Confessions of a Recruiter

Uncovering the Million-Dollar Myth in Recruitment | Episode #111 SNIPPET

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Speaker 1:

So, let's say, a consultant, they're building a desk from scratch. They spend three years building their contractor desk from zero to a million dollars GP. Take out their salaries, for example, and let's say that, you know, maybe the true cost of that person could be I'm just going to make this up half of that. And so what they're actually doing is they're creating a million dollars GP, but the equity is essentially what we're talking about here. The equity that they've created for the business might be two, three, four million dollars in equity. And so I think what a lot of recruiters perhaps overlook around just thinking about income is the equity that they can build in a contractor book, similar to a house where you sit on your house, you do a bit of a reno, you jazz it up a little bit. It's worth 10% more in a year's time. Same type of outcome for a contractor book whereas, yeah, you're getting cash, you're making a bit of profit, but you're actually building more equity than you're making in commissions that you're earning. So it's a super powerful way to build your future income and your future net worth if you're building your own contractor book. So really interesting.

Speaker 1:

Okay, so we understand what, like, the multipliers are If you're making a million dollars in your business, you could sell it for a 4X multiple. You might get someone to pay you $4 million lump sum and you walk away from your business. What an amazing Very rarely lump sum, yeah, yeah, yeah, but hypothetically I mean, if you find someone, call us, yeah, a few people would like to hear that. Yeah, if you're making one mil net profit or EBIT and you get a 4X multiplier, happy days, someone will give you $4 million. There's obviously some nuances to that, but you know that's just a general kind of ballpark. So why would someone pay $4 million, $3 million, whatever the multiplier is for someone's contracted book? Like, what is the strategic advantage? Particularly, it depends on the company, right? So I think the acquirer is a massive part of that, and if you're a large recruitment company buying another one, you'll sit there and go well, I've got that contracted book. Let's say they're solid contractors in government.