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On June 5, 2005, Seth Godin proclaimed “Small is the new big” on his blog (Small is the New Big), which eventually became the lead essay and title of another one of his successful book releases.  While Seth does a bang up job wordsmithing the market’s trend towards small and the advantages of being small, small still has plenty to learn from big, especially when it comes to the staffing industry.

Staffing Industry Analysts reported that the big guys – staffing firms over $100 million - have on average 17% of their revenue going towards operating expenses.  The smaller guys - staffing companies of $10 million or less - are channeling 30% of their revenue into operating expenses.

Typically the smaller guys have much better margins, and can boast of the flexibility and personalized service that Godin writes about, but that’s no reason to surrender profit to higher operating expenses. The small guys do not focus on expenses until they hit a wall, but the big guys are always focused on expenses. Therefore, the big guys end up generating a lot more business out of every dollar they spend.  It is important to note that some of this differential is due to sheer size and larger companies leveraging expenses over a broader business base, but this doesn’t come close to accounting for smaller guys paying 13% more for every $1 of revenue.

While smaller firms have a lot going for them, such as being small according to Godin, they need to start thinking big when it comes to adopting a disciplined approach to leveraging and controlling operating expenses. Here are some simple steps you can take towards getting a better handle on your operating expense:

·         Plan proactively a defensive strategy to head off requests from clients to reduce rates.

·         Measure the individual profitability of all accounts versus the financial and time resources committed to support them.

·         Measure and set specific activity and sales production goals for all personnel responsible for sales and or client retention.

·         Focus on retaining and expanding present client base – it is far less costly to retain and develop present accounts then to acquire new business and replace lost business.

·         Ask the staff to come up with ideas of ways to reduce operating expense; they’ll gain ownership in the initiative and will come up with ideas management never would have considered.