Uncovering the Million-Dollar Myth in Recruitment | Episode #111 SNIPPET

Transcript

Introduction to Building from Scratch

Speaker 1 0:00

So , let's say , a consultant , they're building a desk from scratch . They spend three years building their contractor desk from zero to a million dollars GP . Take out their salaries , for example , and let's say that , you know , maybe the true cost of that person could be I'm just going to make this up half of that . And so what they're actually doing is they're creating a million dollars GP , but the equity is essentially what we're talking about here . The equity that they've created for the business might be two , three , four million dollars in equity . And so I think what a lot of recruiters perhaps overlook around just thinking about income is the equity that they can build in a contractor book , similar to a house where you sit on your house , you do a bit of a reno , you jazz it up a little bit . It's worth 10% more in a year's time . Same type of outcome for a contractor book whereas , yeah , you're getting cash , you're making a bit of profit , but you're actually building more equity than you're making in commissions that you're earning . So it's a super powerful way to build your future income and your future net worth if you're building your own contractor book . So really interesting .

Speaker 1 1:07

Okay , so we understand what , like , the multipliers are If you're making a million dollars in your business , you could sell it for a 4X multiple . You might get someone to pay you $4 million lump sum and you walk away from your business . What an amazing Very rarely lump sum , yeah , yeah , yeah , but hypothetically I mean , if you find someone , call us , yeah , a few people would like to hear that . Yeah , if you're making one mil net profit or EBIT and you get a 4X multiplier , happy days , someone will give you $4 million . There's obviously some nuances to that , but you know that's just a general kind of ballpark . So why would someone pay $4 million , $3 million , whatever the multiplier is for someone's contracted book ? Like , what is the strategic advantage ? Particularly , it depends on the company , right ? So I think the acquirer is a massive part of that , and if you're a large recruitment company buying another one , you'll sit there and go well , I've got that contracted book . Let's say they're solid contractors in government .