Struggling Recruitment Agencies
A lot of contractors take a hit when struggling recruitment agencies go under.
There‘s been a bit of a conundrum recently!
Job boards have been saying that the number of jobs advertised with them have been going up. The numbers of jobs advertised for contractors are positively soaring.
However, agencies have been saying that whilst the market has hit a bottom, it is not improving that much.
This appears to be a bit of a conundrum.
However, a leading pundit has suggested that it is because some agencies are struggling. They are getting so desperate that they are advertising more.
Some smaller agencies go under during a downturn.
Three Tier Recruitment Market
There are appears to be a three tier market.
There is a top tier who have strong balance sheets who are performing well. They are taking market share from their competitors.
Niche agency Players
There appear to be the niche players at the bottom, in the third tier. They have a niche in a particular area. They know the players in that niche area, or they have one or more big clients for whom they are preferred suppliers.
So, they appear to be riding out this difficult time quite well. Although if one of their major suppliers pulls the plug on them, then they could be in a bit of trouble.
It would be worthwhile contractors quizzing some of the lesser know agencies as regards their niche area and which companies that they are on the Preferred Supplier lists of. If there aren‘t too many, or if one major client dominates it, be prepared for a bit of trouble if you hear that they have lost that client.
Middle Tier of Struggling Recruitment Agencies
It is those in the middle tier that you find the bulk of the struggling recruitment agencies.
They don‘t have the dominant market position of the major agencies, and they don‘t have their strong balance sheets.
It might be an idea for contractors to look at the last annual report by their agency. Look particularly at their cash position and their Net Assets. Look to see what their debt position is. Then look to see how much interest they are paying on their debts.
When companies vet agencies that they want to put on their Preferred Supplier lists, one of the things that they check is the strength of their balance sheet.
If it is not strong, then they are unlikely to get on the list. So those who are in a bit of debt trouble have to take drastic action to get fix their balance sheet, e.g. via a rights issue, or to seek further funding from somewhere.
They may not be able to do so, and, as with SBS, their bankers are no longer prepared to give then credit waiting for the IT jobs market recovery to come.
In this market it is a good idea to know something about your agency. That’s because quite a few contractors have had the sudden shock of theirs going under.
Struggling recruitment agencies can cost contractors a lot of money.
You can at least arm yourself with the facts.
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