 5% orgreater.• Conversion fees result in additional revenuethat hits the books like a DH placement fee.Contractor Averages
    11. 11. What are the costs?• Burden includes:– Payroll costs– Workers Comp – can usually include together– Maintain a benefits program, no cost justpaperwork– Hiring a HR consulting company on retainer to askquestions, etc.– FUI, SUI, and any other state or federal relatedcost including unemployment filings– GOOD NEWS – most payroll companies will do allthis for a fee per check cut!!!
    12. 12. How many contractors to make aprofit?• That is up to you!!• 20-30 contractor on billing is an achievable 1year goal for a smaller recruitment firm.• The more AEs and recruiters the easier it is• Example:– 1 AE and 3 recruiters maintain 12 hires a month– 2 direct hires and 2 contractors each on average– This maintains their 20 contractors average.
    13. 13. Where is the most revenue?• Top revue wielding contract positions:• C-Level positions• Management roles of all types• IT roles• Software Development roles• Medical roles- Based on the 2013 QTR 1 salary reports from Monster andCareerBuilder
    14. 14. Contract recruitment process• Similar to Direct Hire process just shorter• Shorter close cycle - typically 21 days from start to finish• Submittal timeline must be shorter• Submittal to interview process is typically 1 week or lessdepending on the urgency• More open to a 70% skill match vs. 90% or higher formost direct hire positions• Low hanging fruit is usually recruiters 1st option.• More competition unless an exclusive client relationship– SendOuts 2012 staffing survey
    15. 15. Baby Boomers and the workforce• Available for contract• No training needed• Great for interim high level positions(lots of $$ here)• Supplement for projects and heavy workloads• Professional and focused group
    16. 16. How do you sell contract staffing?• Great option for “interim” positions while youare finding the perfect fit - Management & C-level• Star Market when no position exists• Easy follow up question if they don’t have anyneed for a direct hire firm, “do you ever haveprojects or short term roles?”• Utilize your candidate pipeline much quicker• Try before you buy opportunity• Working interview (walk on position)
    17. 17. Biggest Bang fortheir Buck!!My favorite part of thepitch, “The recruitmentfirm takes care of thebenefits, taxes, WC, etc.,while your company wouldhandle all the of this for adirect hire. Let me find youthe right person, you takesome time getting to knowthem and let us handle allthe paperwork in themeantime.”
    18. 18. Contract Fee’sConfidence is King!!!• Mind shift from fees tobilling hours and rates• Don’t discuss the payrate, keep theconversation to bill ratesand conversion salaries• Find where you will makemoney and don’t gobelow– Good Rule of Thumb is$18.00 margin forprofessional level or aminimum of 50% MU
    19. 19. Conversion Fee’s• Stick with a consistent pattern so you canquote easily• 15%,10%,5%• Quote 0-6 months first then reduce fromthere• If you are making a healthy margin and thecontracts are over 4 months, it’s ok to giveaway a free conversion, especially to earn longterm business.
    20. 20. Conversion Samples3 Month ConversionThe conversion fee calculation is a percentage of theprofessionals aggregate annual compensation, includingbonuses. The conversion fee will be owed and invoicedupon your hiring of our professional, and payment is dueupon receipt of this invoice. The same calculation will beused if you convert our professional on a part-time basisusing the full-time equivalent salary.The conversion fee breakdown is as follows:After 173 hrs. on assignment, 15% conversion feeAfter 346 hrs. on assignment, 10% conversion feeAfter 520 hrs. on assignment, 5% conversion fee6 Month ConversionThe conversion fee calculation is a percentage of theprofessionals aggregate annual compensation, includingbonuses. The conversion fee will be owed and invoicedupon your hiring of our professional, and payment is dueupon receipt of this invoice. The same calculation will beused if you convert our professional on a part-time basisusing the full-time equivalent salary.The conversion fee breakdown is as follows:After 520 hrs. on assignment, 20% conversion feeAfter 690 hrs. on assignment, 15% conversion feeAfter 860 hrs. on assignment, 10% conversion feeAfter 1040 hrs. on assignment, 5% conversion fee** I start at three month before even discussing a fee for6 month contract to hires.
    21. 21. Key point to remember whenquoting rates• 1 month is 173 workinghours• 1 year is 2080 workinghours• If they tell you how muchthe conversion salary is,divide by 2080 and add yourmark up• Remember to include 3-5%on the pay rate for thecontractors to pay their ownbenefits, etc.• Try and keep your profit(after burden) at $15/hr.
    22. 22. Offering Benefits to Contractors• Most benefit companies like to see approximately20 contractors on billing in order to engage in acontract.• Not necessary unless you want to stand apart asa contract recruitment firm.• If you don’t have benefits available for areasonable price, add 3-5% to the contractor payrate.• Typically no cost to the firm, just the employeeand the time to process paperwork
    23. 23. Hidden Pitfalls of Contract Staffing• Unemployment is a big one!!• Handling the payroll issues and questions• Maintaining the correct Work Comp andinsurance for your contract employees• Ending the assignment• Record keeping and HR• Invoicing your clients and making payroll– Net 15 max invoicing– Weekly or bi-weekly payroll: what’s legal?
    24. 24. "If you want to reach a goal, you must see thereaching in your own mind before you actuallyarrive at your goal.“ ~ Zig Zigglar