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[MikeDDKing]

WHAI - Thoughts on the staffing industry

It has been a while since I looked at WHAI so I don't remember much in the way of specifics on WHAI. I'll try to look more tonight. I thought I would share some general thoughts on the staffing industry.

I spent 2 years working as a headhunter in the staffing industry. We worked exclusively in the technology field (mostly software and electrical engineers) as opposed to healthcare. One thing that I can say about the staffing industry in general is that it is highly cyclical. The company that I worked for went from 30+ people to 3 people inside of 2 years. I left when it became clear that there was almost no revenue to be made (and then there were 2 left).

Generally there are two categories in the staffing field including contract (temporary) and permanent. For the contract piece the fees are an hourly rate. The staffing firm marks up the hourly rate and makes money on the difference between what they pay the individual and what they receive from their client. The individual may either be an employee of the staffing agency or a contractor with their own company. For permanent placement, the staffing agency gets paid a fee when their client hires one of the agency's candidates. Usually the fee is determined as a percentage of the yearly salary in the 15-35% range. The conversion of contract personnel to permanent personnel is done by most if not all in the industry.

The reason that I point out all of this is that margins depend upon the business model that is being used. Revenue per headhunter is going to be higher if the company focuses more on contract than on permanent. Also, the margins are going to be lower in the contract business. However, that doesn't mean that one model is better than the other. Most companies work in both segments but may have a bias towards one or the other.

There is a wide desparity between individual headhunters in their revenue. You might see a 10 to 1 difference. So, the people matter.

The internet has greatly changed the staffing industry. It is much easier for people to find out about jobs with the internet. Because of this, it is easier for companies to get the message out on their own. I believe that this is decreasing the market size for the staffing industry but this is only one of many factors.

I'll try and look some more this evening to look at the specific situation for WHAI.

Mike