How to Seize the Contract Recruitment Opportunity in the US: An Interview with Ben Broughton of Primis
The US contract recruitment market is the most lucrative in the world. Almost 90% of the staffing revenue generated in the United States is made up of contract recruitment.
The opportunity is huge for recruitment leaders looking to build their business as showing competency in the US market can drive up the valuation of their company.
In a recent episode of the Scale Up Stateside podcast, we spoke with Ben Broughton, Founder of Primis, who has offices in both the US and UK, to hear how he built a contract recruitment business in the US
In two short years of its conception, Ben scaled the business in both the UK and the US with a £5.5 million turnover and £2.6 million in gross profit. The following blog is part-transcribed from our conversation with Ben and offers an insight into how recruiters can seize the contract recruitment opportunity in the US.
Why enter the US recruitment market?
Huge market share and reliance on contract recruitment
In 2022, the US generated $218 billion revenue in recruitment, a whopping 89% of which was attributed to contract recruitment. As a matter of fact, the IT contract sector of the US market alone is almost the same size as the entire UK recruitment market!
Furthermore, employment in the US is typically ‘at-will’, shorter notice periods means that US clients rely quite heavily on contract recruitment.
Check out our recent piece to learn more about the implications this has on the growing contract recruitment market.
Earning potential
There are many benefits in the US that all lead to a higher earning potential within the recruitment industry, such as quicker fill times in the US market, higher margins of 30% plus, long term reoccurring fees over time and ultimately an increased business valuation.
In the words of Ben, “If you’re not in the US, go tomorrow!!”
“The average gross profit (GP) per day on our UK business contract is £85 per day. In the US it's £140 per day.
Our average contract margin in the UK is 19%. In the US it's 32%.
Those things just on our books alone, show the quality of business you can get that is so much higher than the UK market.”
The sky really is the limit when it comes to how much a contract recruiter can make in the US.
How is the US recruitment market different from the UK?
A more relationship-driven market
“I love the US market purely because it’s still very much relationship-based whereas the UK is quite transactional.”
Like many recruitment business leaders that we speak to, Ben comments that the nature of the US market is more relationship driven. If you can create a good relationship with US clients, they will trust you and trust your judgment. By earning that trust and continuing to deliver a good service, recruitment businesses can win and retain work from clients for a sustained period of time.
“Clients are much more open to looking at projects, rather than just one or two hires.”
Ben notes that this is in contrast to the UK market which can be a “race to the bottom in terms of margins.”
“You’ve got to be very astute…”
Although we love singing the praises of the US recruitment market, it is important to realise you can’t have the pros without the cons! In terms of the pitfalls of the US in comparison to the UK, from Ben’s personal experience, he believes recruiters need to be able to assess whether clients are actively looking to hire, or whether they are just seeing what talent is available in the market.
“Really measure your ratios in terms of the time spent to fill a vacancy, how many CVS to placement, time to hire, be very tight on all that stuff. Don't be afraid to walk away from business if it's not generating appropriate revenue for the time you’re putting into it.”
It is important to note that this approach to client relationships will differ state by state. Continue reading below to hear Ben’s experience of working with clients in New York and Austin.
How to get started in the US recruitment market from the UK
Set up your ‘virtual shopfront’
If you are working in the US recruitment market from the UK, you’ll want to:
1) Get a US phone number
2) Get a US virtual office address to put on your website
3) Run virtual events to build relationships and create credibility
BONUS POINT: If your business can afford it, make the trip to the US to get face to face with clients.
Have a niche
“We’re just trying to own that space as much as we can”
At PGC we recommend that recruitment agencies take the ‘inch wide, mile deep’ approach to recruiting in the US. You will want to specialise in an area and a specific industry. Ben tells us that in the Primis office in New York, they focus exclusively on data roles and can tailor their business development activity to target appropriate businesses. For example, Primis has created a slack channel dedicated to Heads of Data within New York.
“We're basically creating a community of Heads of Data within the New York area so that they can talk about what's important to them, what's exciting for them. But we own it so we can control the content of that.”
Change your recruitment agency strategy per state
We regularly tell those looking to enter the US market that they should look at each state as its own country, particularly as employment law and compliance issues will change depending on the location of your clients and candidates.
In addition to operational strategy, the strategy of your business development will also likely differ from state to state. You may find that a killer strategy that worked in Massachusetts will not help you close a deal in Miami. Ben comments on his personal experience of this below:
“Every state has its own individual issue with their own nuances and their own ways of doing things. With our New York office, people want to get out, they want to meet, they want to go and do cocktails and get to know you and have a relationship with you. Whereas in Austin it's a little bit more formal, talking about business in boardrooms.”
Bottom line: understanding the culture of how to do business state by state absolutely is key to winning clients over.
Pricing US Recruitment Margins for Contract
Clients in the US are familiar with working in a transparent way so when charging for your services, it is important to breakdown your separate costs such as;
1) The pay rate of the contractor
2) The cost to engage the contractor compliantly
3) The cost to find and place the contractor
Ben comments that being knowledgeable of how fees will change for each state and communicating that with clients is key to winning deals.
“Understand the fees are different for each state you're working in and have those documented. Equip your consultants with those numbers so that when they're going out and they're talking to clients, they know what the mark-up should be and what margins you need to be operating at.”
5 steps to develop a healthy business in the US
Business development strategies for your US business will differ slightly from what you may be used to in your home market, but it’s not rocket science! You’ll be unsurprised to hear from Ben that his success has come from getting in front of the right people, offering value, and ensuring that his agency offers a high-quality service.
1) Find your target clients
“Firstly, look at who your target clients are, who uses contractors. In our New York office, we specialise in data so we can target clients that we know use data contractors. By leading with our specialism we can find prospective clients that are seeking those skills and go after those.”
2) Get in front of prospective clients (if not in the US, do virtual events)
“When hosting events, we bring along an existing client who will speak great things about us in the room! From the four or five events we hosted last year, we witnessed 45x return of investment. And if you’re not in the US, take advantage of hosting virtual events.”
“So we do a lot of events but also make sure you add value for example by using a guest speaker. Clients in the US appreciate value add. So the outcome of hosting an event is not just getting bums on seats!”
3) Educate your clients
“It's really important to educate your clients that you offer both perm and contract recruitment services as many are likely to assume you just offer the former.”
“We've got rate cards for contractors which are provided to our consultants, showing the different rates for specific areas. They can show this to prospective clients who want to see that information so they can compare against their existing rate card.”
4) Contractor care policy
“Make sure you are looking after your contractors, that they are happy on-site and that is fed back to the line manager. That has worked really well for us in terms of winning more business from clients in the long term.”
5) Build relationships and add value
“We tend to find a lot of initial email, then followed by phone call tends to work better in the US. As much as cold-calling will work, we get a better response when we give them value add. We provide data around salaries and the market, reports and whitepapers on the data industry to get them interested. Usually there are about seven or eight points of contract before you finally get that introduction which you then obviously try and convert into sales.”
How to open an office in the US
Once you are starting to thrive in the US market, you may want to start the process of opening an office in the US. In addition to offering his experience of the E2 visa process, Ben has three key pieces of advice for business leaders when they are creating their US entity.
“Clone the culture of your organisation”
“I've opened a number of offices across my career. Cloning the culture of the business I think is the most important thing. So even if you're hiring somebody externally to go and run your US operation, put them into your UK business for at least 3 to 6 months, (it's going to take that time anyway to get their visa sorted), but just making sure that they're actually going over there and creating the culture internally of your organisation is key.”
“Don’t approach it like you’re running a business in the UK”
“Don't approach it like you're running a business in the UK because it is different and has definite differences. I think that's why some people fail. When they start out, they just assume it's exactly the same as the UK. With anybody you're sending over, get them to have a chat with someone who has been there and done that. Reach out to your network, to the industry, and find people that have done it before because there are challenges, there are pitfalls.”
Entice your best consultants
“What we found is a 200k biller in the UK would be 500k in the US so don't be afraid to entice your best people to go over there because the opportunities just in terms of average fees, average invoices, is massive.”
How to open an office in the US (The E2 visa process)
Speak to the experts
“Firstly, have the right team behind you. Definitely speak to a partner like PGC. Don't go rogue and start Googling. Get proven people who are experienced and know what they're doing.”
Track your investment
“You need to look at about $60,000 or $70,000 of investment into your US business. That can be anything from your flights over, your hotels, your travel, if you rent an office, it can be a pre-payment for the office for the next four months. If you've got contractors going through PGC, you can use your margins against it. So anything you've got, throw it into the mix to get to that total to show investment in your US business.”
The process
So what does the typical E2 visa process look like simplified? Ben shares an overview of his journey:
“Within the E2 Visa application you have to do full PnL for the 12 months, outline a proper business plan showing what your markets are, your organigram, your structure, your five year business plan, your costs, your spend, everything like you would do if you were starting a business in the UK and then you submit that.”
“And then about one-two months later, you get invited into your interview and say yes or no. Thankfully both times I have done it, it’s been yes!”
A key tip for anyone about to go through the E2 visa process: track any cost, any spend and any sales you generate in from the US, make sure you track by state. You might need that for tax purposes. All those costs will contribute towards your irretrievable investment in the US and it makes that process of immigration so much easier if you've got that information readily available.
How to choose the best location for your US business
Geographically, the US is a huge place, and with over 50 states to choose from, it can be difficult to determine the best location for your office. Ben relays his advice below:
Be data-led
“I have a slightly different story because I have relationships in those markets [New York & Austin]. So for me it was quite an obvious one where I would go. But still, I definitely did my research there. I think the most important thing is speak to your network, speak to the people in the industry like PGC. They have got data and when you're making a decision like this, you’ve got to look at the data and properly analyse that. So looking at LinkedIn insights, looking at volumes of candidates, looking at job adverts and number of job adverts within the niche that you're going to be focusing on.”
At PGC we always encourage recruitment founders to take a data-driven approach when entering the US. This allows them to be strategically placed to access popular talent pools within their niche, and access tax incentives to suit their budget. If you’re not sure where to get started, our top states for business 2023 data provides greater insight into the highest ranking areas for contract recruitment based on our client’s onboards.
Assess where your talent pool is coming from
“If you're going to be hiring graduates and training them, you want to have a good talent pool of people coming from local universities, or if there's competitors in the same space, you can obviously look to head on from a bring people into your business from that side of things.”
Consider the cost of living for you and your team
“If you're going to be sending people over to the US, you have to consider the cost to relocate and help them set up. For example, we're relocating people to New York and it's incredibly expensive, but for me, that's worth it because we've got a good presence in New York and we've got a good client base there.”
“Using the example of New York, some people at a certain stage in their life don't want to live in the hustle and bustle of New York. So, you know, you want to get it right for the individuals that are moving across.”
Primis has experienced huge success in the US by partnering with PGC to support their placement of contract workers in the US.
If you are interested in seeing what opportunities exist in the US for you, find out how we can help get you started in the largest staffing market in the world!
Disclaimer: All information written here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.