Explode Your Business Through Mastery of Contracting & Outsourcing]


Published on

With an always exciting and fresh perspective on the recruiting and sourcing industry, please welcome and join, Neil Lebovits, CPA CPC, and CTS of TheDynamicScale, in this one-hour webinar, sponsored by TriNet, as he unveils some of the industries best-kept secrets! Neil will explore tactics you can employ immediately to see positive feedback in your organization. These tactics and secrets range from, but are definitely NOT limited to; how to calculate and maximize your gross margin dollars, different ways to price contract positions, how to go from temporary to permanent, and much, much more. Looking for a way to positively impact your organization? Then this will be one webinar you can’t afford to miss!

Published in: Business, Economy & Finance
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Explode Your Business Through Mastery of Contracting & Outsourcing]

  1. 1. Mastering The Art Of Contracting & Staffing  You Must Focus on BOTH Contract and Direct Hire NOW!  You should be doing BOTH! • Even if you “Dabble”  Temp/Contract can now be done “at home”  Little Risk  No funding!  Services like TheDynamicSale Signature Back Office can make this COMPLETE TURNKEY
  2. 2. Why Provide a Contracting Solution?  One contractor out for a year can yield you $10,000 to $30,000 in EXTRA profit!  ALWAYS ALSO have a temp/contracting solution to their problem  Also makes you seem bigger!!  If you’re not offering contract/temp services then you’re letting your competition in the door and they will absolutely go after your perm business  Remember, companies like to consolidate. So, if they can so why deal with two or three recruiters when they can deal with just one.  LOCK OUT YOUR COMPETITORS  GET THAT FIRST FOOT IN THE DOOR  Temp/Contract business is a 40 hour/week reminder that you still exist!!  Contractors will give you leads when they are in the company and keep you in the know!  EASIER by far to convert a current contractor than pitching a random candidate-Increases your Perm deals!  Contractors can actually SAVE companies money vs.. perm!
  3. 3. Make Sure To Download Our Free EBook: “Contracting De-Coded” http://www.thedynamicsale.com/signature-back-office- services/ebook/
  4. 4. Contracting Terms To Know
  5. 5. Terms To Know Make sure To  Bill Rate  What You Charge Clients Per Hour  Pay Rate  What you Pay Candidates Per Hour  Pay charges  The actual COSTS that you will incur above and beyond the pay rate that you choose  workers comp insurance  State and Local Taxes  Shows as a % of Pay
  6. 6.  Markup  The Amount that you are multiplying the Pay rate by to get to the Bill Rate.  Markup does not take into account any pay charges.  So, if you pay out $20/hour and Bill $30/hour, you have a 50% markup!  Similarly, a 75% markup would yield a $35 Bill Rate and a 100% markup would yield a $40 Bill rate!!
  7. 7. Gross Margin  AKA Margin, Gross Profit, GM  Directly related to Markup  Margin is your real gross profit!!!  Total Gross Margin is simply Your Billings less your wages (including wage costs above the rate)!!!  Gross margin % is a way that many measure their business. It is more accurate for your profit than simply markup, because markup does not take into account the varying direct costs (pay charges).  Gross margin % is simply the % of your sales dollars that will become gross profit.  perm/direct hire, your gross margin % is 100%! For temp, you simply take your gross margin dollars and divide by sales to arrive at your %.  Once you know this figure, you can then always multiply it by your projected sales dollars to arrive at your projected profit!
  8. 8. SO…..  Bill Rate - Pay Rate - Pay Charges/hour = Gross Margin/hour  Total Invoice - Wages/Pay - Pay Charges = Total Gross Margin  Pay charges are often shown as a % of total pay rate. In that example, the math is the same, but it would look like this:  Total Invoice - (Pay) * (1+Paycharge %) = Total Gross Margin
  9. 9. Simple Example  Assumptions:  $45 Bill rate ; $30 Pay; Pay charges assume to be 13%  (Markup is thus 50% )  Example:  Bill Rate $45  - Less Pay($30)  - Less Pay charges ($3.90) or ($30 X 0.13%)  = Gross Margin $11.10/hour  In other words, you will make $11.10 per hour gross profit. This example assumes that you are employer of record and does not take into account and other funding fees, or costs of services you may incur.  In this example, your gross margin % is $11.10/$45 or 24.67%. Meaning, you will have a gross profit of 24.67 cents for every one dollar you bill or almost $25 for every $100 Billed!
  10. 10. Example Using Dynamic Signature  Assumptions:  $45 Bill rate; $30 Pay; Pay charges 22%  (Markup is thus 50%) Example:  Bill Rate $45  Less Pay ($30)  Less total Pay charges ($6.60) or ($30 X 22%)  = Gross Margin $8.4/hour  Gross margin % is 18.67% ($8.40/$45)  Meaning, with all payroll and costs accounted for, using Signature at 22%, you will keep 18.67 cents on every one dollar invoiced!
  11. 11. How to Use GM %  If they want a contractor for 3 months or 500 hours, you know you will bill them $22,500 (500 hours at $45 per hour) and then your gross margin (i.e. similar to perm billings) will be $4,201 ($22,500 billed and you keep 18.67% as profit).  At 2000 hours per year per temps billable hours, that is $16,803/year PROFIT per contractor!  If you maintain only ten contractors out at a time, that is an extra $168,000 in earnings! This later example is also fully turn-key for you today and something you can start working on NOW! More on pricing ideas later.  BTW, all of our training will be free if you process one contractor on average
  12. 12. Gross Profit  The TOTAL MARGIN is the key!!! Don’t get TOO hung up YET on the GM %  Margin is Margin is Margin!  Be concerned with how big your portion of the pie is in total! Don’t worry about the % of the pie. Pie size matters  Perm Billings are 100% Margin. However, Temp Gross Margin is same as Perm Billings!!!  Low margin/markup for a one year assignment is GOLD! You will earn MUCH more than a higher margin/markup assignment for 2 months! (Engineering Example)  The Higher Bill Rate/Levels means more Margin DOLLARS (vs. %), even with lower markups/margin!  More on how to use GM Dollars/% to price conversions or rates later
  13. 13. Building a Payrolling business
  14. 14.  Employer Of Record  Insurances & Licenses  Workers Comp  General Liability  Theft  Auto  Errors & Omissions  Payroll Processing  Time Cards  Front Office System/ATS  Credit & Collections  etc
  15. 15. Funding Options
  16. 16. What are your options?  Factoring  Line Of Credit  Funding  Full Service Funding) You are EOR  Full Service-WE are EOR
  17. 17. How To Price Contractors
  18. 18.  The Higher your level of candidate or expertise, the higher the margin % should be!  The more detailed the niche, the higher the %  More Volume = Lower Margins (contract model)  One offs = Higher Margin (Retail Model) (Independents or dabblers will be a RETAIL model in MOST cases)
  19. 19. Bill Rate Pricing Factors  Volume of orders/size/Potential  Client expectations/Budget  Previous relationship or new  Sexiness/sell-ability of job  Length of assignment  Competition on job  Is an interview required?  Stage in the process  Difficulty in finding person (inventory)  Temp to perm?  Commute  How much spread you will earn  “Buying” business  How much of a hot button match will candidate have?
  20. 20. Pay Rate Pricing Factors  Candidate expectation/stretch  Sexiness/sell-ability of the job  Length of assignment  How high the level  Possibility of converting to perm  Commute  Length of assignment  Desperation  “Buying” candidate loyalty  How many hot buttons does this job meet?!!!
  21. 21. General Margin Guidelines  Industrial ranges from 18%-30% MARKUP for contract and 25-50% for Retail  Clerical/office ranges from 20-40% MARKUP for contract and 40-80% for RETAIL  Technical ranges from 30-50% contract MARKUP and 50-100% for Retail.  VERY technical, i.e. Engineering, will average 40%, but VERY LONG TERM!  YOUR RETAIL business should start at a MINIMUM markup of 50%. Aim for 75%+ (again, still keep focus on
  22. 22. Only two ways to increase margin!  Increase your Bill Rate, or  Lower your Pay Rate or Lower Your costs with Funding options/higher risk  Most people focus on one OR the other  Just about everyone has bad habits regarding pricing  One must focus on BOTH
  23. 23. Objectives of Pricing  “To maximize your margin/spread by obtaining the highest possible Bill Rate and the lowest possible pay rate, under the circumstances”  “Under the circumstances” are the key words  Every candidate and every job order is different and should be priced that way!
  24. 24. How to Price on Existing Perm Orders  The key is to make the same you would make if you did a perm/direct hire placement only!  For Example: Assume $15,000 Fee (60k at 25%)  Sell a candidate in for a 3 month contract and then convert to perm  So, 60k candidate need max of $29/hour pay rate! ($60,000/2080 hours year).. MAX!!! Contract or “foot in door” should be less (see more on how to raise or lower pay rate later)  If you can bill client $50/hr (72% markup example), figure out how much you make this way based on funding!  If $29/hour is pay rate, and if 122% is cost, then you make $14.62/hour  $50 less total costs of $35.38 ($29 plus 29 @22%)  14.62/hour profit at 40 hours per week=$585/week or 7,600 profit over 3 months or OVER $30,000 per year!  So, if they want to convert/hire at 3 months, you can charge a conversion fee of $7,400 to arrive at 15k.. Or just agree up front to give it away for free at 3 to 5 months (why? It’s much higher likelihood of conversion than a sendout)
  25. 25. Or doing the same with Gm%  Bill Rate is $50/Hour  Pay Rate is $29/Hour  Signature Charge is 22% Hourly Margin is thus: Bill Rate: $50 Less PR: $29 Less Charge: $6.38 ($29@22%) Total Margin per hour: $14.62 Total Margin %: 29.24% ($14.62/$50 )
  26. 26.  Total Margin %: 29.24% ($14.62/$50 )  Billings at $50/hour:  Weekly: $2,000  Quarterly: $26,000  Annually: $104,000  Your Gross Profit at $50/hour  Weekly: $584.80 ($2,000 @29.24%)  Quarterly: $7,602.4 ($26,000 @29.24%)  Annually: $30,409 ($104,000@29.24%  You can insert ANY bill rate or markup you wish and play with this. You can use the DynamicSale Pricing Calculator to help!
  27. 27. What else can you do?  Back into the length of assignment by the $15k fee to arrive at bill rate (especially if they want free conversion)  $15,000/520 hours (13 weeks @40 hours per week) is $28.85 profit you need per hour  If you know your pay rate is $29 we know your costs are$35.38 cost ($29 X 1.22%)  Bill rate needs to be $28.85/hr required/calculated profit plus pay/costs of $35.38= $64.23  If this rate is too high, you can agree on a lower rate now but charge a conversion fee of some sort at 3 months.. Or, back into the rate you need to make the perm fee after, say, 4 months!
  28. 28. What ELSE can you still do?  Anything!!!!! You can just make contracting profit at a much lower bill rate using other methods discussed earlier and then charge a 10%, 15% or even 25% conversion rate….  This method should be for normal contract jobs.. The previous example was specifically for EXISTING perm jobs that you are trying to earn the money a few different ways!  This can also be used for newbies to try to determine a start for a bill rate. Your candidates will help you determine a normal pay rate. Clients should always be asked about their Bill Budget (Remember to use the previous slides on separating pay and bill and what makes then go up or down)  It is most common to earn MORE when you make temp rev and a conversion fee! Many times, they won’t convert the candidate and you still get the temp profit!! So, worth it to price less at times!  You also work on the perm job with perm only candidates at the same time
  29. 29. Reasons For Openings  Using contractors in Lieu of Perm hires (no intention to hire perm)  Hiring Freeze  To SAVE money (benefits, UI, etc)  Maternity & Other Leaves  Projects  Backlog (normal or due to slow perm hire)  Really a Perm opening but using contract to hire to mitigate hiring risks or costs  Seasonal Hires  Regular closes or high volume processing
  30. 30. Marketing Ideas  Selling an unemployed candidate as a temp to a client to “Try before they buy” • Puppy Dog Close • The Best “interview” is where they can see the “product” in action! • Interview stink! Great Interviews SOMETIMES= Great Candidates • BAD interviews SOMETIMES=BAD candidates • Great interviews SOMETIMES-Bad Candidates • Bad Interviews SOMETIMES=Great candidates
  31. 31. Marketing Ideas  Call on ads- Put temp in to slow down the backlog  Advertise this on all websites, brochures, etc for GRAVY money!  Sell any UNEMPLOYED candidate to ANY order (contract or perm) and to any client (warm or cold)  Skill market contract just like perm!!!!  Remember, clients fill contracting orders through agencies with the best AVAILABLE at the time and not the best (like perm).. As such, any great unemployed candidate is likely better than what they have  How much are you LOVING
  32. 32. Sell BOTH Solutions!  Always TRY to convert Temp orders to ALSO perm  Again, only best available at time was used to fill temp spot!! Not only can they see better temps out on OTHER assignments, but ALSO the best EMPLOYED candidates that can’t temp!  Always TRY to convert PERM order to ALSO Temp
  33. 33. Any Questions?