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SOLO VERSUS NON-SOLO PRACTITIONERS

The information below is reproduced from an article that ran in an industry publication. It is in no way an endorsement or representation of office sales at PMA Franchise Systems, Inc.

AVERAGE OPERATING RATIOS FOR DIRECT PLACEMENT FIRMS

Anonymous surveys were sent (by a firm not associated with PMA Franchise Systems, Inc.) to 3,000 firms, all involved in permanent search/placement. The survey selected a broad cross section between traditional firm architectures (4.4 consultants per firm) and solos. Many factors enter into developing numbers such as these and they can never be completely accurate. Too many variables such as fees charged, specialty areas, tenure of firm (and consultants), skill levels, comfort levels and other factors tend to skew the information. The averages that follow represent composites of the firms who responded to the survey.

SOLO PRACTITIONERS

Total Cash In       $265,000
         
Consultant Compensation       0.00%
Office Payroll       3.70%
Benefits       7.80%
Taxes-Payroll & Associated       1.10%
Advertising/PR       7.50%
Dues/Subscriptions       5.30%
Office Expenses       3.70%
Professional Services       4.40%
Rent       2.90%
Phone/Fax/ISP’s       3.90%
Travel/Entertainment       4.60%
Splits (Amount paid to others)       4.80%
Miscellaneous       2.90%
         
Profit       47.40%

EXPLANATIONS:

Total Cash In: The average solo practitioner made approximately 18 placements a year

Consultant Compensation - Solo: As solo practitioners, no consultants were employed. While many consider themselves to be consultants and paid themselves a regular paycheck or percentage of cash-in, for the purposes of comparing apples to apples, solo salaries were deleted as a computable item since they all come out of profit anyway.

Office Payroll & Taxes - Solo: Most solos either operate alone or with a temp or a part-time assistant. Most of those surveyed were completely computerized and functioned as their own administrative staff utilizing various software products to perform the daily grunt work.

Payroll taxes reflect a percentage of that amount paid to the administrative assistant not the taxes owed by the practitioner who will normally pay estimated taxes based upon anticipated earnings.

Benefits - Solo: This normally represents health insurance and self-funded retirement programs.

Advertising/Public Relations - Solo: Even solos occasionally advertise in traditional venues or use PR programs to keep their name in front of potential clients and candidates.

Dues/Subscriptions - Solo: Most solos rely on professional association memberships, networks and a variety and range of subscriptions to keep on top of their areas of activities. Also included are the costs for such memberships in things like Monster.com, Headhunter.net, etc.

Office Expenses - Solo: This includes such items as printing, postage, office supplies, equipment of all types (Computers, fax machines, telephones, DSL/Cable, Satellite, modems, etc.).

Professional Services - Solo: Legal and accounting fees are lumped here as well as training seminars/materials for those who participate in such activities. Also included are costs for free-lance researchers.

Rent - Solo: Solo's who work out of their homes or out of an office are split about 50/50. The percentage shown is for those who work away from their homes.

Phone/Fax/Computer Access - Solo: Ours is a phone/fax business and this has always been one of the higher percentage items.

Travel/Entertainment - Solo: Recruiters (especially solos) are great at making every pleasure trip somehow tax deductible and every lunch or dinner a business meeting .

Splits - Solo: Most solos are not franchisees (where split business is a regular happening) but almost half of those surveyed belong to a formal network or have informal relationships with other recruiters to work split business. For many, this percentage of cash-in is significantly higher than shown above but the above figure represents what was paid out in splits, not what was received.

Miscellaneous - Solo: Everything that won't fit elsewhere is crammed into this category. Profit Solo For solos, this figure represents the This is what I get to keep and pay taxes on if I haven't successfully hidden it as a business expense elsewhere .

NON-SOLO (4.4 Consultants)

Total Cash In      

$876,245

         
Consultant Compensation & Taxes                38.50%
Office Payroll & Taxes       5.20%
Benefits       3.80%
Advertising/PR       1.50%
Dues/Subscriptions       0.40%
Insurance – E&O + Other       1.30%
Office Supplies/Equipment       1.20%
Professional Services       2.60%
Rent       4.10%
Phone/Fax/Comp. Access/ISPs       5.40%
Travel/Entertainment       1.60%
Splits (Amounts paid to others)       4.80%
Miscellaneous       2.50%
         
Profit       27.10%

EXPLANATIONS:

Consultant Compensation - Non-Solo: This figure might appear a little low; however, it factors in consultants who were on the job for less than a year. Rookies come and go at an amazingly high rate of speed. Sometimes they even leave half-done deals which ultimately close but for which they do not get paid. While many owners complain about the rookie revolving door, most admit that they don't often loose money when they leave.

Office Payroll & Taxes: This category traditionally covers secretaries, receptionists, administrative assistants, temps and other non-producing support personnel. The average firm has 1.3 persons covering these functions.

Benefits: This normally represents insurance, retirement programs and any other of the growing list of benefits being offered by today's employers.

Advertising/Public Relations: This is a low priority item for most recruiting firms. However, the numbers are increasing primarily due to Internet ad expenses and the continuing webification of the industry.

Dues/Subscriptions: Usually larger than solos as a dollar amount, but smaller as a percentage. Includes industry subscriptions, publications, plus network and association dues for groups both within and outside of the business.

Insurance: Business insurance (E&O, etc) not to include health/medical/life insurance that is included under benefits.

Office Supplies/Equipment: This includes such items as printing, office supplies, equipment of all types and is used by many as a catchall category.

Professional Services: Legal and accounting fees are lumped here as well as training seminars and materials for those who participate in such activities. Also included in the category this year is freelance search researcher costs.

Rent: As a percentage, this varies extensively depending on location. Large city Vs small town, Park Avenue Vs Strip Shopping Center, plush private offices Vs utilitarian bullpens.

Phone/Fax/Computer Access/ISPs: Increased over 2 years ago as a percentage of gross, due primarily to increasing use of job boards and on-line databases.

Travel/Entertainment: The larger the firm, the more restraint that is exercised in this area. Owners and managers may T & E but most firms restrict this activity for the crew.

Splits: Money paid out to co-op partners. Identical to Solo percentages; about 2% higher for franchises and members of formal networks.

Profit: Lower percentage than Solos, but higher dollars. Owner/manager compensation, partnership payouts, retained earnings, equity share payouts, etc. come from this figure. Also, any personal production is net-net and personal production is not figured into these numbers.

So, would you rather earn 47.4% of $265,000 ($125,610) as a Solo or 27.1% of $876,245 ($237,462) running a larger firm?

 

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