For a recruiter who only works direct-hire, monthly cash flow can be wildly unpredictable. As if that isn’t bad enough, more companies are asking recruiters to reduce their fees in this economic environment, and many recruiters fear that will not change after a recovery. There just isn’t much of a financial safety net if your only focus is direct-hire.
On the other hand, recruiters who incorporate contract staffing into their business model enjoy consistent cash flow because they earn money for every hour a contractor works. Since the average contract placement lasts between eight and nine months, recruiters are guaranteed eight or nine months of predictable cash flow.
Here is a real life example of the income process for a recruiter who placed a contractor at a financial institution in New York:
- contractor submits her time sheet for 40 hours on 9/20/10 (Monday).
- The client company is invoiced for $3,200 (40 hours x $80 per hour) on 9/22/10 (Wednesday).
- The contractor is paid on $2,200 (40 hours x $55 per hour) on 9/24/10 (Friday).
- The client pays the invoice amount of $3,200 on 10/8/10 (Friday).
- The recruiter is mailed his income check of $382.40 (40 hours x $9.56 per hour) on 10/8/10 (Friday).
The above example is just for one week, but $382.40 per week equals $1,655.79 per month of predictable cash flow (4.33 weeks per month) for that one contractor. Think about the cash flow potential if you had 10 contractors out! That would be $16,557.90 per month. That’s a great cash flow safety net for any recruiter!
