Question: Would you enter into blue collar hiring?
Clarify: Finding the right kind of people - with experience and qualifications for full time employment for employers in manufacturing / services / construction employers
- Blue collar workers are not like white collars, they dont have linked-in profiles, they are not tech savvy and do not have career profiles
- Employers for blue collar workers rely on word of mouth / agents to find the right people.
Current Solutions - no current solution exists except word of mouth and local agencies.
Considering that we are a new venture, I will assume we dont have current assets and decision depends on overall opportunity, return on investment and risks. I will assess each.
There are roughly 150m or so workers in US. I will assume roughly 50% of them are likely blue collar workers. That makes it 75m or so. The unemployment rate is roughly - 5% - apart from that many of the blue collar jobs are limited duration contracts, so there will be a greater number of people looking. Assuming that to be around 10%, we see that 5m people could be looking / available for an opportunity at any given time / may be every month. On the other hand, there are roughly around 200k jobs being added on an average every momth. Assuming 50% are in blue collar, 100K jobs are being filled every month. These are for new positions and then there is turn over. Assuming that it is 200k for sizing, and 20% of the positions are being filled via this venture - we are looking at 40k jobs / month. Assuming that each job filled carries a referral cost - say around $100 (assumed salary = $20k per year, 100/20k = 0.2% referral fee ), then that is roughly a 400k / month business or roughly a 5m / annual business. The upper limit of this venture is 5x5m = 25m business. Assuming 50% margin, that is 12.5million dollar business.
Return on investment:
Main cost factors:
- Building simple directory of blue collar workers
- Building software to search and match workers
- Marketing, Partnering with local worker agencies to create a new destination, new habit
- Support costs
Assuming that this service is provided via a mobile app, a simple team of 1 CEO, 2 full stack developers, 1 marketer / partner expert, support team, Marketing cost - that roughly is 500K(2x200k+100k, 250k - support, 250k marketing/operational cost) = 1m/year. Therefore ROI would be 4m for every 1m spent on the third year. That is 400% return on investment - which is very attractive but has limited upside.
1. It is likely that this business has lot of offline business dev costs on an ongoing basis and little to distinguish between other competitive offerings that might come up. So this margin would erode over time.
2. Changing habits of workforce which is not used to tech solutions for what is well-ingrained. This change of habit could take too long and use up working capital.
3. In many case, unions might be the gatekeepers of hiring rather employers. Then, this kind of a solution does not make sense.
Given the above, the recommendation would be for the investor to wait for someone to work on creating awareness and coming up a with a product built to capitalize that awareness for capital effeciency.