How you know when you’re in the RIGHT Recruitment Market (Direct Hire/Perm)
As a headhunter and agency recruiter, the whole point of your job is to maximize your income potential. The majority of us who do this work have a strong financial drive, which is why we sacrifice our sanity, time, and effort to invest into this crazy career of recruitment, a demanding sales job at the end of the day.
When you work in the RIGHT recruitment market, your potential to earn commissions is highly increased, making a tangible difference in your reward, thus the quality of life and future trajectory of your professional career and personal situation improves.
Conversely, if you’re in the WRONG recruitment market, you’ll waste time spinning your wheels, working long hours for low ROI (Return on Investment) of your mental energy, stress, and time. You’ll probably be so burnt out of your job that you’re making not enough money in that you’ll swear to never work at a recruitment firm again.
Here are important factors to consider to determine if you’re in the RIGHT recruitment market (perm/direct hire perspective):
#1. Your direct hire fee should be at least 20-25%, up to 35% if you’re really in a great market.
If the need for external agency support in your market is high, your fee will usually be at the very minimum 20% for larger Fortune 100 firms and 25% for most other firms. If you can’t command those rates and instead have to mess around with 10-15%, either you work (1) At a poorly-performing firm (2) At a mom-and-pop shop or independently (3) For a leader/firm who has no long-term strategy to grow or team to feed or (4) A large recruitment firm that makes money/competes solely on volume and pricing.
Or, you could also just not know how to negotiate rates well (another problem you’ll need to solve regardless of market). Either way, if you can’t command at least 20-25% rates, you end up working a LOT for a little bit of money, especially if you’re an employee. After your company takes their lion’s share of your production, you won’t have much left per deal.
#2. Level of hire matters.
In addition to the rate for your services that you can command, the level of hire directly influences your billing production potential. For instance, if you work low-level roles all day, it could be again, a lot more work for a lot less money simply due to math and the amount of hours available for you to work. All else being equal, if you do the same amount of deals, but the compensation/seniority is higher, it’s obvious that you’ll make more money working on higher-level salaried roles!
The only saving grace would be higher volume of jobs if you must stay working on lower-level positions; however that breeds new problems: organization, time available to do your job, and the level of focus. Most firms who have their employees running around recruiting junior staff also don’t provide a niche approach, so not only do you have to service lower-paying jobs, you also have to service many TYPES of roles, losing the ability to at least make up commission opportunities with economies of scale – double whammy!
#3. Competitive forces.
Some markets are very hot; many recruiters flock to those markets. If your competition is smarter than you, monopolizes the market faster, and just has a better system altogether, you may lose to them. Furthermore, you’ll lose valuable time trying to take them out when simply you can’t. Thus, carefully monitor the competitive landscape by asking your clients and candidates who else is servicing your market and what are their experiences are like.
Only then, you can get closer to the core question you’re trying to answer:
Are you on the right market that has low competitive forces where again, you can command respectable and sustainable rates?
If not, then you’ll have work to do! Either, you need to get better than your competition from a work ethic, skill level, pricing (risks here!), and market penetration standpoint. Or, you can exit the market and find another one to dominate; one that doesn’t house formidable competition that consistently robs you of deals.
#4. Is your market Candidate dry?
As a permanent full-desk recruiter since I was 23, I’ve always billed from $330k-$700k+ a year simply by operating solely on candidate-driven markets where candidates were scarce. The minute any market switches to being more client-driven, I’ll be the first to exit that market. Recruitment revenue is only realized when your candidate goes to work and successfully completes their rebate period. Thus, ironically, while your clients pay you, you don’t really get paid until the candidate goes to work and succeeds there.
Hence, what I realized is when you focus on generating the top candidates more than just being client-driven, you’ll make more $ long-term. If your candidate isn’t happy with your services, doesn’t get a good offer, is treated roughly by you or your client, and worse yet, tells their friends about you, then you’re essentially out of a job.
The trick is to not only service candidates well, but to focus on the TOP level of candidate, which requires you to be a great recruiter. Furthermore, if the number of top candidates are relatively scarce, then your opportunity to make money increases significantly – this minimizes the competition from internal recruiters using job boards or other means to fill your roles.
TIP: I’m not saying neglect your clients. Of course, the default expectation of top headhunters is that they conduct themselves with integrity, steadiness, and a strong moral code of ethics of how you curate your business from both ends. Which clients do you allow to represent your offering? Which candidates do you allow to represent your caliber of “product”? Be selective and demanding of both.
Remember: The best candidates only want to work with the best headhunters.
Game recognizes game.
If you suck at your job, stumble, stutter, and don’t know basic things about your market or career advice, NO decent candidate will take you seriously. You’ll end up attracting the same caliber of talent you are! If you’re great, you’ll attract great people. If you’re not, you’ll end up attracting B tier talent, hurting your chances of placing. Once you allow B-players into your network, you’ll start running a B-tier business, so be careful about your standards.
While your market doesn’t automatically make you a top-biller, it definitely helps improve your odds. Think deeply about your business, your role, your strategy, and your plan to bill. If you don’t see a positive future for the level of work and effort you’re investing, then it may be time to consider a new role, a new market, a new company, for a better boss, or if you’re style is more suitable to speed rather than quality and depth of candidate market penetration, then perhaps consider recruiting for temp roles.
Get in touch with my team at DG Recruit to speak with us about opportunities to move into the right market, right firm, and right commission plan in US nationwide, remotely, or worldwide!