No matter how long you have been in recruitment, how junior or senior your role is, this chart is of compelling interest to you.

We are in a recruiting boom, with tight labour markets, talent shortages, and a massive appetite for hiring. As a result, it’s an excellent time to be a recruiter, and most recruitment companies are delivering all-time revenue and profit highs.

But therein lies the danger. We are making money, consultants are billing a lot, and the same old mistakes are emerging that I have seen over four decades of riding the economic and recruitment cycles

Back to the chart.

I was running this company, Aquent International, and as you can see through 2006, 2007 and 2008, we were making hay! Revenues were climbing rapidly, and profit was booming. Double revenue and GP (2008) in 3 years!

In the second last year on the chart (2008), you can see some of my mistakes coming to fruition. Revenue and gross profit were climbing, but operating profit (EBIT) was dropping. To me, it was readily justifiable at the time. I was investing for the future, more people, more offices, more technology, and more marketing.

When the Board in Boston quizzed me, my response was, “this is the investment phase. You will see a huge uptick in profit soon!”

And I was sincere too. I thought that would happen. It was logical to an extent, but it was hubris too. I believed I could do no wrong. I felt the market would keep going. So even though I had been through this all before and seen the dips, I somehow pushed it to the back of my mind.

“All the profit was going drop through in time, trust me….”

I literally uttered those words.

Then the downturn hit, and those of you with a few grey hairs will remember it very well – and look what happened to Aquent International and me.

Our revenue dropped by USD 50 million, and our profit went back $ M12 million, plunging us into a massive loss.

In one year!

(BTW, all this is in my book The Savage Truth, and published with the permission of Aquent, and numbers taken from their audited accounts, with their permission)

I found some of our leaders were not up to leading in a downturn. Many of our recruiters could not sell. I had bet too heavily on permanent revenue in some markets. Many of our client relationships were shallow.

All the classic mistakes! And I made them.

Again!

Owners and managers must focus on building a sustainable business that is highly profitable in the good times and yet highly resilient in the bad. Don’t be seduced into all the old mistakes: rising costs, shallow-skilled recruiters, and underinvestment in tech and process.

Please, my recruiting friends, heed my words. Challenging times are just around the corner. We will go into a significant downturn sometime in the future. When? I don’t know precisely when, and if I did, I would be shorting the stock market.

But it will happen. It always does. Maybe 18 months, might be three years. And when it does happen, plenty of recruitment companies will be caught short and go under. Many recruiters will lose their jobs because they won’t have the skills and relationships to cope in a new market. And this is not just a management issue. I hear recruiters making blithe comments like ‘candidates are king. We don’t care about clients’ because we’ve got so many‘.

Well, trust me, that chicken will come home to roost. Soon (ish), you will be begging for a ‘candidate short market like we used to have’. Trust me; it’s a client-short market you really need to fear!

Owners need to be building a resilient business that can withstand a significant downturn in revenue with all the hallmarks that I’ve spoken about so often: multiple revenue earners, annuity revenue, a second tier of management, robust process, niche and network, foundation clients (It’s all in the book and on the Savage Recruitment Academy).

And recruiters? You need to hone your client-side skills. Think of it like fixing your roof while the sun is shining. It’s only going to shine for a while. Build deep relationships, build strong networks, hone your consulting and advisor game, guard your reputation and be very wary about assuming that there will be no downturn to follow this boom.

There will.

*************************************************************************************************************************************************************

Savage things you should get around

Subscribe to this blog

Read my book, ‘The Savage Truth‘.

Join the Savage Recruitment Academy

Connect with me on LinkedIn

Pick up my free eBook on Recruiter Productivity

Pick up my free eBook on ‘How to fill more roles’

************************************************************************************************************************************************************