As best we can determine, approximately 35-40% of our readership is comprised of solo practitioners. About 90% of them work from their homes with the other 10% working from executive suite setups or small offices. Most made the decision to go solo after spending several years working for a more traditional multi-consultant firm. The average tenure as solos for this group of survey respondents is 4.5 years and the average overall tenure in the business is 6.4 years.
The averages shown below represent composites of the 310 solo firms who responded to this survey.
Total Cash In: $216,000
Consultant Compensation: 0.0%
Office Payroll: 3.5%
Taxes-Payroll & Associated: 1.1%
Office Expenses: 3.7%
Professional Services: 4.8%
Splits (Amount paid to others): 5.2%
The average solo practitioner in this survey made approximately 13 placements a year with an average fee of $16,615. Although many believe that solo practitioners operate with lower fee percentages and, in some cases, this is true. Lower overhead allows some solo practitioners to charge less. But in many cases, because the solo excels in a particularly narrow niche, they are able to charge a higher percentage fee. The revenue reported by respondents went from $85,000 to several in the $500,000+ range. One, specializing in the biotech field, reported an income of $765,000 working only four days a week, three weeks a month. Quality of life and freedom from the more normal workaday regimentation seems to play a big part in the solo world. But one said, “It’s great to work from home, but unless you watch it, you’re also always at work.” This is a subject we have covered in previous issues.
As solo practitioners, no consultants were employed. While many considered themselves to be consultants and paid themselves a regular paycheck or percentage of cash-in, for the purposes of comparing apples to apples, we deleted solo salaries as a computable item since they all come out of profit anyway.
Office Payroll & Taxes
Most solos either operate alone or with a temp or a part-time assistant (often a spouse). Most of those we surveyed were completely computerized and functioned as their own administrative staff utilizing various software products to perform the daily grunt work. Major projects (such as occasional promotional mailings, etc.) were usually farmed out.
Payroll taxes reflect a percentage of that amount paid to the administrative assistant – not the taxes owed by the practitioner who will normally pay estimated taxes based upon anticipated earnings.
This normally represents health insurance and self-funded retirement programs (SEPs, Keoghs, etc.) but can also include cars, club memberships, etc.
Even solos occasionally advertise in traditional venues, send direct mailings, or use PR programs to keep their name in front of potential clients and candidates. This figure has jumped considerably since our last such survey due primarily to costs for creating and maintaining websites and posting jobs on various Internet sites.
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With only two ears, two eyes and one mouth, most solos rely on professional association memberships, networks and a wide variety and range of subscriptions to keep on top of their areas of activity. We also include the costs for such memberships in things like Monster.com, Headhunter, et al.
This includes such items as printing, postage, office supplies, equipment of all types (computers, printers/cartridges, fax machines, telephones, DSL/Cable, Satellite modems, etc) and is used by many (who don’t use the Miscellaneous grouping) as a catch-all category.
Legal and accounting fees are lumped here as well as training seminars/materials for those who participate in such activities or purchase such products. Also included are costs for free-lance researchers, who are increasingly used by solo practitioners.
Solos who work out their homes or out of an office are split about 90/10 in this survey. The percentage shown is for those who work away from their homes. Although some claim a home office deduction this is frequently more trouble than it’s worth.
Ours is a phone/Internet-intensive business and this has always been one of the higher percentage items. We have recently added Computer Access charges to this category to reflect the increased usage of the Internet as a tool. Some lump this together under Office Expenses.
Recruiters (especially solos) are great at making every pleasure trip somehow tax deductible and every lunch or dinner a “business meeting.” As Gerard Roche, Chairman of Heidrick & Struggles once said [paraphrased], “Everybody I meet is a tax deduction since everyone is either a potential client or candidate.”
Most solos are not franchisees (where split business is a regular happening) but almost thirty percent of those surveyed belong to a formal network or have informal relationships with other recruiters to work split business. For many, this percentage of cash-in is significantly higher than shown above but the above figure represents what was paid-out in splits, not what was received (which is reflected in the cash-in figure).
Everything that won’t fit elsewhere is crammed into this category, from Cable TV charges (“I occasionally use information I get from watching CNN or MSNBC”) to the Orkin Man (“I don’t want cockroaches or silverfish munching on my files.”) Personal creativity can bulge this item as long as you can sell it to the tax authorities.
For solos, this figure represents the “This is what I get to keep and pay taxes on if I haven’t successfully hidden it as a business expense elsewhere” category. This is about the same as previous survey results.
As we mentioned last month, we will probably hear from many who say these figures are specious . . . and, for them, it may be true. That’s the paradox of averages. Different accounting systems, priorities, mindsets and philosophies may create strange and diverse results. While they may not be a standard, they are certainly a starting point . . . perhaps a benchmark.