Let’s keep this simple.
Your agency must survive. Obviously.
So that you don’t lose jobs, people, money, pride, your company, your house.
Your accountants, advisors and colleagues are all throwing numbers and predictions and a myriad of ‘scenarios’ at you.
Cash is disappearing.
I know. I know.
Take back some control. So you know what the f*** you are dealing with!
Just do this. Now.
An excel spreadsheet will do nicely.
Six columns. Six months from this month. Across the page. (Look, I created an example ‘Savage Spreadsheet’ for you)
- Create a row (1) for your predicted Permanent Placement Gross Profit. Six numbers. Base them on your pipeline of current open, fillable orders. Factor in your prediction of job flow, based on what you know about your market, and your sector, and your Consultants BD activity and capability. Yes, I know. It’s a guess. But it’s all we have, and it’s an educated guess, right? And you are going to update it anyway. Daily.
- Next row (2) is for your Temp/Contract Gross Profit (or net margin). You know your current contractor/temp numbers and margins per week. Look at your starters coming up (Hope there are some!). Look at your finish dates for each contractor. What likelihood of extensions? BTW if you don’t know if there is a chance of a contract being extended, that’s bad, and that good. Bad you haven’t done this already, but good because your recruiters should call both client and contractor and negotiate an extension. Now! Budget for early finishers. Some will finish early, right? Again, predict your temp numbers, hours and net margin for six months. Be conservative.
- The third row (3). Any other Gross Profit you have. (Training fees, Consulting fees, temp to perm, whatever it is). DO NOT include government stimuli like Jobkeeper in Australia. That is a bonus. You want to be profitable without government grants because as sure as night follows day, they are going to be taken from you one day. (Soon!)
- Next Row (4). Total Gross Profit. For the next six months. (add up the three rows above).
- Next row (6) is total predicted expenses, after all your cost cuts and salary reductions. Your latest monthly P&L will give you a good idea. Get it accurate. Take into account cost savings that have not hit the P&L yet.(and any impending expenses too!)
- Next Row(7). Take expenses away from GP for the six months.
What’s the result?
I will tell you.
The result, to be found in those six numbers, is your future viability.
If it’s ongoing losses, you will run out of cash and go bust.
And even a mediocre accountant will be able to tell you the exact date of that event based on your current cash reserves, and the simple little spreadsheet you have just done.
Now add a row below your Profit/Loss line. Add the government stimuli. Does it push you into profit? Great! I mean that. But you are on borrowed time.
You are betting your future on the hope that your GP increases before the stimulus is revoked.
Is that ok with you? Sleep well?
Go back to the expense line. What else can we do? Reduce whatever you can without smashing the fabric of your business. You might already be on the bones of your bum. Many are. So focus on GP. Can we get it up?
Your goal is to get the GP line to equal one dollar more than the Expense line. Every month. $100,000 more would be better, but $1 will do
And then, collect your invoices. On time. Which will get increasingly challenging. The issues facing our industry will affect most others too. We can expect slow-paying, fee haggling, bad debts, debtor day blowouts, as well as insolvencies from clients.
All of this threatens to smash your little Savage Spreadsheet, even if it shows a profit on the P &L line. Because its only a placement when you get paid right? A cool idea I have seen recently is to get a finance company to pay your permanent invoices immediately. and then offer your clients six months to pay. Offered by APositive – Workforce Finance
Because that’s survival. Profit. Then Cash.
Re-calibrate your spreadsheet daily. Track job orders. Track the progress of each order. Track temp starts and finishers.
A couple of my clients are in IT and other areas which are doing pretty well, to be frank. Their profits have been unimpacted. I still make them do this exercise. Because this is a fluid, dangerous situation. Nothing is for sure.
Except that it will be a long journey out of this shit-storm.
And you must survive.
I provide ideas on all the above questions and many more. I am adding to it almost daily.
I hope it helps you.
We talk about this and much more in my new Webcast. THRIVE
Riding the Recruitment Recovery
Do not miss it.
- Posted by Greg Savage
- On June 30, 2020
- 0 Comment