What staffing entrepreneurs really need to learn from investors

When I talk to owners or managing directors of staffing companies, the conversation almost always starts the same way:
with revenue.

“We’re at €40 million.”
“We’ll break €100 million this year.”
“We grew by 12%.”

All valid statements.
But they don’t answer the most important question:

How good is this business really?

As soon as topics like scaling, succession, external capital, financing, or a potential exit come into play, the perspective changes completely. Different rules apply.
And this is where international valuation logic becomes highly relevant.

In many traditional industries, revenue is a reasonable proxy for value creation.
In staffing, it fundamentally isn’t.

Why?
Because revenue in our industry is largely driven by pass-through costs:

• Salaries of external employees
• Freelancer hourly rates
• Social charges, provisions, sick leave
• Other project-related costs

Depending on the business model, the same euro of revenue can have completely different economic meaning.

That’s why:

Two staffing firms with identical revenue can be worlds apart economically.

Private equity investors, family offices, and strategic buyers almost always ask the same first question:

“What is your Net Fee Income – and how has it grown over the last three years?”

Net Fee Income (NFI), often also called Gross Profit, represents the true value contribution of a project:

• independent of contract type
• independent of pass-through costs
• independent of accounting logic

Revenue does not create value.
NFI + conversion creates value.

Only the ability to convert net fees efficiently into operating profit and cash flow determines valuation, scalability, and exit readiness.

Many companies still manage their business based on:

• revenue targets per consultant
• revenue growth per division
• revenue comparisons between perm, contract, and temp

The problem: This approach trains the business against its own economics.

A temp consultant with €200,000 in revenue can generate the same value as a perm consultant with €25,000 in revenue — or even less, if the cost structure isn’t clean.

Ignoring this leads to:

• misleading productivity benchmarks
• distorted margin comparisons
• poor strategic decisions

Assume one consultant with a target of €250,000 NFI per year — a common international benchmark.

Assume further:

• 20% EBIT margin on NFI
• resulting in €50,000 EBIT

The economic performance is identical.
The revenue is not:

• Perm: ~€250,000 revenue (almost 1:1)
• Contract: ~€1,250,000 revenue
• Temp / Agency: ~€2,200,000 revenue

Resulting revenue margins:

• Perm: ~20%
• Contract: ~4%
• Temp: ~2.5%

Anyone comparing these businesses based on revenue margins will inevitably draw the wrong conclusions.

The NFI margin is 20% in all three cases and only that allows a fair comparison.

Once NFI is accepted as the core steering metric, a clean KPI logic emerges:

• Productivity = NFI per consultant
• Cost ratio = costs / NFI
• Scale effects = declining overhead as % of NFI
• Profitability = EBIT / NFI
• Enterprise value = EBIT × multiple (implicitly NFI-based)

That’s why professional investors use NFI as the foundation for:

• budget models
• scenario planning
• growth strategies
• purchase price calculations

Revenue usually then becomes secondary.

Two companies with identical NFI can still be valued very differently.

The difference lies in:

• stability of NFI generation
• repeatability
• dependency on a few top performers
• NFI-to-EBIT conversion

Especially conversion is a powerful lever:

A 1% improvement can mean millions in enterprise value.

Revenue is a sales metric.
NFI is a leadership metric.

Anyone who wants to build sustainable value must:

• understand NFI
• measure NFI
• manage NFI

Everything else is cosmetic.

Or put differently:
Revenue looks impressive.
NFI creates substance.