The Secrets of High-Margin Staffing Companies: Focus and Thrive with Francis Larson

Benjamin Mena [00:00:00]:
You are going to rock the year, and we're going to help you do that. Here at the Elite Recruiter Podcast, we have the Rock the Year event, the Recruiting Growth Summit, kicking off on March 10. It is going to be awesome. We're going to be focusing on mindset. We're going to be focusing on sourcing. We're going to be focusing on AI. We're going to be focusing on operations and high performance and BD and sales. Every single thing that you need as a recruiter to make sure that you can rock 2025 and make it the year of abundance.

Benjamin Mena [00:00:28]:
Make it the year that that works for you. Make it the year that you crush every single one of your dreams.

Francis Larson [00:00:33]:
Let's go get it.

Benjamin Mena [00:00:39]:
Coming up on this episode of the Elite Recruiter Podcast, curious, motivated people are.

Francis Larson [00:00:44]:
Going to be able to accomplish so much with AI tools. If you have those things, the world is yours. And if you don't, like, you're going to wonder, like, and this is anthropic. CEO is saying, it's like, you're going to wonder, like, how did I get here? You know, you get to 10 million, $20 million of sales in a certain niche and like, okay, let's diversify. No way. You should get to, like, 300 million of sales in that market before you diversify. Like, forget it. Like, just really go deep.

Francis Larson [00:01:09]:
Welcome to the Elite Recruiter Podcast with your host, Benjamin Mena, where we focus on what it takes to win in the recruiting game. We cover it all from sales, marketing, mindset, money, leadership, and placements.

Benjamin Mena [00:01:27]:
I am so excited about this episode of the Elite Recruiter Podcast because there are staffing companies and recruiting companies that are doing everything right and growing right now. Growing last year, but not everybody's growing. So behind the scenes. One of the coolest things about seeing behind the scenes is the data. The data combined with the leadership, combined with what's actually working and how to grow. So that's what I am so excited to have Francis from Send here today to talk about what he's seeing from the companies that are doing everything right and just absolutely crushing it. So, Francis, welcome to the podcast.

Francis Larson [00:02:02]:
Benjamin, thank you for having me.

Benjamin Mena [00:02:04]:
So, real quick, before we start doing a deep dive and talking about the ins and outs and the data and what's actually working. Quick introduction about yourself.

Francis Larson [00:02:12]:
So, I'm Francis Larson. I'm founder and CEO of a company called Ascend. We're a back office and employer of record for staffing companies. We're backed by Y Combinator. We've Been doing this for six years or so. And before that I was also an entrepreneur. We sold our company in 2018. So been at the entrepreneur game for a long time and now very deep into the staffing market.

Benjamin Mena [00:02:35]:
Okay, two questions on this. Before we start doing like a dive into how you ended up in the space. I'm seeing YC getting a lot more involved in the staffing and recruiting like businesses.

Francis Larson [00:02:45]:
Why is that? You know, labor and employment is just such a big part of the economy that I think it's very natural. So YC Y Combinator has I think like close to 5,000 companies now. So they invested in us in 2019 in the winter batch. And you know, they invest in like 200, 300 companies a year. It's pretty astronomical. So you get like a pretty large index of almost the entire startup economy is flowing through yc. So you know, naturally a lot of that is going to be labor focused companies. And I think that just staffing in general is.

Francis Larson [00:03:22]:
A lot of people are waking up in contingent work. They're waking up that this is a big part of the economy. A lot of people don't know about it. A lot of people don't know about staffing. They think it's just something that, you know, somebody goes on maternity or paternity leave and you know, you need somebody for three months. But in reality it's like a huge part of the economy. And so I think just a lot of YC companies have, have picked up on it. Less so I think on selling to staffing companies, but more in the contingent sort of payroll and workforce space I think has been really hot.

Francis Larson [00:03:54]:
You know, there's some like a couple billion dollar companies in the space. One from our batch actually. It's just an area that's so big, it's growing especially around what business we're in. Employer of record was like the hottest thing, you know, especially during COVID So yeah, I think workforce in general is just a huge part of why see companies especially for the last five years. Okay.

Benjamin Mena [00:04:13]:
And so like how did you end up in this wonderful world of recruiting?

Francis Larson [00:04:18]:
Yeah, so my former company, we were a student lending company and before that I had freelance and so I, I've actually never had a real job. I ever, I've never, I. I worked when I was in high school, I worked at like this place called Hollister for like three months and then I worked for pro baseball after college. So I was professional athlete after college, but I never had a real job. So I left pro baseball and I was in an angel organization. I left and I had no skills. I taught myself how to code and I wanted to start a company as you do and in order to make money while I was like trying to be a startup entrepreneur, I freelanced. So I was like doing contract work and I loved that.

Francis Larson [00:04:57]:
I thought I was good at it. I liked, you know, temporary type work. I really like freelance gigs and I was doing well. And so eventually the company that I was trying to make, we eventually sold that in 2018. And so that was like a really big windfall for me. I was really happy about that. After our earn out, I left the acquirer and joined YC and I was like, I'm going to build something in the sort of temporary freelance market. I first wanted to make a marketplace and then we went to something like, okay, we're going to make a peo for freelancers, you know, to handle their benefits.

Francis Larson [00:05:30]:
And then that put us onto staffing and we realized that, okay, there's a lot of staffing companies. We try to be a staffing company for a little bit. And we realized though that being a staffing company is actually really hard. You know, if you find a client and you find a candidate and you know, it's fine on the permanent side, but if you're on the temporary side, you know, that's when the work starts. It's not where it ends where it starts. And so we realized very quickly that staffing companies have a very hard time with just operating, like operating in different states, like dealing with employment stuff, dealing with funding, you know, when you're fronting payroll until a client pays 30 days later. So we realized all this stuff and there are all these vendors in the space that were servicing staffing companies and they were really bad. They were like really old school.

Francis Larson [00:06:16]:
They had technology that like was really, really bad. And we thought, you know what, there's a better way to do this. And so I had this like tech background and I'm like, I'm going to make a company that's purely focused on staffing companies, employer of record, an all in one platform just built for them and use all those skills that like we had built up in our former company and dealing with finance and lending, all that stuff and put all that effort into this space. And we launched it, you know, just around Covid time and it blew up. It really has done well. We grew very rapidly. We now work with all sorts of staffing agencies, with hundreds of agencies on the platform, got thousands of W2s on our payroll every single week. And you know, we're a large employer in every, every state.

Francis Larson [00:06:57]:
We're, you know, we've really grown up. So what's happened is, you know, starting from being like a humble freelancer now to being I, I think an integral part in a lot of staffing companies operation, we see a very large cross section. So it's been sort of, we've gone through the back, so to speak. A lot of people, you know, get into recruiting and selling for staffing companies and that's how they get in. For us it was by way of the infrastructure. Now we have a pretty good overview of the market.

Benjamin Mena [00:07:22]:
So you're going to laugh at this. I was probably like 15 years into recruiting, maybe just a little less than that before I launched my company. And like right after we launched our company, I got a call from a potential client. It was just like, hey, can you hire a bunch of contractors? I started running the numbers and I'm like, I just launched. I'm like, I don't have like enough payroll to handle these like high level engineers. Like I can't afford this crap. And I definitely can't afford, I can net 30. I'm like, I'm going to be broke.

Benjamin Mena [00:07:47]:
I don't even have a house to mortgage. So I actually turned the work down because at that point in time I did not know about ERs. So for the one person out there that is like me that is listening to this podcast, quickly explain what an eor what, how you guys operate.

Francis Larson [00:08:02]:
Yeah, so the problem that you were facing is really a funding problem and that can be solved in a lot of different ways. But that's like inherent in staffing. Right? So you have to cover payroll weekly for W2s, which is 90% of the staffing market, you have to cover payroll weekly or bi weekly. Clients are paying, you know, 30 to 60, 90 days later. So you inherently have a cash flow problem in staffing. There's operating capital need and so, you know, there's a lot of services for that. There's like factoring asset based lending, credit lines. And then a newer solution in the market is something like us, which is we're an employer of record that funds.

Francis Larson [00:08:33]:
And so what that means is we become the employer of the workers, we cover their payroll, we handle their compliance, onboarding, everything, because we're technically their employer. And then we also front the money for the payroll, the benefits, expenses, all that stuff, burdens. And then the clients later on, you know, could be 30 to 90 days later, whenever their terms are, they'll pay us and then we release the gross profit to the staffing company. So in effect we've, you know, provided payroll funding. So factoring off like works a similar way. Factoring like buys your invoices and mantis you money. AVLs are similar. You post invoices and you, you borrow on the back of them.

Francis Larson [00:09:09]:
But factor, fundamentally staffing is like a cash flow problem. And on top of that we offer this other stuff which is we're the employer, we're handling all the crazy compliance stuff, you know, you getting sued, you having to deal with changing regulations, all of that stuff. So we're a bundled solution. But the problem you talk about is like, it's really inherent in staffing. It's like you're always going to have funding issues.

Benjamin Mena [00:09:29]:
And it was just like, because I started my recruiting career at one of the largest staffing companies in the world and I'm like, I don't have that kind of backend operation. It's just me and my wife. I'm like, oh. So I actually turned down the work.

Francis Larson [00:09:42]:
And this is one of the reasons. So some of our best customers are, are basically folks who are, they're at a big agency. So let's say they're at like an Allegiance or something. They know how to sell and they know how to recruit and they know how to have a team of people to sell and recruit. Right. So you know, they're good at their job. But then they decide I'm going to leave allegiance or whatever big staffing company and I'm going to go on my own. And then the first thing they realize is wait a minute, I have to do all this other stuff that I was taking care of me by the mothership, you know, back in my big company, like weird finance stuff, back office stuff, managing, like I have to meet payroll, I have to like be registered in all these states.

Francis Larson [00:10:21]:
So like that's the one thing we see is like, and this is the core insight to our company is that recruiting and sales are fundamentally different skills than operational back office. It's just, it's a different personality, it's a different like, you know, you, the paths to get there are different. Everything about recruiting and sales is fundamentally different than running like high quality operations in back office. So like, you know, it's oil and water, it just doesn't mix. And we realized this like very early on that like you need to provide like almost like Shopify. So Shopify, interestingly enough, like, like if you're good at selling and branding, that doesn't mean you're necessarily good at like running an E commerce site, right? So like, you know, Shopify came in and allowed like thousands of these e commerce sites to come into existence. We sort of see ourselves a similar way. It's like you being good at recruiting and sales is just nothing to do with you, like running this, like, big operation.

Francis Larson [00:11:14]:
It is a different skill and a lot of people just frankly don't even want to learn it or care to learn it. It's just not, not part of their, their interest at all.

Benjamin Mena [00:11:21]:
Before we start figuring out what the agencies that are growing are doing, it's something I like. I know we've had this conversation a while back, but you guys also work with a lot of companies trying to break into the United States. Can you talk about that?

Francis Larson [00:11:33]:
The US is the best staffing market by far. You know, just in terms of size, in terms of the type of discipline, the type of pay rates, of bill rates, excuse me, like, the margin in the US Is very large. The south, like, just the level of markup you can get is very good. Just the size, the type of disciplines, how fast certain markets are growing. There are many reasons, like folks outside the United States want to go into the US So the best market for that is like, is uk The UK recruiters are, you know, they're great at speaking English. They recruit in the most competitive staffing market in the world. You know, in the UK for instance, there's 30,000 staffing for like recruitment agencies. They call them.

Francis Larson [00:12:12]:
There's 30,000 recruitment agencies for a population of like, you know, it's like, I think it's 60 million. And then in the US there's only 20,000 agencies for 300 million. So they have like five times as many agencies versus population than the US so if you can make it in the UK and like, if you're good in the UK that means you will crush it in the US like you have inherently, you have, like, you have perfected something in the most competitive staffing market in the world. And you can take that into the U.S. you know that statement, like, if you make it in New York, you can make it anywhere. Well, if you can make it in the UK and stack your market, you can make it anywhere. And so we see a lot of UK firms coming into the US Canadian firms coming to the US Other folks, Europe coming to the US but the UK bar flower, especially the language and the competitive nature of it means that they find that the US market is just very good for them and then the economy, like, there's other reasons like sort of macro conditions, you know, sometimes like UK economy or Canadian economy might be like depressed. And then the U.S.

Francis Larson [00:13:16]:
economy, you know, continues to be an exception. You know, who knows for how long. But it happens to be a place where a lot of people can make money.

Benjamin Mena [00:13:23]:
And like, is it hard for these, like international companies to get set up, like doing all this to be able to use you guys, or is it easy process?

Francis Larson [00:13:32]:
So I think, I think a lot of people are like, I think this is a general thing about starting a company. I think people, whether you're based in the US and starting a new staffing company or you're in the UK wanting to break into the us it's really not that scary. Like as long as you can fund it and as long as like, like you figure out the funding situation with somebody like us or someone else. Like, the reality is, is that it's at will employment in the US for W2. And that means you're not going to be stuck with these crazy termination windows. You know, you get a client, you find a worker, you put them on payroll, invoice them. There's some operational complexity, but there's nothing to be like scared of. They're all solvable problems that, you know, you can find vendors like us or someone else, like, you can figure out these problems in other markets, like the UK for instance, or even Canada, like other places where there's no at will employment.

Francis Larson [00:14:20]:
It's actually really scary to do staffing. Like, it's hard to terminate somebody. Like, it's really, really hard. Like your contract ends, but now you have two months where you have to pay somebody, for instance, or you, you know, you're gonna get 28 days of holidays a year. Like some of these markets outside the United States, you should be scared to go into staffing. It's actually, it's really scary because you might not necessarily be able to bill for what you have to legally pay. So the US like, I think people should be less afraid than they are and should just go for it. And then, you know, like, if you're in a big agency and you're like, why am I only like getting 10% of my gross, you know, margin that I'm making for the firm? Well, you know, it's probably time to like start your own firm.

Francis Larson [00:14:58]:
There's no, there's no barrier to entry. Like nowadays, like, you can get all the infrastructure you need just like again, back to Shopify. If you have a product that you know how to sell and you know how to sell it, like you know how to recruit for it, you know who to sell to. There's no reason you shouldn't start your own agency. Like, staying at a big firm and we compete with big firms. Like, big firms want to keep you. They are competitive over their top billers the same way. Like, they understand that they can go start a firm any day and take their whole book.

Francis Larson [00:15:28]:
They know that. So, like, if you're really good at your job, there's no reason to stay at a big agency. At a certain point, you should start your career there. Sure. But if you're good, you might as well make 100% of the gross margin yourself and start out on your own.

Benjamin Mena [00:15:42]:
If you want a good laugh. The agency that I started at starts with an A. And I think, like, my gross margin of like, my best year there was like 650k and I think I walked away with 62,000.

Francis Larson [00:15:53]:
Oh, my God. Yeah. Like, yeah. No, it's crazy. It's crazy. Like, think about that. Like, like, if you're on your own, it's 100% yours. I mean, other than your recruiters or whatever who you're paying out.

Francis Larson [00:16:04]:
But, like, you know, you're talking five times to ten times as much money for the same amount of work. I mean, maybe the brand helps you a little bit, but not really. Like, only if you're doing the most big enterprise. Like, if you're dealing with, like, some enterprises, you know that you're not going to get in the door until you know you're a top 10 staffing company. But, like, for most clients that are under, like, 10 billion sales, like, do they really care? I don't think so. I think it's just you. I think it's your ability to sell and talk about your solution and know the market. I really don't think the brand matters until you're dealing with, like, $100 billion, you know, organizations.

Benjamin Mena [00:16:39]:
Okay, so fast forward, like, to the agencies that you see that are just absolutely crushing it. What are they actually doing?

Francis Larson [00:16:47]:
It is all about focus. They pick a very narrow band of customers they want to serve. So, like, they'll pick, like, schools and. Right. They'll pick, like, schools of a certain type, like, you know, high schools. Or they'll pick, like, cybersecurity startups. Or they'll do like, fintech, or they'll say, I'm going to do government. Right? So they pick a very narrow band of customers that they want to service, and then they have a skill set that they want to accrue for those customers that's like relatively narrow, like going back to school example.

Francis Larson [00:17:17]:
They're like schools and then they'll like nurses at schools, right? They won't do like nurses everywhere. They'll do like nurses at schools or they'll do like nurses at nursing homes or they'll do cyber, like AI engineers at FinTech companies or they'll do like a certain type of clinical science, life sciences person at life sciences startups, right? So they get very narrow and they pick a skill set that they're very good at recruiting like the generalists. We actually don't see any real generalist doing well right now. Like generalists. It very tough. Like some people with like historical, you know, historical books are doing well in generalist. But it's all about focus right now. Like you're not going to be able to compete with platforms if you're not having like focus.

Francis Larson [00:18:03]:
Like we see this in light industrial and people are trying to be generalist. Any kind of light industrial doesn't work. You have to pick like I'm going to do meat, like I'm going to focus on like meat or like I'm going to focus on third party logistics and that's it. And so like it really comes down to focus and they don't deviate from that. And then so that's like the sort of the strategy that they're going with and then how to distribute they're doing, and I think you've talked about this before, they're doing like very specific type of sales. Like they'll do LinkedIn content for their niche, they'll do conferences for their niche. Everything they do is targeted to a very narrow band of community where everyone kind of knows each other or respects each other. And it's sort of that focused strategy that gets success within that market and they really don't try to expand out from that.

Francis Larson [00:18:49]:
A lot of people try to diversify. They had like know you get to 10 million, $20 million of sales in a certain niche and you're like, okay, let's diversify. No way. You should get to like 300 million of sales in that market before you diversify. Like, forget it, like just really go deep. Unless you're, you know, you. There are some natural limits, but what we found is that folks who focus on the strategy side and then on the distribution side when it comes to community content, any kind of interaction, they do really, really well.

Benjamin Mena [00:19:16]:
Okay, so let me just take a few steps back in this. Like you just mentioned a bunch of different types of skill sets. Can you guys actually Handle those as your eor.

Francis Larson [00:19:24]:
Yeah, yeah.

Benjamin Mena [00:19:25]:
So we.

Francis Larson [00:19:26]:
We have the broad scope of the market, so the only things we don't cover are like, oil and gas. We don't cover oil and gas. We don't cover, like, shipbuilding, a heavy industry. And then there's certain things we can't do, like medical doctors, although we do the rest of health care, can't do prisons, stuff like that. But everything else we can do. And so we see, in a way, we're kind of like The S&P 500 of, like, staffing because we see all the companies that are doing well and what's doing poorly, what's doing well. We just have a broad index of the market.

Benjamin Mena [00:19:53]:
You guys do government security clearances.

Francis Larson [00:19:55]:
We cannot. So we could be. The problem with clearances is that the whole chain has to be cleared. So everybody. It's very, very difficult. And that is one area. If you can do it, if you could focus on government, like, you should actually own that yourself. You should get cleared.

Francis Larson [00:20:15]:
Like, that is your competitive advantage. Because it's so hard to do that.

Benjamin Mena [00:20:19]:
I always have to ask, since that's.

Francis Larson [00:20:20]:
The world I live in, the liability there is, like, you go to jail forever. So it's a little bit. Little details.

Benjamin Mena [00:20:27]:
Details, yeah. Don't worry about those details. Okay. So when you're talking about this, like, you're talking about building, like, how big are some of these staffing companies that use EORs? Like, you know, I occasionally think of this as just like a one, two man shop, but is this entire teams using their back office for ERs?

Francis Larson [00:20:43]:
Yeah, so we have like a barbell. Right? So we have, like, 1. So it's like code 0 to 15 million. 15, 30. Like 15 to 30 million is sort of the part where people start saying, I want to do this in house. So if you're doing 30 million of sales, people start to think, well, you know, maybe I. You know, we can take some of this in house. Maybe we won't fund.

Francis Larson [00:21:02]:
Maybe we'll do our own insurance and they move off. And so, like, you know, 0 to 30 million is where we have our best customers. And then there's a gap of like 30 million to, like, you know, 100 million where people do things in house. And then you have platforms which are doing 100 million plus which do a lot of VOR because they work with lots of VORs. So we have, you know, zero to $30 million. Staffing agencies who are, you know, they're just. They don't have the scale to justify the fixed Investment of having like a chief legal officer or a chief financial officer or an HR person or a back office person or a payroll person, they just don't have. They can't amortize that cost over their workforce.

Francis Larson [00:21:45]:
So there's no point up until like maybe 30 million where it starts making sense. And then you have platforms which are, you know, 100 million plus. Like these are like labor marketplaces, labor apps, you know, direct sourcing platforms where they, you know, strategically decide they don't want to be an employer. And so they'll put all of their volume through different EORs, usually not one. They'll work with several, depending on the location. And so it's really this barbell. But if you're under, under 30 million of sales, there's just like. And it goes higher too.

Francis Larson [00:22:12]:
We have customers doing more than that, but that's like the sort of area we see. There's just no point. Like you really should focus on getting like doing well in your market, you know, paying a couple extra percent. A couple percent. It has going to have no bearing on you for growth. You really should just own your market. Forget about like, you know, like trying to like shave off half a percent. You know, you're going to be able to like have way more margin by focus, by growth, by being good at selling.

Francis Larson [00:22:40]:
And so we just see like companies that, that try to penny pinch, like, and we see this all the time. They try to do everything in house and like, good for them, whatever, they're going to save money during that. The problem is a lot of times those firms stay there. They stay where they're at because they're so focused on operations. Like, think about this, like if you have to do a day, a week, a full day of an executive's like like time devoted to internal operations, that's just like kind of doesn't go to growth. And that translates to like a 20% lower growth rate per year. You know, over five years you're a dramatically different company. Just like small changes like that.

Francis Larson [00:23:14]:
And we think the, the biggest thing is like focus. If you're a small, you don't have the time to hire enough people to actually like deal with these issues. And you're going to be like losing your focus because you just don't, you just don't have the scale to justify the fixed investment.

Benjamin Mena [00:23:28]:
If I come in with like an agency of like 10 recruiters, like, how do I work this out with a commission structure with all my recruiters while using an eor, like how does that work out?

Francis Larson [00:23:35]:
It's the same, I mean it's the same as you're doing now. You're just paying a little bit more in burdens for burdens right now. Like if you're doing, let's say you're doing a hundred dollar pay rate, like $150 bill rate, your burdens right now are probably something like around 15%. So you're probably paying like 15% for FICA, SUDA, Fuda, other insurance type stuff. Like call it 15%. With an EOR, you're paying a few more percentage points. So like unless you have like markups that are like 30%, which is just ridiculous, you should never do that. Even 14%, it just doesn't matter.

Francis Larson [00:24:04]:
Like, like an extra 2, 3% to an EOR does not make a material difference. You should be charting if 50% markup plus anyways. And so those, the small percentage points shouldn't make a big deal. But yeah, you are going to pay for it. It's really like what's the trade off? Like you can pay like you know, three extra percent or you can hire you know, 150 grand, you know, HR and payroll person, you know, total to deal with stuff. So it's like do you want to have that fixed cost that like doesn't go away and then also your focus or you pay a couple percentage points. So it's like realistically like, you know, the burden might change going up with somebody like us or any eor, but in reality like you're still going to be paying for that in other ways. Either you're focused, you're having a fixed cost by having a couple of employees, you're doing operations.

Francis Larson [00:24:51]:
So in reality like the costs are, you know, it's somewhat equivalent. The real difference in terms of, you know, additional profit you're paying to the ER is like maybe even less. It's like around a percent. So it's really, really tiny when you start factoring in your own existing cost that you would have to do in order to just do everything in house.

Benjamin Mena [00:25:10]:
So I'm building up my staffing agency. I'm using an aor. My goal was to grow it, scale it and sell it. Can I actually sell my company even though like all the staffing is being done by the eor?

Francis Larson [00:25:21]:
Yeah, yeah, yeah. So we've had customers who've been bought and like the staffing company that is buying you, they're going to transfer everyone to their payroll anyways a lot of the time. So they're just going to transfer folks. I mean a Lot of staffing acquisitions are asset sales anyways, so that are not actually buying the company, they're buying the assets and then the company's folding. So asset sales are very, very common because of liability anyways. So when a big staffing firm buys another staffing firm, a lot of times they're buying the assets, they're transferring the people. And so it doesn't matter if you're the employer or someone else is the employer, the people are leaving anyways. It doesn't matter.

Francis Larson [00:25:56]:
So like that's one thing. The second thing is that the compliance risks are worse, you know, so if, or worse than having an external employer, if you're having an acquirer and they come in and they see you haven't been doing compliance for 15 years or 10 years, you know, that's way worse in diligence than saying, hey, we have a third party, does a really good job at compliance. Like that's what they care about is like latent risks, like risks that are like unknown liabilities that could crop up in a couple years. They're more worried about that. And then any fees you pay to like a third party back office, they're probably going to adjust your earnings down because that fee is going to go away when the acquirer buys your business. So like in reality that effect, like the profit effect of an EOR fee is going to go away because the investment banker, whoever's doing your financials, they're going to adjust your EBITDA down or sorry, to adjust it up to remove the fee because the acquirer is going to know, like, we're not going to have to pay this fee going forward. So like what we've seen is that it doesn't really matter for folks. People, people get weird.

Francis Larson [00:26:58]:
Like sometimes staffing owners, like, well, you know, like I want to have more control. But you know what, like, it's a personality thing. Sometimes, sometimes people, they don't want to use a third party provider. It's like a, it's more of a question like, do you like outsourcing critical stuff that you don't want to do? That's a broader question. And sometimes it comes down to personality. You don't want to give up a certain amount of control.

Benjamin Mena [00:27:17]:
Okay, so picture this. You're talking with a recruiter or a firm owner that's like 100% on the direct placement side of the house, maybe a little bit of contingent and retain in there, but they want to start up a staffing side. What's the best way or the best advice that you would give that to be like, okay, let's start the staffing side of the house.

Francis Larson [00:27:38]:
We okay, so you get like a per shop doing like 10 million, right? Make 5 to 10 million in direct hire fees. And what they do is they go, I really want to get into this temp game. I want to sell. They want to get to like 5, 50% perm to temp, because that's going to affect their multiple a lot. Like, if they're doing 100% perm, their sale multiple is going to be like one to two times, like really low. But the second you get into temporary, like being a heavier percent, the multiple of your EBITDA is going to go up a lot. So they think to themselves, okay, I really want to get into the staffing game. That recurring revenue.

Francis Larson [00:28:07]:
I really like that. And what we see a lot of people do which doesn't work is they say, I know nothing about temporary and I'm going to hire a head of contract and they will figure it out. And they go, I'm going to like dust my hands of this and put the head of contract. And the head of contract, you know, will work for six months to a year. We see this again and again, by the way. Like, it's like the recurring. It recurs constantly. They hey, meet our head of contract we just hired and then they're gone like six months later.

Francis Larson [00:28:35]:
Our theory is that you need to learn how to sell temporary. And once you're able to sell temporary, you can find a head of contract after you as a founder or a CEO or as a head salesperson. You should learn how to sell temporary and then hire someone else to take it over if you decide to do it. That's our theory of what works the best. Because it's a different sale. It's different, the speed is different, the way they interview is different. Like how you work with procurement is different. Everything about the temporary side is slightly different.

Francis Larson [00:29:05]:
And it's like less about benefits, for instance, a lot of time it's less about like the package or it's like the lead times are a lot shorter. You have to be willing to do a speed. Like, it's like somebody meets somebody on a Friday and they start on Monday, where it's not like, hey, I'm going to interview somebody for three months. So it's very different. And you as a founder should learn how to do that. You should sell a few deals yourself. Like, learn what that's like if you can't sell it yourself. We're very, very skeptical.

Francis Larson [00:29:31]:
If you could build a big head. Unless you get like a unicorn head of contract person, which is like we just don't see, we see if the founder doesn't understand it, you know, the firm collectively doesn't understand it. But you know, this is our take in the market. We again, we're on the lower end of the market. You know, 30 million below is our sweet spot. So this might be a bias towards that.

Benjamin Mena [00:29:50]:
I feel like that unicorn head of contracts person would just have a contract company themselves. Right. Or stuff get correct house.

Francis Larson [00:29:56]:
No, that's. So that's. See that is fundamentally that issue is that if they're so good that they can run an entire, they can hire your whole contract team, why aren't they joining you? Like are you offering them some insane. Like unless they're becoming a partner in your business, like a 50, 50 partner. Like the odds of them wanting to work for you and build the whole contract book. It's like in reality they would have left and started their own thing. And so we see again and again somebody starts head of contract, they work for six months and six months later they're on a new job. It's like they just keep doing it again and again and again.

Francis Larson [00:30:30]:
And so, you know, I do think that if you want to get into temporary space, just try to sell yourself. Like do the work, do some sales, figure out what customers like. Is the niche going to be slightly different? Are the roles going to be slightly different? Maybe you have to learn it yourself. That is your edge. Your edge is you learning how to sell to a certain type of customer, selling a certain type of thing. And you really can't outsource that. And it's not the same as the perm. It's going to be slightly different.

Francis Larson [00:30:58]:
Okay.

Benjamin Mena [00:30:58]:
To save me time, I'm running five to $10 million a year direct placement. Where's the best places to go actually learn how to do it so I can go implement it and go hire the right person.

Francis Larson [00:31:06]:
So honestly, I think you just have to start like asking your existing clients, hey, like, do you do temporary side? Can I talk to the people who deal the temporary? They will have hired somebody that's on the temporary side and talk to whoever's dealing with that on the client's team. That is step one and just like scheduled a call with them. If you have to come in and do like low margins on a couple deals, whatever for your client just to learn. That is the way this goes always with your existing clients. Like start with them, learn from them, get some deals. With them. And then you know, like, you can always find a vendor to deal with like the back office and stuff like that. Don't worry about that.

Francis Larson [00:31:38]:
Just like talk to your existing. Don't figure this out first. By the way. You should get the deal before you figure out the infrastructure. There's so many vendors now. Like there's lots of VORs, there's like, there's lots of funding providers. Just go talk to your clients, ask if they have any temp deals, see if you can maybe recruit for them and see if you can get the msa. That's what I would do, get the MSA and then figure out once you have like you're close to getting the MSA sign, then go out and find infrastructure to deal with it.

Francis Larson [00:32:04]:
Because there's so many providers now. Just like you don't have to worry about that. This is actually like a core entrepreneurial lesson that I think a lot of people like forget sometimes when they do new things is you really should sell it first. See if you can sell it and then go build it. Like, then go figure out how to like provide it. Like just go sell it. Like go see if you like. Does your client need temporary.

Francis Larson [00:32:27]:
Okay, okay. They have a certain position that's similar to your temporals. Okay, great. Can you recruit that? Yeah, probably send over the msa. Like you send. Try to send your MSA or get a temper, get like a one off the Internet like from ASA or something and see if you get close to the conversation and that if it's metering towards working, then go find like an EOR or a funding provider and deal with it. Then that's our recommendation is for folks. It's like, don't overthink this.

Francis Larson [00:32:53]:
Like just try to go sell to your existing clients. Try to do it and then once you're close to a deal, then try to figure out all this, the back office stuff that it's easy. Nowadays.

Benjamin Mena [00:33:02]:
Do you see a lot of people overthinking it?

Francis Larson [00:33:04]:
Yeah, we do. A lot of times you'll get. And usually it's the head of contracts. It's the head of. It's those head of contracts. They're like, oh yeah, like, how do we do this, how do we do that? Sometimes finance people, operations people. Like this is really a founder, CEO thing. Like the founder is going to have to go sell it.

Francis Larson [00:33:21]:
The founder is going to have to make the executive decision. Like you really, if you're a founder, you cannot outsource this. If you're not into temporary, just have to do it yourself. Do the phone calls. You're starting new, you know, get into it, learn how to do it yourself and then go to outsource it with your team. Find somebody to take over after you've understood what to do.

Benjamin Mena [00:33:41]:
Are you seeing like any other things outside of what we talked about that like these teams that are crushing it.

Francis Larson [00:33:47]:
That are doing, I think honestly, like, podcasting is really big right now, where podcasting is just huge. Like we see like these little firms, like really tiny firms, they'll start up and they, they say, I'm going to do a podcast on like where there's only like 50, like they'll have like a certain type of customer that's maybe like, I don't know, it's some person at a, like a CSO at a certain type of startup and there's maybe like a hundred people that could fit that description maybe. And they interview every one of those on their podcast and all of a sudden they become like, well known in that niche in a really tiny niche. And it does really well. I see some people getting like really crazy interviews of like really, like really important people. And the agency is like a one person shop that has been around for six months. And it's almost like it's just a, like the focus breeds credibility with buyers in a way that like, it's better than time, it's better than size. It's like if they know you speak the language, you're intelligent about their product and like what they need, people will open their door for you.

Francis Larson [00:34:56]:
It's crazy. So we see that people doing podcast, like various other kind of content, but really the podcast, it's hard to bring that down to how that goes into sales. But we see the folks who are doing the best doing that. So it seems like it correlates.

Benjamin Mena [00:35:09]:
I've been telling people for like the four years that I've had this podcast, like, go start a podcast because it's such an easy door opener. Like, hey, I can help you with staffing, I can help you with like your, your people. Do you want to be on my podcast?

Francis Larson [00:35:21]:
Uh, yeah. Especially if you're interviewing like, like, if it's not. So let's say if you want to interview like a famous founder, like, okay, little hard, you're going to get blown off a lot. But if you're going to like interview like an HR director of a certain type of startup, they're going to say yes because they don't get that many opportunities and all these people kind of know each other and it's like just people that are just below founder, like sort of executives in a certain niche. They're gonna want to do your thing. And some really big, let's say you're selling to like AI companies, but like all the HR directors of these companies, they're not as famous as the founders. You can probably interview them, they will probably go on your show and if you focus on them, they'll all know each other because they'll be like looking at like people in similar spaces. They're all in each other's LinkedIn feeds.

Francis Larson [00:36:06]:
So it's like I think people need to be just like the selling staffing. It's like don't overthink it. You just have to focus, you just have to focus on a particular type of customer, particular type of person and a skill set you're selling into. Then you get all the vocabulary, you get all this knowledge. You understand who the players are and you come across as legit to the important people that are in your space. And that is most important. Even if you're tiny, even if you're just like a one person job, you'll come across as legit.

Benjamin Mena [00:36:35]:
I absolutely endorse this a hundred percent.

Francis Larson [00:36:38]:
Love it.

Benjamin Mena [00:36:39]:
Well, you know, we covered a lot. What's working? Is there like one of maybe three things that you've seen that isn't working right now that like people should try to like avoid? When it comes to selling staffing, it.

Francis Larson [00:36:49]:
Comes down to the focus thing. People try to go into areas they're not comfortable with or they'll get a client and a client will say, hey, I've got like 60 jobs. And they'll say, oh, I can do all of them and it doesn't work. The two things I think dealers should avoid if they're new, the newer companies or new to staffing or just newer companies in general is don't try to sell temporary staffing to enterprise. That's very hard unless you're like government or something where you have a good relationship where you know the space really well. If you're new and selling into huge enterprises, we're talking like F100 very hard. They're going to be very, very strict with things at the lead times. The only way you should do it is if you have a really good relationship with the HR manager and that you could do that by having that podcast.

Francis Larson [00:37:29]:
So you have to be, you have to be able to bypass their procurement. You can't go in directly, you have to go in with a good relationship. That's number one. So if you're going to do enterprise, which you should avoid, I would go for like, you know, SMB, middle market. That's where I would go if you're starting. But if you have to do it, you really have to hone in on the relationship there because they'll help you navigate the procurement maze. Otherwise you're going to get lost in there. RFP land, forget it.

Francis Larson [00:37:52]:
If you're going in cold and rfe, you're, you're done. Forget it. So I wouldn't do that. Number two is I wouldn't go to msps. We see like certain industries are more common than others. But msps, it's a black hole. It's like, you know, people, a lot of staffing agencies think that, oh, I got this msp, you get all these job orders. Well, you know what? Like they're not real.

Francis Larson [00:38:12]:
If the job orders aren't real, there's like 50 other agencies doing it. You're getting like absolutely screwed on fees. You know, they're going to have no recourse to you. Like you're going to have no recourse to them. If the client doesn't pay. Like, you know, it's just not worth it. It's not worth your time. Like get the client yourself.

Francis Larson [00:38:28]:
Like get a direct contract with the client. If you can't do that, like just pretend you're like, you're not. Like getting an MSP is like it, you didn't win. You didn't win. Like you didn't get a deal. Like just because there's a hundred jobs on there, you didn't win. Like it's not real. People say, oh, I just signed up with this msp.

Francis Larson [00:38:45]:
It's like, no you didn't. You were just fooling yourself. It's just a complete joke. Shouldn't deal with them, just get the contract yourself.

Benjamin Mena [00:38:53]:
I love that you mentioned that because like in the government space we have like the IDIQ awards that, you know, these government contractors like celebrate win. Like one of the ones that we were consulting with, it was part of like a, I think a six point something billion idiq. So they had this gigantic party and I'm like, don't have the party till we actually get a contract.

Francis Larson [00:39:10]:
And you know, we ended up like.

Benjamin Mena [00:39:11]:
Not working with them after that point in part just because they weren't chasing the stuff. But they ended up the entire length of the idiq. They actually didn't win a single program.

Francis Larson [00:39:19]:
Yeah.

Benjamin Mena [00:39:19]:
And I'm like, throw the party after you get the award. Not just the checkbox you can play the game.

Francis Larson [00:39:25]:
Well it's similar in this is like, this is a very stretched analogy. So take this for what it's worth is like a lot of times people like really celebrate when they raise a lot of money for their startup and it's like no, that's like not your money now you have to like you have to actually do the real work like now like the job has just started, now it's even worse than it was before. So like I think that's something that a lot of, a lot of like newer, like sort of naive sort of newer founders and temporary staffing. They think I got the MSP or I got the enterprise, I'm a vendor, I'm an approved vendor, you know, forget it like get the real relationships like if you can get direct contracts. And this is, this is common and by the way this is actually common in any kind of product like startups. Like if you're selling software it's very difficult to go to enterprise. It's much easier to go middle market and where they're going to assign much faster the deals are, you know, not so many layers you're going to have to deal with. And so when you're just starting out unless you're in a highly regulated space where there are no small players but if you're in a non regulated space like you know selling into middle market startups is like really good like or middle market companies.

Francis Larson [00:40:29]:
You know, if you're in light industrial like middle market like you know, okay, maybe it's only a 30 person deal but who cares? Like you should do that like sort of get the reps in and then once you're building cash flow from this, the middle market folks, then you can try the enterprise because now you have the cash flow. So it's like you kind of like let the growth engine be the middle market SMBs and then use that cash to spend the time to get the enterprise deals. Where it's going to be navigating that maze and it's going to take like a long time and I wouldn't try like if you're just starting down, I really wouldn't start on big contracts unless you have a very good in or it's a regular industry like government where there's only big companies.

Benjamin Mena [00:41:06]:
Two questions. First of all do you see a lot of like temp hiring within startups and secondly what niches are doing great right now?

Francis Larson [00:41:13]:
So for temporary you should look where there's a structural need for temporary work. You know, it's a Little bit different than permanent hiring because you're looking for types of roles that people structurally don't want to put on their own payroll. So like a really good example of this is, and which continues to do really well is ERP software. So you know, ERP, you know, enterprise like NetSuite and Salesforce and Workday and all that stuff. Like structurally no one wants to put those people on their payroll because they're going to set up NetSuite or whatever SAP, it's going to be a six month project, but they don't want those people on their payroll. That's like a. Fundamentally it's a temporary staffing market. So like that's a really good type of thing.

Francis Larson [00:41:59]:
What you should look for is things that structurally where it's going to be temporary. Like events are structurally temporary or call centers are structurally. Because they're so high turnover. So places where there's like high turnover in. It used to be within technology, for instance, there's some like nowadays, like there's all these companies that do training on AI models and those. See these people are like highly paid, but they're like really just like fiddling around with like human feedback for AI models. They're structurally a temporary employee. So like no one wants to hire these people forever because they're just like they're going to Pay, you know, $100 million to build their model.

Francis Larson [00:42:34]:
They're going to use all these humans to do stuff with it. And you know, they might be PhDs, they might be highly paid, but they're structurally not going to be a permanent employee. So you should really look for something like that. Like people had a lot of success like AI drivers, people who are like modifying AI. So in the temporary side you should look for clients that have a need to have something structurally temporary. You should look for roles that are like inherently like that. And that's where you should go into things. And that's what you should do to find this out is talk to your clients.

Francis Larson [00:43:03]:
Like, ask them like, where do they hire a lot of temporary workers? What kind of spaces? How come, how does that work? Like talk to your clients, like put it on Fathom or something like that. Put all your Fathom notes together and compile it or like whatever you need to do and then you start seeing the insights. Oh, like all my clients said this role, they always like hire through like an outsourced agency. Like do something like that. Like there's an investigative process like a sort of a, like a gradient. They call it like gradient descent in machine Learning. The point is like you, you, you're searching for this and then eventually you'll find it and then boom, then that's where you focus.

Benjamin Mena [00:43:38]:
Love that. Well, before we jump over to quickfire questions, what's your thoughts on AI within the staffing industry?

Francis Larson [00:43:44]:
So there's this, you know, Charlie Munger, you know, this guy, you know, Warren Buffett's like right hand person for many, many years. Charlie Munger. So Charlie Munger died last year, I think, and he was a hundred or just about a hundred very famous investor. And one of the things he used to say all the time is like there are certain businesses where the reason they're terrible businesses to invest in is that every time there's a technology improvement that the value doesn't go to the company, it goes to the customer. And so one of his favorite example is textiles, like low grade, like textiles, you know, like if you're like sheets and stuff like that, like it's a commodified industry. So every time there's a new textile manufacturing style, like let's say you can produce sheets for 1/10 the price and you're like, oh my God, I can get rid of all my workers. I'm going to make so much money. Well, guess what? Structurally that savings is going to go to the customer because like you might fire all those people or whatever and make a bunch of money, but your competitor is now going to sell at a cheaper price because they were able to fire all those people.

Francis Larson [00:44:51]:
So there's some inherent reasons why certain businesses, even when there's technology improvements, it doesn't flow to the company, it flows to the customer. And my theory, unfortunately my theory is that in most staffing companies, AI will lower the need for human recruiters, screeners, eventually sales with sales agents like client account managers, it's going to lower the need. And instead of making like higher margins for staffing companies, it will for some companies that are really focused, instead of making like high margins permanently, it'll just etch away at them. Because one company is making higher margins, there's going to be another competitor because the barriers of entry are so low that they're slowly going to chip away at it. And so eventually by our sort of internal theory is that AI for most generalist stacking firms, their gross margin will go down to effectively the RPO cost, which is just the recruitment fee plus EOR spend. And our theory is that like markups will go down to 30, 40% across the industry, like going into the next 10 years, is that it will Become very compressed because there's just no justification for the cost of these things. The one area where we don't think that's the case is highly specialized industries where there's some other reason why you have some advantage. Like you're either it's highly regulated, where it's hard to get competitors in either it's inherently human where you have to talk to people and it's like high trust, like very complicated industries.

Francis Larson [00:46:23]:
But for commercial roles, light industrial, healthcare, generalist, like sort of low level software for sort of commercialized roles which are less like more like tick the box type stuff. Those areas where there's less human touch, way, way, way. We think it's going to get compressed because of that. So we think AI is going to be incredibly transformative to every aspect of recruiting and everything. Sales screening, voice, AI, text, everything. However we think it's going to flow to the customer except in the specialized roles where there's high trust, extremely high skills. So if you're in an industry right now that's like uncomplicated and airline industrial, you either have to be rapidly adopting AI or you're going to get out competed, you're dead, it's over. Like commercial firms are dead if they're not using AI.

Francis Larson [00:47:09]:
And if in other industries I think you should go up market, you should try to be in the most specialized, highly complicated, high trust, high regulated somewhere where you know it doesn't matter how efficient you are at doing recruitment. It's like it really is human touch. So we think those two things are going to happen. The broader scare, which is more scary to me and this is the sort of second track is I think that AI may change the labor market dramatically to where I do not know if some whole industries will be around like they are like generalist it. I think a lot of that will just go away because of AI, because it's so good at coding, it's so good we use it internally, it's so good. I think there's just some industries are just going to go away. I think light industrial probably just like go away in certain areas. Like they just won't use many bodies, engineers won't need these many bodies and like for python developers or whatever.

Francis Larson [00:48:01]:
I think like certain things are just going to kind of disappear. I think health care is going to still be really big. I think like home care, health care, school, like anything with high humans and then like really high intellectualized like jobs like like you know, life sciences, highly paid it anything where it's like really high Capacity where they're using AI tools. But I think some industries are going to go away. So that's like a broader fear we have as a company. But that's why we see like again going back to this. Like we're kind of the s and P500. We see some companies go up, some go down and you just see the change over time.

Francis Larson [00:48:33]:
The staffing market doesn't go away, but man does the mix change.

Benjamin Mena [00:48:37]:
And you know, the teams that are growing, the companies that are growing, that you're seeing the back end data, is there something that sticks out with the leaders on why they're growing?

Francis Larson [00:48:47]:
One thing they do is they maintain margins. The best companies, they do not get margin compression. So if they are not able to get a deal at the margin that they need, they turn it away. So they maintain that even when we think they're unwise for doing it, they'll turn away stuff. If like, if they think the costs are too expensive or they think that the client is being unreasonable, they won't do the deal for 47% markup. They're like, nope, like we need to make this price. We just don't even do it. On one hand that's a personality thing, but the other hand is usually that's a sign that they have some kind of power.

Francis Larson [00:49:20]:
Like they either like their client needs them, a lot of times they'll take over the whole workforce. That's a very effective strategy. And this is what msps inherently do is you'll take over the whole workforce for your client. So you can't really do that on the high level because you have to be an msp. But on a low level, if you're doing with like a somebody who's doing a $10 million spend or $5 million spend, your staffing firm can take over the whole spend. You probably could. You know, you can't do that if it's too wide ranging of roles. But if it's like light industrial, you can take over the whole spend.

Francis Larson [00:49:47]:
It's healthcare. Sometimes you can take over the whole spend. So we see people doing that and they do other things like you know, they have like again focus. If you are very focused on a certain type role and your network is so good in a space like the client knows that like no one else is focused like you, you have the best pool. Your margins are brain 10. So what we see is that like it seems like there's the high margins beget success, but then the focus begets the high margins and you really have to find A way to have power to maintain those things. And so that's what we think. Like, we think the focus is what does it and some other things they do to maintain power.

Francis Larson [00:50:23]:
But people who like get negotiated down on price, like there's something else wrong with their business that it's evident in the margin.

Benjamin Mena [00:50:32]:
Awesome. Well, jumping over to the quickfire questions, do you have a favorite book that has impacted your career?

Francis Larson [00:50:40]:
I have a few books. I have one book. The best is Me as an entrepreneur. It's called Competitive Strategy. It's by Michael Porter. This is a Harvard professor. This is like a famous, famous book. And he goes over like how to have to make money in industries, in different industries and what different things you need to think about to compete.

Francis Larson [00:50:58]:
And that's very important in an industry like staffing, which is like heavily commoditized, it's like so competitive. So you have to understand that in some kind of technology firm, you know, maybe you have a really good technology and that's your mode. Well, in staffing it's like not really like that. You have to be very creative of what you do and you have to make some decisions like, are you going to be a premium firm that focuses on like a niche and you have like high margins or are you going to be an AI like technology firm that's just volume and you go lowest price possible and you have to make that decision. You cannot mix them. And that's the point of Porter is that he goes like. It's like there's certain things you have to decide and you fundamentally cannot mix the strategy. So you have to pick.

Francis Larson [00:51:40]:
Are you going to be premium or are you going to be like low cost leader? You cannot do both. You cannot pick deals that do both. So that's one thing. Another book I read, this is entrepreneur Wise Spin Selling, it's a famous selling book. I can't remember who it's by, but it's like how to talk to your customer to figure out like, like what they want and just to like talk to your customer. Like if you can talk to your customer really well, you're going to learn about all this stuff, like temporary staffing. You're going to learn what they need. Like you're going to learn about them.

Francis Larson [00:52:06]:
And the customers like to talk nowadays, like you can record it and you can summarize it in such a nice way that like now you know the payoff to being able to ask customers really good questions is really good. So that's called spin selling. And it's not for staffing per se, but it was probably like the biggest influence on me, selling, because sales is like the skill that matters the most for anything you do. It's all about sales. And if you can't sell, it doesn't matter you know what you can recruit or you know what kind of talent you have. It's all about sales.

Benjamin Mena [00:52:36]:
Now you have a company that you founded, a team that you work with, tons of agencies that you're supporting, hundreds of millions of dollars through the eor. Is there a favorite tech tool that helps you get through your day?

Francis Larson [00:52:50]:
So, I mean, we use a lot of stuff. We use like the Hubspots and we use this thing called. Actually we really like this tool. It's called Front, and there's like more modern versions of this, but it's like a, it's a unified support, Omni channel support where you can like, talk to your team and shared inboxes and, you know, support. And one of the things that we've done really well and I think is like high touch support. And in order to have like, really high tech support, you have to have like, good tools around it. So like, Front is like a, a big one, but there's like some more modern AI versions of that nowadays. And so I think, like, if you can find a tool that really enables you to be high touch with your customers, I think that's like, really, really good.

Francis Larson [00:53:26]:
So that's one that's been nice. We just started using clay for stuff, some of our SDRs as everyone. A lot of stuff there. It's not the simplest tool in the world, but is that what I'm saying, Clay? No.

Benjamin Mena [00:53:38]:
I'm laughing because I think it's going to be one of the top recruiting tools. You know, this podcast is going to go live well after the event, but, you know, I'm in Clay learning it, but I've like partnered up with somebody else that knows really well. He's putting on a class and I'm literally just going to be sitting there in the class, like learning with everybody else, like how to actually use it to its best capabilities.

Francis Larson [00:54:00]:
It's like one of the fastest growing SaaS, B2B SaaS companies like ever. And they're doing something right. And yeah, I think, but AI selling tools, I mean, that's like, I mean, and those two tools, that's, that's whatever. I mean, the biggest one, which I, I can't believe I didn't mention this, is like chatgpt. Oh one, you know, like deep research. I've tried to use amazing Operator not working great is not working great. It's like a drunk toddler. It's a lot of toddler.

Francis Larson [00:54:24]:
It's like if you get like, yeah, if you have enough drunk toddlers, like you can click on a one button is kind of how Operator works. But deep research is really cool. Like that's really good. We use AI for all sorts of stuff internally. Use it for a ton of things, like for HR related things, which is really, really. Or like sort of operational related things rather we use AI for. And then we use it like to write code. And it's just, it's crazy.

Francis Larson [00:54:45]:
Like it used to be like when I was writing the first version of our software, like every kind of problem that you face, you'd have to figure it out yourself. Like you'd have to figure it out you searching the Internet to like, you know, write a solution to a problem. But nowadays, like if you have a sufficiently good prompt, you can solve almost anything. It's really come down to like how good your prompt is, like how much context, like are you getting enough examples or giving enough like guidelines to the prompt? It's good enough now to write incredible code. It's so good. I think, I think people don't understand that like even six months ago it's jumped where now like six months ago with 4O, like it'd be like a kind of a bad engineer in a way. But now it's like a good junior engineer, like a really smart junior engineer. And it's just going to improve in six months it's going to be even better.

Francis Larson [00:55:36]:
I don't think the world is prepared for it. I don't even. People who are really smart aren't prepared for what's happening. It's like this is something that people are saying now is that if you're curious and you're motivated, you are. The world in the future is yours because you're going to have an unlimited supply in terms of, you know, effectively unlimited of workers for you, almost for free, a negligible price. So if you're creative and motivated, you're going to be able to accomplish so much with a small team. Whereas if you're like, if you're not interested, you know the world is going to pass you by and it's going to happen. Like I think in the next few years, like curious, motivated people are going to be able to accomplish so much with AI tools.

Francis Larson [00:56:21]:
You're like, how do I do this? Okay, well, okay, how do I do this? You can teach yourself anything now. You can build all this stuff with agents, you can have all these teams working for you, but it takes like curiosity and energy and motivation. And if you have those things, the world is yours. And if you don't, like, you're going to wonder, like, and this is anthropic CEO is saying, it's like you're going to wonder like, how did I get here, here? Why are certain people doing so well? You know, in 20, like in 2028, who's doing really well? It's just going to be motivated, curious people, that's it. And everyone else, doesn't matter how smart you are, if you're not motivated, you're not curious with the AI tools, forget it, you're going to lose. And I think that rule is going to be very different from what we see today.

Benjamin Mena [00:57:00]:
Oh, I love that. Well, and if you can go back in time, like everything you've learned, you're talking with your customers, figuring out like the market, where you guys are at, into your first month of ascent and you get a chance to chat with yourself, what would you actually tell yourself, advice wise?

Francis Larson [00:57:16]:
I really don't think, like a ton of regrets. I think what I would have done is like, I realized that personally, my intuition, I wouldn't doubt my intuition. Sometimes you bring in a partner or you bring in like an organization or investor and they tell you that, oh, let's focus on this like hot thing. Like if you chase that stuff, if you chase somebody else's intuition, I think it doesn't really work out. And anytime I've done that, like you went into YC and like YC is like, oh, you should focus on this stuff. And my intuition was to do another thing and like it ended up like wasting like a year because I focused on some other stuff. Like I've had, you know, business partners that I want to focus on certain things. And what I've realized over time is that your at least, my intuition at least has been right.

Francis Larson [00:57:59]:
Like, you should follow your intuition first. You got to train your intuition, like on whatever your skill set is. But you really should follow your intuition of like, what you think, where the market gap is, what you think. Like the product should be like where you think the company should go. Like, that is what you do as a founder. No one else can replace that. You can't outsource that. And so like, if you don't have good intuition, you're not going to make it anyways.

Francis Larson [00:58:24]:
So you really should follow your, your intuition and then have other people support that, like sort of vision. It's very hard to outsource your vision to outsource what you see in the world. And so I think what I would do is, like, I would tell myself, hey, like, don't get too excited by, like the hot thing right now. Stay focused on what you know is correct, because you're going to go back there eventually anyways. Like, you're going to go back, it's going to fail whatever you try to chase. You know, it's like this in investing. Like, you never want to invest after everyone's already into something. Like trying to buy Nvidia now, for instance.

Francis Larson [00:58:54]:
Like, for instance, like a stock. Like, forget it. Like, you're late. Like, forget it. Like, maybe you're not late, but you are. Like, you shouldn't chase. And you should use your intuition, get in something early, have it build over time. And I would have told myself to listen to that and not get excited by some outsiders telling to do certain things.

Benjamin Mena [00:59:11]:
Love that you speak with a lot of recruiting founders. You speak with a lot of recruiting teams. They ask a lot of questions like, how did you do this? How did you do this? You know, what do you do? You know, mostly tactical, maybe a little bit of strategy. Is there a question that you wish they would actually ask you, but they never do?

Francis Larson [00:59:26]:
I think people should ask, like, what should I really worry about? What should I worry about? A lot of times they have certain worries, like, what about this, what about that? Like, you know, how do I do this? Like, they have specific questions, what really should be, like, what should I be thinking about? And really, what should I be worried about? And everything else, you know, is not a big deal. And I think that would be really important. Like, we found that, you know, people might get hung up on some contract issues with clients, or they might get hung up on, like, some operational things or compliance things, especially foreign customers, like, outside the US they'll get hung up on, like, certain things, like about indemnification. And I think the best thing that they could do, at least dealing with somebody like us, is to say, what should I worry about doing temporary staffing in the U.S. like, what are the top things that actually are going to sink my business? Everything else is kind of a rounding error. Like, there are a few things that are really important. Everything else, like, it doesn't really matter. You should just not worry about it.

Francis Larson [01:00:29]:
So I think that would be really good is people, you know, took a step back and say, what am I missing? Yeah, you're going to have your specific questions, but you should try to Find out what you don't know.

Benjamin Mena [01:00:38]:
Taking you back to the very beginning of this conversation, what I didn't know about staffing was I could have used the company to help me. So I just literally kissed off an entire, like, team of engineers they needed help with that I've previous recruited on, and I knew the space.

Francis Larson [01:00:53]:
If you had AI back then, would you be like, how should I handle this situation?

Benjamin Mena [01:00:57]:
Oh, yeah, deep research. Real quick, hold on a second.

Francis Larson [01:01:00]:
Like, would have been different. Like, you know, like using. I. I wonder if our decisions, maybe they're going to be a little bit better because we'll think of more, you know, more possibilities, like now, you know, as opposed to before. It was all in your mind.

Benjamin Mena [01:01:12]:
One of the podcasts that went live this week. I know this is, like, gonna be dropping down the road. I don't wanna use the word kid. He's like, 25 now, but he started his recruiting company in college because of technology, because of the options are there.

Francis Larson [01:01:25]:
Yeah, there's this famous banker in the space and his kid. His kid has a staffing company in college that's like, producing like a couple of million dollars or something like that. And he's just in college in a dorm room, and he has a staffing company, you know, and he found some weird niche. I think it was like law review. I don't know, something. Something really specific and it works and he's doing it and he's. I don't know, he's like 21 years old, something like that.

Benjamin Mena [01:01:53]:
If you know who it is, I would love to do that interview. That'd be fun, right? I just want to say thank you so much for coming on. Almost like giving pretty much a masterclass on, like, how you can jump into the staffing side of the house if you haven't been partaking, you know, things.

Francis Larson [01:02:06]:
That you could do with the ways.

Benjamin Mena [01:02:07]:
You could get set up, really, and the questions that you should be asking without, like, freaking out about all the research, but on top of that, like, sharing about what the future is going to hold. Because I truly believe the recruiters out there that are, as you said, excited, curious and motivated are just absolutely going to crush it. They can make 2025 their best year yet and make it the year of abundance. So, once again, Francis, thank you so much. And for you guys listening, Crush it, guys.