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Add Contract Labor For Recurring Revenue

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Dec 26, 2012

Dear Barb:

I have heard you advise owners to add a temp or contract division, if they are only doing direct placements. Our firm does 75% contingency and 25% retained search. Since we have a retained search division, do you still think it would benefit us to add temp or contract?

Amanda H., Pittsburgh, PA

Dear Amanda:

If your exit plan is to sell your company to the highest bidder, it is wise to have a recurring revenue model. The temp or contract business is a recurring revenue model, which greatly enhances the value of your company.

Your current clients could be utilizing other firms for their temp or contract business because you don’t offer those services. This business could be slipping through your fingers.

If you do decide to add the temp and contract segment of our profession to your business, make sure you specialize in an area that provides you with the best chance of attaining high margins. You should also research third party back-office providers who can provide you with the entire back-office and payroll. I would suggest you talk to owners who have blended firms, and weigh the pros and cons before you make your decision. I’m just suggesting that you consider a blended business model.

Barbara J. Bruno, CPC, CTS

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