Having been in business for over 5 years and talked to hundreds of companies and passionate entrepreneurs from varied industries and geographies allowed us to develop diverse insights regarding potential business models for On-demand staffing.
What is a business model?
For the context of this post: A business model is how a company makes money.
Example: Facebook's business model is to give a platform to connect, and show ads to make revenue. They could have gone with charging a monthly subscription fee for usage or a freemium model (Like Linkedin) where you can use it for free but to unlock some advanced features you have to pay more.
Or Uber: They could have come up with a model that charges the driver for providing leads. Hence drivers would pay a dollar for every time they accept a ride and let them charge the client directly.
How do we come up with the business model:
In many cases, not always though, entrepreneurs and executives in the staffing industry arrive at the business model from one of the two ways:
Existing business model: Most on-demand staffing companies are migrating from an existing temporary staffing company. By default, these companies want to replicate the model of their existing temp staffing company or an acceptable model in the industry.
Inspired Model: They have some benchmark, standard, or platform they are inspired by and want to replicate that model.
While both sources are fine, we have built up our own assessment on how to evaluate a good business model. With that we proudly present...
If we don't know what we are looking for, we will never find it:
A Step by step guide to finding the right business model
Step 1: Listing
List all potential business models. There is no wrong answer. Brainstorm and bring everything to the table. The most popular models we have seen are:
A fixed hourly rate to bill clients and a fixed hourly rate to pay candidates. The margin between these two rates is the profit. The platform or staffing company handles the payment.
A fixed per shift charge. Here the charge is more like a finder's and scheduler fee. Shifts could be for an hour or 10 hours. The fees remain the same. The client handles the payment.
Per unit fee: Clients post jobs and reviews and picks from the available staff themselves. They pay to post, to view candidates, or to connect with a candidate. The client handles the payment.
Step 2: User Advantage
Once you have listed all potential business model here are some questions to help you evaluate your business model.
Think of your business model vs your biggest competitor with another business model. Which one will your ideal client choose? Is there a subsegment of your clients that would choose you? How big is that segment? Enough to be profitable and scale?
Do the same with candidates. Who will candidates choose if they had all the options? How many will choose you and why? Is that a big enough pool?
Do a combination on both side (Client & Candidate) to see which one ranks the highest (i.e. gives you the most amount of growth).
Step 3: Defensibility
Used quite frequently in the technical circles, defensibility deals with how will you defend your market share once you have acquired it. For example: what if a competitor with the same tools and technology comes up and offers your client cheaper service. How do defend your business? Maybe your business model has the answer to it. Maybe not. If one of the business models offers you better defensibility but is not that highly profitable in the short term, it might be a better option.
Step 4: Bottomline Profitability
Most importantly how profitable is the model? In the short term and long term. But mostly long term. Which one makes you the most profitable after meeting other criteria. I am focusing on the long term here because in many cases, in the short term you will have to give up profit for growth and scale. Which will eventually start churning out profit. As they say: Revenue is vanity, profit is sanity, but cash is king. So most importantly you need to factor in your business model to meet your cash flow needs.
To summarize:
All models work well in different scenarios. At Wolf we support all the business models and the model can be changed/switched within a matter of seconds by your team itself. We recognized that after doing this exercise you might have a hypothesis of which is the best option, but we could never be sure. This is why we give you the option to change your model on the fly. What we can be sure of is the need to experiment. Conduct quick experiments to test and iterate. Hence the platform's ability to quickly adjust the business model and run different experiments is key. At Wolf we have spent an immense amount of resources so you can quickly change and adapt the model from your dashboard.