March 25, 2022
You have surely heard the old adage “Don’t put all of your eggs in one basket.” Old yes, but still relevant, especially when it comes to client diversification.
To better serve clients and grow the business, the trend in staffing has been to specialize. Although your staffing firm may specialize in one segment such as Healthcare Staffing or IT Staffing, it’s still possible (and critical) to have a diverse client portfolio.
Having a diverse client portfolio mitigates risk, allows you to grow your business, and puts more CASH in your pocket. Here are 4 reasons why you must diversify.
- Credit and Receivables Risks In staffing it’s common to say an order isn’t an order until it’s filled and billed. I would take that a step further and say, an order isn’t an order until it’s filled, billed, and collected. Uncollected receivables can have a significant negative impact on your business. Have a resource in place or use your funding company to assist with credit checks, assess risk, and establish reasonable credit limits for each client.
- Affected by an Industry Downtown – The great lockdown of 2020 hit the travel and hospitality industries like no other. Over the years we’ve certainly seen other industries touched by economic downturns. One thing to consider is, even if you’re staffing a recession-resistant industry, can you adjust if necessary, and can your candidate’s skills transfer to other sectors?
- Single, Large Client Loss – Losing your only client or a client that represents a significant portion of your total portfolio can be detrimental. Forbes suggests (especially for mature businesses) that no single client should account for more than 10% of your total sales. Other sources say no more than 20% of your revenue should come from one client. This may be challenging for a start-up or small staffing firm, but it’s a benchmark to strive for. Bottom line – It’s important to manage your customer concentration.
- Heavily discounted rates and additional service requirements – Often a large client will require a dedicated team member or demand a high level of reporting and resources. This can be sustainable if your portfolio is balanced, but it can be restrictive if this is your only client. Service and client retention are important, but it’s also vital to consistently allocate time for sales prospecting.
Check out these 5 Tips on How to Improve Client Diversification
- Analyze your existing client portfolio. Gather basic client information, determine evaluation criteria such as client size, profitability rate, invoice days outstanding, and then use a spreadsheet to assist with your analysis.
- Come up with a diversification plan. Will you add new skill sets, new geography, or grow market share in your existing space?
- Consider adding new solutions such as creating a Direct Hire program with a dedicated team.
- Set aside time each week for new business development – even if you don’t think you need to. Our first instinct is to stop selling when recruiting is tight, but that could be a poor decision. It’s essential to keep your opportunity pipeline moving. Align your sales efforts with your diversification plan, create a target account list, and keep selling!
- Consult with a staffing industry expert for diversification strategies to promote growth.
Payroll Funding for Staffing Agencies
Payroll funding is also known as accounts receivable financing; It provides instant cash flow so your agency can grow without limits. The process works by selling your open receivables to a payroll funding company in exchange for an immediate cash advance.
Having a dependable source for funding is one of the most important aspects of operating a successful agency. Payroll funding gives you the financial freedom to market your agency, take on new clients, go after large contracts, fill orders, and achieve the goals you have for your agency.
Contact us today!