50 recruitment firms growing up fast

20-January-2010

This year’s Fast 50, Recruiter’s ranking of the 50 fastest growing UK private recruitment businesses in the UK is testament to the enduring dynamism of the recruitment industry.

Even as the storm clouds of the looming recession gathered in the summer of 2008, many recruiters continued to make hay. Andespite some recruiters being hit as the downturn began to cut a swathe through the industry from late 2008 on, many recruiters recorded impressive rates of growth.

The in-depth analysis, carried out by Catalyst Corporate Finance, based on recruitment businesses most up to date accounts, reveals a healthy average growth rate by revenue of 46%. This compares with 52% in the previous year.

“We are surprised and pleased by the resilience of the growth rate,” says Tim Evans, head of recruitment M&A at Catalyst, and co-author of the Fast 50.

That said, Evans points out that for most recruiters, the accounting period on which the Fast 50 is based ended during 2008, although for the minority it is 2009. Consequently, he says, it does not reflect the full impact of the recession.

So what sets the Fast 50 companies apart from their many competitors?

According to Evans, there are some “very clear common denominators” that set the Fast 50 apart from the rest. “It’s about good leadership, high quality consultants and robust systems rather than being about size, geographical location or sector,” he says.

Recruiters in the Fast 50 also tend to go that proverbial extra mile for their clients, suggests Mark Kingston, senior researcher at Catalyst, and co-author of the Fast 50.

One example is oil & gas recruiter Orion Group, which opened an office in Kazakhstan. “This was a proactive step to respond to the changing needs of their global client base,” says Kingston, and one that has proved successful.

Fast 50 recruiters themselves agree that a service ethos and differentiation from the competition are important reasons for their success.

Toby Kerr, managing director of IT recruiter Williams McKinley, which specialises in SAP [a type of software] (14th), attributes the company’s growth performance to its “unusual approach”.

“We are a service company rather than a sales organisation.

Our growth is entirely organic based on reputation and referral. This allows us to focus on the quality of the work we do rather than waste time with cold calling.

It’s better for our consultants and better for our long-term relationships with clients because we are not foisting ourselves on people who don’t want us,” he says.

Kerr also extols the value of being a true specialist. “It’s really important to understand the depth and the detail of the market. You can’t understand 30 or 40 [IT] technologies, you can only understand one of them,” he says.

Sean Zimdahl, chief executive of IT recruiter, Aston Carter (15th), says that what sets the company apart and has enabled it to grow its turnover from less than £10m to £100m plus within a decade is “our proven business model that we’re successfully replicating in every new market we enter”.

Zimdahl adds: “Ninety per cent of our staff are recruited at entry level, and each consultant specialises in a specific business or technical vertical - with a defined career path, their own personal learning and development plan, and the opportunity to become a shareholder in the business if they hit their targets.

“Everything at Aston Carter is about the individual. Every single office has been grown organically, all our opportunities have been created internally, and there are rewards and opportunities for performing staff.”

Mark Swain, managing director of multi-sector recruiter Fusion People (18th), says the company’s focus on passive rather than active candidates gives it a competitive edge and drives growth. “It gives clients access to a wider selection of candidates and a better match than in-house recruiters and our competitors who often use job boards,” he says. “As an agency you have to stand apart in the way you do your resourcing.”

A noticeable aspect of this year’s Fast 50 is the almost complete absence of companies which have grown through merger and acquisition (M&A) activity. Compared with 2009, when six companies engaged in M&A, only one recruiter (FiveTen Group) made acquisitions. That said it was this that helped propel FiveTen to the top of this year’s rankings.

“The biggest factor in the reduction of M&A was the availability of debt and equity finance. Companies were also focused internally and looking to position themselves for the upturn,” says Evans.

The number of Fast 50 companies backed by private equity has also dropped, says Evans. He suggests that one reason is that private equity-backed recruiters have been focused on paying off their debt in “very difficult market conditions”.

Leadership is also a key factor, says Evans. In the tough business environment of the past 18 months, there has been more emphasis on the ability “to guide businesses through tricky waters” rather than pursue unbridled growth.

Diversification, both sectoral and geographical, also played an important role in driving growth among this year’s Fast 50 companies.

Kingston says a good example is Eurostaff (12th), “which historically focused on the ICT and finance sectors, but has now diversified into serving the renewable energy and analytics industries”.

Multi-sector recruiter Diamond Resourcing (25th) has also benefited from diversification.

Director Mark Diamond says that while parts of its business, notably financial services, bore the brunt of the downturn, this was more than compensated for by the growth of its healthcare business, Health Care Services.

Based in the East of England, the company has doubled the number of branches to eight, and health care now makes up 75% of the firm’s £6m turnover business, he says.

Drivers Direct managing director Gethin Roberts says the company has switched some of its focus away from pure recruitment into training not only its own drivers, but also the drivers of some of its clients. Training now makes up around 10% of the firm’s business, he says.

Paul Amani, managing director of Petrolic Consultants (19th), one of the strong representation of oil & gas recruiters, attributes the company’s strong showing to a number of factors: high demand from clients for the personnel it supplies and diversification away from the relatively weak UK market into new markets, namely Japan and Qatar.

Overriding all of this is the company’s focus on understanding both clients and candidates, enabling the company “to find a perfect match”.

Swain adds that Fusion People’s growth was boosted because demand from its clients in the Middle East for civil engineering professionals peaked in 2008.
While recruiters such as Petrolic have undoubtedly benefited from the buoyant energy markets of 2008, because of the time lag in providing accounts, next year’s Fast 50 is likely to reflect the worst of the downturn.

However, Catalyst’s Evans strikes an optimistic note, saying that he expects an influx of new entrants to next year’s table, “particularly where they bring a fresh approach to service delivery and the use of technology”.

With 29 of the Fast 50 new entrants this year, Evans notes that achieving fast growth in one year can sometimes be achieved by acquisition or by operating in a niche with low competition.

However, he argues that the bigger challenge for recruiters is sustaining strong growth over a longer period.

“Medium-term growth is a very different and serious achievement, and is always the result of good sector knowledge, high service levels and the quality and motivation of the people involved,’ he says.

But whether recruiters are focused on the short or the longer term, and whatever the state of the economy, it’s clear that growth opportunities will continue to exist.

 

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