SI Review: June 2014

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Research Report: Where Do You Stand?

Easy tools for benchmarking your staffing firm against your competitors

By Ziv Tepman

As a business leader in the staffing industry, it can be tempting to compare your company’s performance solely to what you have achieved in the past. This is the lowest hanging fruit because the data is so easily accessible to you. However, setting informed goals means comparing your results and operational metrics to how your peers are faring as well — and regularly.

You may be hitting your internal targets, but benchmarking against other staffing firms can serve as a reality check and an early warning sign in case you are not keeping up. Where you rate low, you can investigate underlying causes, develop an improvement plan and monitor the outcome of your efforts. Two easy tools for benchmarking your staffing business are Staffing Industry Analysts’ monthly Pulse Report and semi-annual Staffing Industry Benchmarking Consortium (SIBC) Report.

The Pulse

Every month we survey hundreds of staffing firms of various sizes on how their business performed in the most recent month. Firms share their year-over-year and month-over-month revenue growth broken down by staffing sector (temporary staffing, direct placement, and retained search) and skill segment (such as office/clerical and finance/accounting). It is valuable to compare, on a monthly basis, where your firm’s top line growth falls relative to that of your peers.

We calculate the median, 25th percentile, and 75th percentile of the year-over-year and month-over-month revenue growth reported by participating firms. If your firm’s growth within your skill segments is falling above the median on a regular basis, you are effectively keeping up with your competition. If you are exceeding the 75th percentile on both a year-over-year and month-over-month basis, you can rest assured that your firm is a top performer. Conversely, growth results at or below the 25th percentile over multiple periods should be a call to action — adjust your company’s growth targets accordingly and identify why you are falling short of your peers.

The Pulse Report also displays historic trends. Achieving revenue growth in line with your competitors in a particular month may not be sufficient if the skill segments in which you compete are seeing acceleration while your growth remains constant. Do a side-by-side comparison between your company’s monthly growth trend in each skill segment with the trends in the Pulse Report and identify any significant divergences. Other trends captured in the Pulse Report include new orders, bill rates, and sales and recruiting difficulty.

While the Pulse Report can go a long way in helping your firm stay in tune with the competition, digging deeper reveals more.

The Consortium

Twice a year, we ask staffing firms to share more detailed data from the prior six months and from the year-ago six-month period. From the data points they provide, we can compute key metrics that can serve as outstanding benchmarks for many aspects of your business. Like the Pulse Report, this report details 25th percentile, median and 75th percentile values, and compares current results to prior-period results. On the financial side, the SIBC Report allows you to benchmark your gross margin percentage, various operating expenses as a percentage of your revenue, and EBITDA as a percentage of revenue. Even if the Pulse Report reveals your top-line growth to be on par with your competitors, if your gross margin is falling below the 25th percentile, you may not be containing temporary worker direct costs as effectively as your peers. Similarly, if your marketing and advertising expenses are running rampant compared to the industry as a whole, this may indicate you should take a more cost-effective approach to promoting your business.

The SIBC can help you dig a little deeper. Consider breaking down your financials into per-employee metrics such as revenue, gross profit, and wages and benefits per employee, and comparing them to SIBC results. How much profit is each of your employees generating? Are you paying them enough? Is your staff turnover higher than that of your peers? Some simple arithmetic can reveal invaluable insights into your business. Other operational metrics covered by the SIBC Report include weekly temporary worker hours served per internal employee, average number of days to collect revenue after a sale, and a variety of others. Identifying where your firm falls along these dimensions can pinpoint operational shortcomings in a way that financial benchmarking alone cannot.

In this information age, the more data you have, the better equipped you will be to guide your staffing business in the right direction.

For more information, contact member services at (800) 950-9496.

Ziv Tepman, research associate at Staffing Industry Analysts, can be reached at ztepman@staffingindustry.com.

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