Think Units, Not Dollars

Daily I receive calls from owners and managers who ask the same question:

“What billings goal should we have for our consultants?”

This is a fair question. As a prudent business owner, you need to understand the billings/cash-in numbers required to support your operational objectives. This includes determining your monthly operational break-even point or “nut,” as well as calculating revenue projections and profit margins. From that point you can establish minimum and targeted production figures for each position in the organization and for the organization as a whole. However, in managing your staff, focus on unit placements first and dollars billed/cashed-in second (number on assignment, length of assignment, and gross margin for temporary staffing).

Most of the experienced producers in our industry, if allowed to concentrate only on dollars billed/cashed-in, reach a production comfort level somewhere between $150,000 and $250,000 per year. With an across-the-board average fee of $19,000 to $22,000, that equates to less than one placement per month.

A specific example is an experienced consultant I spoke with last week who has a goal of billing $250,000 this year. However, his average fee is $32,000. That means he needs to finalize only eight deals/placements this year. Although the overall billing numbers do not look bad, consummating eight placements within a 12-month period of time means this consultant will be continually walking the fine line between success and failure. If one or more of these deals do not come to fruition, his overall billings number shrinks dramatically.

As an industry, we tend to recognize high billing numbers, and to some extent we should. However, as owners, managers, and producers, a more accurate picture of our capability is reflected in our number of unit placements.

In those staffing firms where the focus is on unit placements, minimum individual performance standards generally align with the following numbers:

Professional Search & Placement

By the end of their first year, producing at the minimum rate of one full unit placement per month.

By the end of their second year, producing at the minimum rate of two full unit placements per month.

Clerical and Office Support

By the end of their first year, producing at the minimum rate of two full unit placements per month.

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By the end of their second year, producing at the minimum rate of four full unit placements per month.

Calculate your average fee and multiply it by the minimum numbers listed above. How do you and your firm measure up? Remember, these are minimum numbers.

Focusing on unit placements and not just billing/cash-in dollars sets a performance standard that more accurately reflects competency, effectiveness and efficiency.

Operating with performance standards based on billing/cash-in numbers handicaps most staffing firms. In many instances, meeting these standards provide the owners and producers with a limited return for the investment of their time, effort and resource.

The first step toward realizing your full potential and that of your staff is to establish realistic performance standards. Basing those standards on unit placements allows the billings/cash-in number to adjust naturally based on your average fee. The focus is on achieving results, i.e. unit placement. The billing/cash-in numbers will take care of themselves.

As an additional benefit, having performance standards based on unit placements allows you and your staff to better understand the importance of effectiveness ratios and activity numbers. On a daily basis, these are the figures that really count.

If you are interested in learning more about the process for establishing, supporting, and surpassing performance standards based on unit placements, please let me know. Your questions and comments are always welcome.

Recipient of the Harold B. Nelson Award, Terry Petra is one of our industry's leading trainers and consultants. He has successfully conducted in-house programs for hundreds of search, placement, temporary staffing firms and industry groups across the U.S., Canada, Mexico, Australia, New Zealand, Russia, England, and South Africa. To learn more about his training products and services, including PETRA ON CALL, and BUSINESS VALUATION, visit www.tpetra.com. Terry can be reached at (651) 738-8561 or click to email him.

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