One thing is certain. The difficulties we are now seeing all over the recruitment market will get worse before they begin to get better. Whilst not wishing to add more gloom to what is already a bleak outlook, it is important for recruiters to be realistic and accept this situation so that they can be proactive and take the right steps now to see them through this economic crisis and come out the other end with a solid, healthy business.
Let's start by looking at where we are now. The construction market for new housing was one of the first sectors to suffer. Sales of new houses slowed right down, the market stagnated and construction workers began to be laid off. Over the last few months, the problem has extended to general construction and commercial projects with new projects being postponed indefinitely as confidence takes a nose dive. Sales of new cars have all but evaporated, and chilly winds are blowing down our high streets as retailers struggle to entice Christmas shoppers to spend. An unprecedented 20% one day nationwide sale at M&S, with Stuart Rose very much under the media spotlight, just serves to highlight the extreme measures being taken.
There are few corners of the market which remain unaffected by the dramatic slowdown as the momentum gathers pace across the entire supply chain. Suppliers, customers and workers all suffer, and insolvencies are certain to follow as reports of recession and now redundancies litter our news channels every day. We have already seen many Polish workers neglecting the UK labour market to return home - a sure sign of the speed of employment changes resulting from the economic downturn.
The Government has taken radical action with its rescue of the banks and, more recently, through the cuts in interest rates and taxes. These are desperate attempts, which I believe are absolutely right, to put money into people's pockets to encourage them to spend more. This is the way to generate the confidence needed to kick start the recovery.
With much talk of the possibility of seeing a recession hit its peak during the first half of next year, it comes as no surprise that employees increasingly prefer to hold onto the jobs they know, too scared to move to a new employer. The lack of people on the move, the fuel of the recruitment industry, is now causing the industry to slow right down. So times are tough for permanent staffing agencies and this is made worse as employers are reluctant to commit to long term appointments, amidst such a climate of uncertainty. Temporary staffing agencies are also badly affected as businesses reduce headcount to counter the slowdown - and temporary staff are the first to go.
Whilst it is very difficult to forecast precise timings, it is possible that demand will begin to pick up from the middle to late 2009, at which point those companies that have survived will find themselves short of staff to carry out essential functions and projects. Temporary agencies are then likely to rally and prosper more quickly, as they can provide a quick fix whilst permanent agencies may struggle to source good candidates quickly enough from the sluggish permanent marketplace.
The good news is that the latest actions by the Government could mean that the recovery could be rapid when it comes, which will be fantastic for the recruiters.
So what does all of this mean for the individual recruiter, and what steps can you take to ensure your business is in the best shape possible to ride out the worst of the recession? Radical times call for radical measures and some of these points will make you feel uncomfortable, but doing nothing is not an option if your business is to prosper into and beyond 2009.
10 points to help recruiters weather the financial storm...
1. Attitude. It is a major problem for agencies struggling to survive now. Accept that the situation will get worse - understand this, and do not bury your head in the sand. You can, and most certainly should, take action now.
2. Overheads. Really reduce your overheads and make sure they do not exceed your income. Consider any new investments extremely carefully, and take advice on the short and long term benefits of any investments. If the prospect of a move to new premises, or an increase in staff were on the cards, then put them on hold for now.
3. Staff. Assess the number of staff you employ already. Reducing numbers may be necessary to ensure the business is as lean as possible, but take care to consider first the skills most needed to adapt to challenging and changing times ahead.
4. Expenditure. Analyse in detail all your expenditure and watch every penny spent. Squeeze more out of what you do spend and ensure you have the best value from all your suppliers and are not duplicating any efforts.
5. Personal pay. For thousands of small recruitment businesses, many of them sole traders, cost control is even more difficult as they need to look to reduce their own costs by taking less out of the business for their own personal income. Prepare to draw less from the business by making adjustments to your own personal finance arrangements and domestic spending patterns - at least in the immediate short term.
6. Finance. Assess your existing business finance arrangements, but take care about switching providers as it is not the best time to structure a new deal. The credit crunch has left the banks and some of the invoice finance companies reluctant to lend money at competitive rates, or even at all. Your existing lender may be better as they are more likely to be flexible based on their relationship with you, even if that flexibility is more limited than it used to be. It is always worth shopping around, but check that any new supplier can and will deliver what they promise.
7. Outsource. If you are beginning to struggle with PAYE and VAT, consider using an outsourced provider, such as Oriel, who has the expertise to take care of your back office processes as part of an overall service, which includes looking after slow crown payments. When outsourcing your business finance, shop around for quotes as it can decrease your overall costs and provide other time-saving benefits, including access to experienced credit control staff.
8. Accountant. Do not underestimate the difficulties in finding a good accountant who will not only prepare your accounts and tax return, but will also offer expert and meaningful advice to your business. You should feel you can work in partnership with your accountant and trust their advice to help see you through difficult times. This means taking appropriate action before, as well as during, any downturn.
9. Openness. Do not wait until it is too late. As soon as you anticipate difficulties, do talk to your outsourced suppliers and financial providers before problems really take root. Most providers prefer clients to be open and honest so that they can work together more effectively and develop a solution in good time that works for both parties.
10. Plan. Do not stop planning beyond the immediate crisis. Those businesses that can take a longer term view - as well as focus on the current priorities - will be the ones to truly prosper when the economy begins to pick up again. Despite these challenging times, do not lose sight of your ultimate vision and be proactive in shaping the future success of your business.
