Recruitment Success Group has dramatically increased its revenue in the 12 months it has been using a non-traditional pricing model, according to managing director Leanne Ferreira.

Back in 2011, the IT, and sales and marketing recruitment company was struggling with profitability after losing around 50% of its business post-GFC, Ferreira told Shortlist.

Moving to the new pricing model last year "without a doubt" saved RSG from closure and its revenue has since increased 60% year-on-year, said Ferreira, who launched the business in 2002.

"We were dead. We could've limped along... The small-to-medium [recruitment companies], and even some of the big ones, have really limped along and copped an awfully hard time."

RSG now offers unbundled services and charges clients based on which parts of the recruitment process they need help with, rather than having a flat placement fee.

This enables the company to provide a high-volume, low-cost service that often leads to more repeat business, she said.

"You're not billing $15k [for a placement], you may bill $4k but you've got three or four jobs to cover that [and] we're getting them because we're doing a lot more work for the client," said Ferreira.

"It's flattened out all the ups and downs in my revenue, so I no longer have a great quarter and a crap quarter, or a good month and bad month, because we invoice every week and my debtors days are down to 32. I've halved my debtor days."

Clients can also choose to stop working with RSG at any point during the search, settle their bill and continue the recruitment process themselves, Ferreira said.

ASX-listed recruitment company Ambition has similarly moved to a non-traditional pricing model, which comprises five different services that each has its own fee structure.

The consulting pricing model

RSG has four different price rates for each part of the recruitment process: administration and research, head hunting, consultant work and senior consultant work, said Ferreira.

This separates the pricing from other professional services models, such as law where the price depends upon the lawyer who does the task, but enables the company to monetise recruitment support staff, she said.

"We've got an admin person who now spends 30% of their role doing recruitment. She's gone from being a cost to an income [earner]... because she can do all the beginning of that process."

With each invoice, the company sends a statement of work that is compiled by a customised version of billing software Timesite called RSGSelect, which gives clients complete transparency on where their money is going and why, said Ferreira.

"We had one [recruiter] whose candidate pulled out of a job on Saturday. He got on the system and spent the Saturday afternoon and Sunday finding another candidate, got them interviewed on the Monday and started them with the client on Tuesday. When the client got the statement of work with the invoice, they saw that [our consultant] had been working on that role over the weekend," she said by way of example.

"A few clients now just pay us as we go. Some weeks you might send out a $500 invoice, some weeks you might send out a $3,000 invoice. It just depends on what the consultants have come up with for that client that week."

RSG now charges a lower gross margin on contractors (8–10%), but makes up the difference by collecting a lump sum payment for the search work required to find each candidate, which also improves the organisation's cash flow, said Ferreira.

"Imagine if you could say to the clients, you're going to get the same outcome, more control, more transparency, and it's going to cost you 40–50% of what the fee was going to be. You've got to take that little bit of pain to start with but you know the next time he needs another job [filled] he's going to give it to you, and the one after that, and the one after that."

No need to change remuneration

Under the model, consultants are still paid a base-plus-commission package but the high volume of work makes up for lower fee levels, said Ferreira.

Consultants also have greater flexibility in their working hours thanks to the RSGSelect platform, she said.

"It was the last thing we needed to do so people can be working anywhere anytime... If they go home to look after the kids at 3pm and log on again at 6pm, it's there and the clients see.

"The consultants didn't need convincing... One of our top billers, who has 15 years in the recruitment business, joined us because he wanted something different."

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