After my Dad sold his interest in Wald Research, a New York engineering company in the mid-1950′s, he couldn’t find a job despite a masters degree from Stevens and what I would think was some solid experience. Such was the suspicion I guess during that conformist era of U.S. history of someone who operated outside the box.
After months of job searching and with his third child on the way (yours truly), he grabbed onto the only opportunity he could get. You guessed it – selling staffing for a company called Design Service which had to have been one of the first technical staffing companies of its kind. Anyway, he went around opening offices and selling staffing contracts for this firm and later went on to do the same thing for Manpower. He traveled a lot, an awful lot, and visited many staffing companies and branches around the country.
I have a lot of stories that he told us about those travels. One is that he used to say that he could walk into a staffing operation and guess after a few brief minutes their gross profit percentage within a point or two. I’m pretty sure he used his gut in making these estimates and not any empirical formula, so I thought it would be fun to try to put some method to his madness.
Try my Gross Profit Estimator and see how well it applies to your operations:
Start with 20%.
Walk into the branch. Immediate high-touch greeting by receptionist: add 2% (to the initial 20%). No immediate greeting, no change. Last living soul appears to have moved to the competition sometime last year: subtract 2%.
The owner or founder is: Actively involved in the operations side of the business, i.e. customer relations, recruitment, etc – add 1.5%. Passively involved – no change. Intensely studying beach resorts in southern Florida – subtract 1.5%.
Inspect the furnishings of the office. Clean and well-maintained. Add 1%. Clean but seen better days, no change. Dog turd on front stoop, subtract 1%.
Phone the branch on three different occasions (on three different days at three different times, etc) and record the number of rings required for a human response. Score as follows: less than two average rings, add 1%. More than two, no change. Voice mail hell, subtract 2%.
Talk to the branch manager and ask her what the main goal of the operation is. Find great talent for clients: add 2%. Fill jobs: no change. Branch manager is busy preparing for upcoming wedding and can’t make the time to talk to you, subtract 1.5%.
Talk to the VP of Sales. Ask how many times her comp plan has been changed in the last six months. Comp plan not changed, add 2%. Changed once or twice, no change. Changes every time financial results are released or CFO reads a new business book at Barnes and Noble, subtract 1%.
I tried the test on some of the staffing companies I’ve visited recently and found it good to within two percentage points. I’m sure I’m missing some things and, of course, actual numbers will vary based on percentage of direct hire business or high-volume industrial business. But it’s a start. Let me know how it works for you!