By Steve Beckitt, Founder, SourceBreaker
Diversifying is not a new concept in recruitment. As an industry, we pride ourselves on our ability to perform a quick pivot so we can take advantage of a hot new market.
As the pace of change in the world accelerates, markets fluctuate and different industries rise to prominence, your ability to diversify successfully is going to be essential to ensuring your agency’s success far into the future.
I will be hosting a webinar with Dean Kelly on 23rd July at 2pm, providing real life insights into diversifying into new markets.
Dean successfully pivoted into a new sector and built the fastest start up to exit business, selling Kellis for £13.5m with a £2.2m EBIT in under 3 years of operation, going on to be the youngest CEO on the stock market running the parent company. All from a completely new market.
Before the webinar takes place, I’ve created three articles that cover the core areas to consider when moving into a new market. From identifying the market through to winning new clients and identifying new candidates.
First up, we’re looking at the 5 key things to consider before you take the leap.
One of the main advantages a recruitment business has is the relative ease and low cost with which it can take on a new market. Diversifying across sectors and skill sets increases the growth potential of your company and limits risk in times where one or more particular markets may be affected by a downturn.
The ease with which you can take on a new market is both a positive and a negative. It means that you can build up a presence in a new space, but so can anyone else. Recruiters are quick to catch on to a good thing and markets soon become saturated, so moving fast and moving first is a significant advantage.
As you know, recruitment is 90% the same whatever market you’re in. It doesn’t matter if you’re dealing with architects or engineers, tech or finance, banking or hospitality. The core skill set remains the same.
However, you will certainly need to learn a few things before you choose a new market, move into it and position yourself within it. With almost 45,000 agencies registered in the UK, recruitment is already a hypercompetitive space.
So where do you begin? How do you identify a good market to move into? And what are the first things you should learn about the market you choose?
There are five key areas to consider when diversifying into a new market:
- Candidate volumes vs jobs
- Average fees in the market
- The best companies to work with
- Skill sets most in demand
- Contract vs permanent
1 – Candidate volume vs leads
Think about what competitive advantage you can bring to a particular market. Why will you succeed ahead of existing suppliers?
Typically, the most profitable markets to enter and win big are niche markets with a shortage of quality candidates. Recent big success stories such as the Frank Recruitment Group and Phaidon International have achieved rapid growth by focusing on candidate short markets where their ability to identify hard to find talent has seen them win significant market share. Here, you’ll need to be confident that you can find an advantage in identifying talent that your competition can’t.
In a market with a strong supply of candidates, you’ll need to think about your speed to market in order to win. A race to the bottom on fees and running on tight margins may provide some success (though it’s not a strategy we’d recommend), but it’s a difficult model to scale and leaves little room for error in an economic downturn.
What can you offer the market that doesn’t involve a lower price? Services such as video interviewing are a proven differentiator to win both contingent and retained business, allowing you to compete with a more complete offering, rather than lower fees. At all times you should think about how you can ensure you’re able to deliver the available talent faster, and be first to identify opportunities to place them.
Automation in both niche and volume spaces is critical, as you’ll need to make sure you’re first to new talent and new opportunities in order to win.
2 – Average fees in the market
What are the fee levels in the market you are looking to enter? Is the space full of niche agencies all working at high fee levels or is it dominated by large players working for lower fees? Either model works, it’s just about knowing what the levels are and how you can differentiate yourself and your value proposition.
Misjudge your fees and you risk alienating your new market. If your ambition is to scale then whatever you do, avoid the temptation to price yourself lower than the competition in order to win. The companies that have achieved the most success in our industry have been the ones with the highest margins. They have ensured their product is better than the competition and justified the price with the value provided.
If you’ve switched from high volume recruitment to niche for example, the average fees will naturally be considerably higher. You’d be doing yourself a huge disservice by going in with high volume pricing and leaving revenue on the table. On the other hand, if you’re entering a high supply market and try and win with much higher fees without a discernibly different offering, you’ll find it hard to win business.
3 – The best companies to work with
Who are the emerging, comparatively unknown companies that have a demand for talent, but don’t have the typical hurdles that come with trying to break into a Barclays or Glaxo.
Seek out companies that have the means to pay a premium price for talent and need a lot of it fast in order to scale. Markets where there are a lot of companies that have private equity or venture funding are great spaces to break into, as they offer a wide pool of companies with money and the need but without the high barriers to entry in established markets.
If your chosen market is exclusively large enterprises, spend time uncovering the ones that don’t have the strict processes and internal talent teams that you’d expect. My best client when I was recruiting was a FTSE 100 FMCG company that you’d expect would have hard and fast processes. The opposite was true and they gave me all their network contract roles on exclusive at 25%.
Look for the companies that are not only hiring for a particular skill set now, but to fulfil a long-term strategy that requires multiple hires across the next year, two years and beyond.
Don’t get drawn into working with every company that will give you a job to fill. Far too often we see recruitment companies that have a long list of vacancies they’re spending time on, but the client gives little to no commitment, has a poor brand, won’t interview candidates promptly or delays processes.
Value your time and walk away from clients that don’t prioritise hiring. As tempting as it is to work every job in a new market, you can end up being sucked into wasting a huge amount of time on clients where you will either never fill their roles, or you spend so much time getting them filled that you’d have been better off spending your time finding better opportunities.
4 – Skill sets most in demand
What are the most in-demand skills within the niche? And what skills are going to be in demand in the long term?
You don’t want to spend valuable time building a great pool of candidates with skills that are dwindling in desirability.
An ability to spot which skill sets are going to be in demand next allows you to start engagement with candidates early, long before they are in high demand. Master this and you will find yourself far ahead of your competition.
5 – Contract vs Permanent
Are you looking to build up a contractor book or do you want to focus on permanent recruitment? Both have their own distinct benefits and drawbacks.
As we’re seeing now, having a strong contractor book offers a lot more protection in economic downturns. In the contractor market, the emphasis is on speed and will typically be far more job driven and require a harder sales approach. On the other hand, permanent recruitment will often be more candidate driven, where the ability to manage sourcing for multiple opportunities simultaneously is more important. Whichever approach is most suited to you and your team’s skill set, make sure your technology stack is set up to complement the approach.
Some markets sway heavily towards one type of recruitment or the other. It’s important to do your research and make sure you understand why before you decide to go against the norm.
The advice above should hopefully give you some good ideas on how to select your new market and set yourself up with the best chance of early success.
Next up, we’ll be looking at how to find clients in your new space and position yourself as an expert from day one.
Want to learn how to put these skills into practice?
Sign up to our webinar where myself and Dean Kelly will take you through the best practice guide on diversifying your recruitment market with real life examples on 23 July at 2pm BST.