Productising Your Expertise From 18% to 35% Margins
Recruitment businesses have spent years becoming experts in their markets. They understand talent availability, salaries, skills shortages, competitor hiring and the challenges their clients face. The commercial opportunity is to turn more of that expertise into something clients can buy.
In this TRN session, James Osborne, Co-founder of The Recruitment Network, explored how recruitment businesses can move beyond transactional placements by productising their expertise and developing more embedded, recurring and consultative client relationships.
Move the conversation from vacancies to business problems
Many recruitment businesses still operate around a short term cycle: find a vacancy, fill it and then look for the next opportunity.
That creates an inherently unpredictable model. Good months can quickly be followed by bad ones, and market volatility makes that cycle more difficult to manage.
There is a more valuable position available.
Instead of entering a client's meeting room to discuss one vacancy, recruitment businesses can work towards entering the boardroom to discuss the organisation's workforce requirements over the next 12 or 18 months.
That changes the nature of the relationship. The conversation becomes less about supplying CVs and more about solving business problems.
Those problems might involve talent shortages, workforce planning, employee retention, employer brand, upskilling, redeployment or the impact of AI on future workforce requirements.
If the problem is more strategic, the service can become more strategic too.
Build recurring revenue into the business model
Predictability matters because low operating margins leave recruitment businesses exposed when trading slows.
Recurring revenue can help create a stronger financial base.
This does not mean every agency needs to become a contract recruiter. Recurring revenue can also come from retainers, subscriptions, embedded services, data products, managed services and consultancy.
The principle is straightforward. The greater the proportion of regular operating costs covered by predictable income, the less dependent the business becomes on individual permanent placements or sporadic assignments.
Spot business generated above that base then has the potential to make a much stronger contribution to profit.
Stop selling one service
One of the limitations of traditional recruitment is that clients are often presented with a single commercial proposition.
The conversation becomes: do you want to use us or not?
Productisation changes that question.
Instead, a recruitment business can present several clearly defined ways of working together. Each offers a different level of service, commitment, outcome and commercial structure.
Even a straightforward permanent recruitment business could offer:
- Contingent recruitment.
- Exclusive recruitment.
- Retained recruitment.
More developed product suites could include subscriptions, RPO Lite, project recruitment, statements of work, managed services, insight products or consultancy.
The aim is not to add services for the sake of variety. Every product should solve a real client problem.
Start with pains and gains
A strong product suite starts with the client, not with the agency.
What is the client trying to achieve? What is preventing them from achieving it?
Their gains might include a stronger talent pipeline, better workforce planning or improved retention. Their pains might include skills shortages, inefficient recruitment processes, agency dependency or difficulty understanding future hiring requirements.
Products can then be designed as gain creators and pain relievers.
This is a significantly stronger starting point than asking what additional services the recruitment business happens to be capable of providing.
Clients are more likely to engage when the proposition directly addresses something commercially important to them.
Increase the value of relationships you already have
Productisation also creates an opportunity to improve customer lifetime value.
Consider a client making three permanent hires each year at an average fee of £20,000. If permanent recruitment is the only service available, the maximum annual value of that relationship is £60,000 unless hiring volume increases.
The agency has already done the difficult work of establishing trust and winning the account.
The next question should be what else that client genuinely needs.
A relevant insight subscription, workforce project, retained programme or consultancy service can increase the value of the relationship without abandoning the recruitment specialism that created it in the first place.
Productisation is therefore not about diluting the core business. It is about using existing expertise more effectively.
Look for the white space between recruitment and consultancy
There is a significant gap between traditional recruitment and large consultancy firms.
Recruitment agencies can be perceived as reactive. If there is no live vacancy, the client may see little reason to have a conversation.
At the other end of the market, major consultancy engagements can be expensive, slow and more complex than the client requires.
The space between the two creates an opportunity.
Recruitment businesses already understand talent markets and have access to specialist people. That capability can be packaged into projects designed around client outcomes rather than individual hires.
TRN describes these as capability projects.
They can address challenges such as workforce planning, recruitment operating models, skills development, employer brand or reducing reliance on external agencies.
The client is no longer simply buying candidates. They are buying an outcome.
Package capability into repeatable products
A project becomes considerably more valuable to the recruitment business when it can be repeated.
One example covered in the session involved helping an organisation reduce its dependency on recruitment agencies and lower its recruitment expenditure.
Rather than pitching for vacancies, the recruitment business developed a programme designed around that strategic objective. The approach reportedly saved the client close to £600,000 at a cost of approximately £200,000.
Once created, that methodology could become a defined product that the agency could take to other organisations facing the same problem.
That is productisation in practice: solve a problem once, define the process and create a proposition that can be sold again.
Turn recruitment data into a commercial asset
Recruitment businesses also hold large amounts of information that clients can use.
Salary levels, market movements, hiring patterns, candidate behaviour, competitor activity and retention signals all have value when they are converted into useful insight.
Traditionally, an agency might create a salary report and give it to the client as a one-off piece of added value.
A productised approach asks whether that information could become an ongoing service.
One example in the session involved a platform giving clients access to live insight on areas including market mapping, retention risk and hiring processes for £599 per month on a 12 month subscription.
The principle is more important than the individual product.
Data that already exists inside the recruitment business can be packaged into information that helps clients make decisions. AI can make the collection, analysis and presentation of that information increasingly practical.
Price for the relationship you want
Productisation can also change the economics of traditional recruitment.
A more comprehensive service does not automatically need to carry a higher percentage fee.
James outlined an example in which contingent recruitment was priced at 26%, exclusive at 24% and retained at 22%.
At first glance, reducing the fee while increasing the service appears counterintuitive.
The economics change because the agency has greater certainty.
With retained recruitment, the business can commit properly to the assignment, reduce duplicated effort and improve the likelihood of completing the work. A lower percentage fee can therefore still produce a better commercial result.
The client receives better value and the recruitment company gets a stronger, more efficient relationship.
Pricing should encourage clients towards the way of working that produces the best outcome for both sides.
Make each level genuinely different
Productisation works when the distinction between options is meaningful.
A contingent service might provide the core recruitment process.
An exclusive service could add priority search time, access to passive candidates and a dedicated advertising campaign.
A retained service could go further with competitor mapping, progress reporting, headhunting, psychometric assessment and hiring intelligence.
The client can then see why greater commitment creates a better outcome.
Instead of defending a recruitment fee, the consultant is helping the client choose the most appropriate solution.
Think beyond recruitment delivery
The same principle can extend considerably further.
Recruitment businesses can deploy specialists into clients to support workforce or succession planning. Those specialists generate contract revenue while also helping identify the recruitment requirements that follow from the strategy.
At the more advanced end of the spectrum, agencies can explore embedded solutions, assessment services, mobility advisory work and other areas where their existing market relationships create an advantage.
Not every recruitment business needs to pursue every opportunity.
The important step is to recognise that expertise, relationships, networks and data can all become commercial products when they solve a valuable client problem.
Move progressively, not all at once
Moving towards solution based recruitment does not require abandoning the existing business model overnight.
A better approach is to increase the proportion of higher value work deliberately.
A business with only a small amount of retained, recurring or consultancy revenue might first aim for 30%, then build further from there.
The same thinking can be applied to client selection.
Recruitment leaders should examine whether their current customers provide healthy profit, reliable payment, sufficient volume, exclusivity, recurring revenue and scope to grow the relationship.
Not every client deserves equal investment.
Productisation works most effectively when the right services are being sold to the right customers.
Take the products to market properly
Designing the product is only the first stage.
Recruiters need to understand what each product does, how it differs from the alternatives, why it benefits the client and how to explain the commercial model confidently.
An internal launch is therefore as important as the external one.
Once the team understands the proposition, the business can take it systematically to three groups:
- Dormant clients.
- Existing clients.
- Prospective clients.
Existing relationships can be particularly valuable because trust already exists. Productisation provides a reason to reopen those conversations around a broader set of client priorities.
From recruitment supplier to strategic partner
The opportunity is ultimately about positioning.
Recruitment companies already possess considerable expertise. The challenge is that much of it is bundled into a traditional placement fee rather than treated as a valuable capability in its own right.
Packaging that expertise into clear products changes the conversation.
It creates opportunities for recurring revenue, stronger client relationships, more efficient delivery and better profitability. It can also increase the strategic value of the business itself.
The shift is from supplying a service when a vacancy appears to providing solutions that clients can use throughout their workforce journey.
For recruitment leaders looking to build a more predictable and valuable business, that is the real opportunity in productisation.