Ask Barb: What Size Firm Is Best?

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Oct 31, 2012

Dear Barb:

I’d like your opinion on the perfect size for a blended firm. I’ve downsized to myself working the clients and two recruiters working candidates in the past couple of years. I’ve been as large as 25+ in the past. It seems the big guys are getting these national contracts which are starting to squeeze the smaller firms out. Should I stay where I am, or hire and build again?

Frank Z.

Plantation, FL

Dear Frank:

The answer depends on your exit plan. If you intend to sell your company in the future, the firms that are valued the highest are blended models that are larger in size than your current firm. If you are not positioning your firm to sell, you can create whatever model provides you with the lifestyle you desire.

I think it is a wise decision to hire when you have job orders or contracts slipping through your fingers because you don’t have the manpower to fill them. You must also have the budget to hire someone, so you don’t jeopardize your business. Put minimum standards in place to guarantee a return on your investment from this new hire.

Another issue with your current business model is your business is on your back. You are the only person working with the clients. You have to ask yourself, what would happen if something happened to me? If you intend to sell your business in the future, your personal production can’t represent more than 25% of the revenue unless you want to go with the sale, which rarely works.

Regarding national contracts, you are correct that large firms land national contracts. When they are not able to fulfill the demands of these contracts, companies then turn to independent boutique firms who specialize in a niche. They will pay these firms higher fees and margins because they specialize. As a boutique firm, it is wise to develop a reputation and network in a specific niche vs. being a full service or generalist type of firm. There is plenty of business out there for staffing and recruiting boutique firms.

Barbara J. Bruno, CPC, CTS

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