However, some businesses did not survive 2009 and many may still not see the end of 2010 in their current form. Nonetheless there are some positive signs of profitability returning to the sector, according to BDO’s review of the latest outputs from Recruitment Industry Benchmarking (RIB). The losses incurred during the first half of last year meant that by the half year operating profit as a percentage of sales was standing at an overall deficit of nearly 1%. Operating performance at the same time showed profits breaking even; therefore, believing that you would be able to record a profit for the year was viewed as very optimistic.

However, profitability slowly began to return and on a net basis this has recovered to the extent that those losses in the first half of the year have been turned around and a respectable profit will be recorded for the year.

Sales and margins were significantly reduced during 2009, so returning to profit has come because recruiters have realigned their cost base. Some of these cuts will have been directly related to volume, but to recover profits during these economic times can only have resulted from ’cutting the fat’ in the cost base.

Unsurprisingly, the major cost being cut related to people, with more than 25% fewer employees in total in 2009 than in 2008. Additionally, the focus has moved to employing fee earners and the split of employees has moved from an average of 72.6% to nearer 74% of staff being fee earners.

Non-essential costs were also slashed: Christmas parties may not have been as lavish; offices refits or moves were deferred; and there was a general curtailment of entertaining budgets for both staff and clients.

These are the obvious cuts to make but more proactive recruiters are likely to have taken the opportunity to make structural changes to their cost base that will not creep back up as the economy begins to grow again.

Outsourcing non-core functions is often spoken about but is rarely executed as there are a host of reasons to ignore the benefits - the main one being that “we are too busy”. Now is a perfect opportunity to review working practices in the office and look for the opportunities to reduce costs without affecting client service.

Three top tips for recruiters looking to cut costs are:
1. Review timesheets and invoicing processes
2. Use more efficient methods for candidate/CV management and matching
3. Cleverer use of advertising and of the internet
These three areas usually tie up significant resource and funds or lead to bottlenecks in a recruitment process and they could ultimately cost you money. Reviewing and re-engineering these areas should release both financial and operational resource that could be put to much better use in your business, increase your capacity to fulfil more roles and ultimately increase your operating profit.

Recruitment Industry Benchmarking (RIB) provides its members with bespoke monthly comparisons of their performance on key industry

• Christopher Clark, Corporate finance partner, bdo
• Crawfurd Walker, director, recruitment industry benchmarking

Key Indicators

• Temporary margins have reduced from an average of 19.3% during 2008 to 18.6% for 2009
• The ratio of invoice value to placement salary percentage on permanent placements has reduced from an average of 18% during 2008 to 16.3% for 2009
• Combined revenues of temporary and permanent placements were 25% lower in 2009 than in 2008