Writer : James Paul
I had an interesting meeting with one of my new clients recently. They are a small-medium sized commercial construction company that turns over $20M a year. The owner had been struggling finding good estimators and project managers and had hired several people in each position over the last 2 years who had left, or been moved on for a variety of reasons, and some of them were candidates I had come across in previous years and found unsuitable from references and checks. I had recently recruited him a good estimator and we were reflecting on the value in him paying a recruitment fee versus recruiting the wrong people himself. After discussion we agreed the following:
Construction Business $20M turnover:
- A good estimator responsible for $10m in projects per year- once completed effectively possible revenue for the company ~10% : $1M in profit
- A Good project manager delivering $10M per year – delivered effectively ~10% : $1M in profit
Previously as a result of poor hiring decisions even though he was turning over $20M his profit margin was well below expectations due to various cost blow-outs on estimates and contractual and delivery issues which ate into project margins
We agreed a good estimator and a good project manager could both provide a $2M profit injection on his bottom line
Recruitment Cost: 12% of $120,000 salary= $14,400 x 2 =$28,8000
He was someone who could not understand the real value of using a recruit agency and paying fees until he saw the real cost of doing it wrong.
Being a builder he was pleasantly surprised about the actual cost of engaging my services versus potential revenue gain and commented he wished this ratio was possible in other areas of his construction business!
Keeping in mind not all recruitment agencies are able to provide this level of service. They must provide:-
- Long term industry-specific experience
- Relevant client references and industry recommendations
- Well-presented and well researched candidates
- 6 month replacement guarantee
We agreed it will be interesting to look at his profit next financial year and hopefully see a sizeable increase.