Beyond Placements Building Consultancy and Productisation Revenue Streams That Scale

Recruitment businesses have traditionally relied on placements as their primary source of revenue. But in a market where hiring decisions are taking longer, margins are under pressure and clients are increasingly selective about agency spend, that model is becoming harder to sustain.

In his TRN World session, James Osborne explored how recruitment businesses can move beyond transactional recruitment and develop productised services, consultancy solutions and recurring revenue streams that create stronger client relationships and improve profitability.

The opportunity is not to abandon recruitment. It is to build a more valuable business around the expertise, relationships and market knowledge recruitment agencies already possess.

Why recruitment businesses need to move beyond the transactional model

For many recruitment agencies, the traditional contingent model creates a fundamental commercial problem: significant time and resources are invested before there is any certainty of payment.

Preferred supplier lists, competing agencies and fee negotiations place further pressure on profitability. Even businesses generating healthy placement volumes can struggle to translate that activity into consistent operating profit.

The challenge becomes more pronounced when hiring activity slows. A business dependent on individual placements can experience significant fluctuations in monthly revenue, making financial planning and investment difficult.

A more sustainable model involves moving a proportion of the business towards retained assignments, embedded recruitment partnerships, consultancy services and recurring contracts.

These arrangements create an opportunity to build deeper relationships with clients, improve delivery efficiency and generate more predictable income.

Recurring revenue changes the economics of recruitment

Revenue growth and profit growth are not the same thing.

A recruitment business can increase its turnover without materially improving profitability if the cost of delivering that revenue rises alongside it.

One useful benchmark is to aim for approximately 25% of gross profit to cover overheads, 45% to 50% to cover staff costs, and around 30% to convert into operating profit.

Achieving that level of profitability becomes more manageable when a greater proportion of gross profit is supported by predictable, recurring contracts.

Consider a business where recurring revenue contributes enough gross profit to cover most of its existing operating costs. Additional placement income can then make a greater contribution to profit, rather than continually funding the underlying cost base.

The objective is not necessarily to convert every client into a subscription or retainer. It is to increase the proportion of revenue that is secured through longer-term commercial relationships.

This provides greater financial visibility while reducing dependence on the timing of individual placements.

Productisation starts with understanding what clients actually need

One of the most accessible opportunities for recruitment businesses is productisation.

Rather than selling a broadly defined recruitment service, productisation involves creating distinct offerings with clear deliverables, pricing and commercial benefits.

However, developing additional products should not begin with deciding what an agency wants to sell.

It should begin with the client.

The Value Proposition Canvas provides a useful framework for identifying two essential factors:

• Customer pains: The challenges clients need to overcome, such as recruitment costs, talent shortages or inefficient hiring processes.

• Customer gains: The outcomes they want to achieve, including better workforce planning, greater productivity and improved hiring results.

The agency can then design services that either relieve those problems or help clients achieve their objectives.

A practical example is a recruitment business that developed an advertising-led candidate longlisting service during the COVID period.

By repurposing available LinkedIn advertising credits, the agency could generate and assess candidate longlists for clients without delivering the full recruitment process.

The service was priced at approximately 14%, compared with a traditional contingent fee of around 22%.

Although the headline fee was lower, the reduced delivery requirements made the product commercially attractive.

The lesson is that a successful product does not necessarily need a higher price. It needs to solve a relevant client problem while generating an appropriate return for the recruitment business.

Give clients a clear choice between recruitment services

Productisation can also improve the way agencies sell existing recruitment services.

Instead of offering one broadly defined service and negotiating the fee, businesses can create structured packages that demonstrate the differences in commitment, delivery and value.

For example, a permanent recruitment offering could include three options:

These percentages are illustrative rather than prescribed pricing levels.

The commercial principle is that greater client commitment allows the agency to allocate resources more effectively, undertake more substantial search activity and reduce the uncertainty associated with competing for vacancies.

The retained option can therefore provide a more comprehensive service at a lower percentage fee.

The distinction must be meaningful, however.

A retained service should not simply be contingent recruitment with an upfront invoice. The additional commitment should fund activities that genuinely improve the approach to solving the hiring challenge.

That might include targeted advertising, competitor research, more extensive candidate assessment or specialist employer branding support.

The client should understand exactly what changes when they choose a different product.

The consultancy opportunity sits between recruitment and transformation

Recruitment agencies traditionally sell access to talent. Established consultancy businesses typically sell advice, transformation and organisational change.

Between these two offerings is an opportunity for recruitment businesses to provide more strategic support without necessarily adopting the delivery model of a large consultancy.

Many organisations need assistance with workforce planning, talent acquisition processes, recruitment technology and the development of internal hiring capabilities.

These are not always conventional recruitment assignments, but they are closely connected to the expertise recruiters possess.

They can be approached as capability projects.

One example involved a client that wanted to reduce its reliance on external recruitment agencies.

Rather than attempting to win another vacancy, the recruitment business proposed helping the organisation develop its own internal talent acquisition function.

The project supported the client in reducing its dependence on several recruitment suppliers and establishing a more sustainable approach to hiring.

The reported outcome was just under £600,000 in client savings, while the recruitment business generated approximately £216,000 from the engagement.

This demonstrates a different commercial relationship.

The agency was not paid for maintaining the client's dependency on recruitment suppliers. It was paid for addressing a wider workforce problem.

That shift creates opportunities for recruitment businesses to participate in strategic conversations that might otherwise be directed towards consultancy providers.

Build a consultancy offering in three stages

Recruitment businesses do not need to launch a comprehensive consultancy division immediately.

A more practical approach is to build a portfolio of services in stages, beginning with capabilities that already exist within the business.

1. Turn existing insight into paid advisory services

Most specialist recruitment agencies already possess considerable information about their markets.

This may include salary benchmarks, candidate availability, market mapping, skills gaps and workforce trends.

Much of this insight is currently shared informally as part of business development or recruitment delivery.

Packaging that knowledge into defined advisory products creates an opportunity to generate revenue from expertise rather than relying solely on placements.

It also provides clients with information that supports their workforce decisions before they have an immediate hiring requirement.

2. Use specialist contractors to deliver consultancy projects

The next stage involves offering more substantial advisory and implementation services.

These might include workforce planning, incentive scheme design, leadership development or performance framework development.

Rather than employing permanent consultancy teams, recruitment businesses can build a network of specialist contractors to deliver work within client organisations.

This creates an opportunity to generate revenue from project delivery while maintaining flexibility in the resources required.

It can also strengthen the agency's understanding of the client's organisation, creating visibility of future recruitment needs.

3. Develop embedded and enterprise talent partnerships

The third stage involves deeper, longer-term engagements.

These could include recruitment process outsourcing, embedded talent acquisition support, post-merger integration projects or broader Total Talent Partnership arrangements.

At this level, the recruitment business is no longer engaged solely to deliver individual vacancies.

It becomes involved in the client's wider workforce strategy and ongoing talent requirements.

The commercial benefits can include stronger relationships, more predictable revenue and greater influence over the services being delivered.

Use AI and existing recruitment data to create subscription revenue

Technology is making it possible to package recruitment expertise in new ways.

Rather than delivering salary benchmarking reports or market maps as isolated projects, agencies can combine multiple information services into an accessible platform.

One example involved a recruitment business creating an AI-enabled talent intelligence platform that brought together salary data, market mapping and skills gap analysis.

Clients could then pay a monthly subscription to access the information rather than commissioning separate reports.

The example described approximately 20 to 30 customers paying between £1,500 and £3,000 per month for access.

This changes the nature of the commercial relationship.

Instead of selling a report once, the agency provides an ongoing information service that supports regular client conversations.

Those conversations also allow the business to remain engaged with clients between recruitment assignments.

The value extends beyond the subscription itself. It creates a continuing relationship built around workforce intelligence and strategic decision-making.

Consultancy-led relationships can strengthen traditional recruitment revenue

Developing consultancy services does not mean that placement revenue becomes less important.

In some cases, consultancy discussions can create new recruitment opportunities.

One TRN member generated £140,000 in retained permanent recruitment business in a single week after engaging a client in conversations about consultancy services.

The separate consultancy proposal was still under consideration, but the strategic discussion had already changed the nature of the relationship.

Instead of being approached as another recruitment supplier, the agency had established itself as a broader talent adviser.

That positioning can create access to different decision-makers and higher value commercial opportunities.

It also reinforces the importance of understanding the client's wider business objectives rather than focusing solely on current vacancies.

Making the transition requires a different sales approach

Introducing new products is only part of the challenge.

Recruiters must also understand how to discuss, position and sell them.

Traditional recruitment business development often begins with presenting an agency's credentials, specialisms and candidate delivery capabilities.

A consultancy-led approach begins with the client's challenges.

The conversation should establish what the organisation is trying to achieve, what is preventing progress and where specialist support could create value.

The agency can then recommend the most appropriate product or service.

Making this transition requires two parallel activities.

Externally, recruitment businesses need clear product descriptions, defined pricing structures and client conversations that demonstrate the benefits of each solution.

Internally, consultants need training on how the products work, when to recommend them and how to explain the difference between contingent, retained and consultancy-led delivery.

Targets, incentives and business development activity should also support the desired shift towards higher value client relationships.

Without this alignment, new products risk remaining additional lines in a proposal rather than becoming meaningful sources of revenue.

A practical starting point for recruitment leaders

For agency owners considering how to develop new revenue streams, the starting point is to examine the existing client base and service offering.

Identify which clients provide the strongest commercial relationships, where recurring revenue opportunities already exist and which problems clients are currently struggling to solve.

Then consider which of those problems can be addressed through services the business already has the expertise or resources to deliver.

For some agencies, the first step will be introducing clearly differentiated contingent, exclusive and retained packages.

For others, it may involve charging for market intelligence, creating subscription-based insight products or developing a network of specialist contractors for consultancy assignments.

The objective should be to move a growing proportion of business towards relationships that are more embedded, commercially valuable and predictable.

A recruitment agency does not need to stop making placements to become a more consultative business.

It needs to recognise that its expertise has value beyond the placement itself.

By packaging that expertise into relevant products and consultancy services, recruitment leaders can develop additional revenue streams, improve the quality of client relationships and build businesses that are less dependent on individual hiring decisions.

Speaker: James Osborne – Co-Founder, The Recruitment Network