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The Disruption of old business models – Recruitment is changing in line with the way business gets done in the New Economy

wowMany industries are experiencing disruption, with new models of work emerging to replace traditional practice, driven by technology, opportunity and new thinking.

For the most part, recruitment agencies have remained the same in spite of this. Recruiting has remained largely a sales business, with little differentiation between one provider and another, other than surface branding.

Today the power has shifted from the employer to the candidate, as employers find themselves losing top performers, and candidates with specialised skills are in high demand and tough to find.

  • Niche sites?   They could win if their business models are not totally dependant on buying traffic and can offer personal service with hard to fill roles.
  • For the candidate?       More confusion and compounded feelings of throwing your CV into a black hole.
There are areas of change that will impact contractors from next year as outlined in the 2015 Budget, namely a higher rate of dividend tax and potential IR35 changes.
It remains to be seen whether contractors will move to fill the multitude of permanent roles widely available.
Political factors, such as making it harder to source from abroad or stringent immigration quotas may also limit the ability to hire the right skills.
A candidate’s journey can be simple or complicated, depending on a number of variables.
  • Candidates want simplicity – The Guardian has reported extensively on this very issue – graduates apply for upwards of 70 vacancies before landing a job, professionals average 15 applications. That’s a lot of form filling, and always the same information.

Embracing change in recruitment

Εικόνα1Evolution leading to a faster, cheaper, more reliable hiring model embraces the New Economy dynamics and leveraging the power of data science and machine learning (systems that can make sense of big data) to quickly and easily identify the best candidates for specific jobs.

Then the screening and “selling” the job to a candidate will be handled by experienced recruiters to save employers time and maximise the chance of a successful hire. This model empowers the three stakeholders in all recruitment processes: the employer, the recruiter and the candidate.

What recruiters need to consider is how to finance the business during a period of growth, as the cashflow gap from offering more generous credit terms to gain market share creditors is becoming a challenge.

Understanding your business’s working capital requirements is vital, so that growth can be controlled within the funding available and flexible enough not to inhibit the business. Invoice discounting is widespread across the recruitment sector and is a flexible way to finance a growing contractor base.

1. But even at a lend rate of 80% of invoice value, equity of 20% is still required
2. Using working capital facilities for non-working capital purposes (for example, funding start-up losses for people and new premises) is inherently risky and fundamentally an equity risk that should be funded as such.
Keeping tight control of working capital will determine the level of equity required in the business. At a long-term average of 42 days of sales being locked up in debtors, a business turning over £1m annually would require £120,000 of working capital before taking account of any start-up expenditure. Part of the business plan needs to ensure that adequate facilities are in place to meet all these requirements.

There is a number of opportunities at the moment where recruiters have not had sufficient funds to cope with fluctuation in working capital and not reacting quickly enough to adjust their cost bases accordingly.

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