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  • Writer's pictureNick Andriacchi

Make the Big Deal the Right Deal

4 Keys to Structuring “The Right Deal”

Most staffers catalyst to expansion is landing that "big deal" with lots of positions to fill. These types of deals can generate enough cash-flow to build additional infrastructure, add additional location(s) and hire more internal staff. This can be a launching pad for endless additional opportunities if it’s the “right deal”.

So what makes it the right deal? Take a glance at the BIG 4 keys to consider:

Pricing – Most of the time, staffers have to give a little on the margin to win a big deal. That’s ok, as long as the margins aren’t so thin that not enough profit exists to grow other areas the business. Let’s say average gross margin for ABC Staffing is 15%. ABC can win a deal worth $200,000 weekly billing, but gross margin would have to be cut to 1.5% in order to win it. If that is the case, this account will only generate $3000 in weekly gross profit which may not cover the additional cost of servicing the account. But if the pricing is right - keep going!

Payment Terms – The margins look good, but what are the payment terms? Let’s stick with the last example: a big deal worth $200,000 weekly billing. If the payment terms are 120 days then $3,400,000 is needed to fund the account before receiving the first payment. This may use up too much of your available cash which will stymie growth with other accounts. For this and other reasons, make sure payment terms are reasonable. Once the payment terms are acceptable for your company – keep going!

Credit Risk …. will help determine payment terms. Any customer has to have the financial strength for a staffing company to extend large amounts of unsecured credit. And when I say unsecured, it means the staffing company is one of the last vendors to get paid if the customer experiences financial difficulty. Workplace safety fits in here. What is the injury history at the site? Workers comp claims affect the modifier for the entire payroll – not just the folks working at this site.

Once the credit checking comes back satisfactory – you are ready for the last part of the due diligence process.

Servicing the Customer - This is the X factor. Basically, what kind of strain will this put on your existing operation if you can’t hire more internal staff quickly enough or don’t have the technology to service the customer. Some items to consider:

· Wages and Safety - My good friends Brian Leptich of Quality Labor Services and Ray Garrison of UpstateMFG both have told me that these two go hand-in-hand. If pay rates for the deal are too low, not only will a staffer have a tough time recruiting, the contractors they do find may not be qualified enough to succeed in the position. This creates lots of turnover and injury risks.

· Billing Requirements – What are the invoice requirements and how complex is the process?

· VMS/MSP – If there is a VMS, how strong is that company financially and how difficult will it be to use their system. How much are the fees?

Once all the boxes are checked – go for it!

An account like should generate the cash-flow to allow a staffing company to expand by winning additional accounts. That is the ultimate goal. A diversified portfolio consisting of profitable, credit worthy accounts.

And if you use a full-service funder like my employer, you won’t have to worry about assessing credit risk, funding payroll, payroll processing, invoicing and ATS technology. A full-service funder provides all of it so you can take advantage of these great opportunities.

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