Profitability pressure is no longer a temporary challenge for IT staffing firms. As firms head into 2026, leaders are navigating a reality defined by tighter margins, longer sales cycles, rising talent costs, and clients demanding more value for less. Revenue alone is no longer the differentiator. The firms that remain profitable are those that operate with discipline, clarity, and a deep understanding of their data. 

A recent TechServe Alliance discussion brought together Sean Gilligan, IT Staffing Executive-in-Residence at TechServe Alliance; Tom Nunn, Business Consultant at Tom Nunn Consulting; Steve Norris, Managing Director at TechServe 360; and Michael Allen, Founder & Principal Consultant at Data Minds Optimization to examine what profitable firms are doing differently—and what others must change to compete. 

Profitability Starts With Execution, Not Ideas 

Tom Nunn opened the conversation by emphasizing that strong performance is rarely the result of one bold move. Instead, it comes from consistent execution across a set of foundational practices. Healthy companies build strong cultures, develop leaders, hire effectively, and create accountability systems that reinforce performance. 

“Ideas are important, but without discipline of execution, they don’t mean much,” Nunn said. 

Too often, firms try to fix margin pressure with surface-level adjustments while ignoring deeper operational gaps. Nunn stressed that leaders must prioritize what matters most rather than treating every initiative as equally urgent. Stack-ranking improvement areas and focusing energy on the top one or two priorities prevents teams from diluting effort and stalling progress. 

Data Beats Gut—But Only When It’s Actionable 

While experience and instinct still matter, panelists agreed that profitable firms increasingly rely on data to guide decisions. Sean Gilligan noted that many leaders blend intuition with analytics, but firms that fail to measure the right things often struggle to understand why results fluctuate. 

“You can’t manage what you don’t measure,” Gilligan said. “Gut feel is helpful, but it can’t replace visibility into what’s actually happening in your business.” 

Tom Nunn cautioned against overwhelming teams with excessive reports. Instead, he advocated for simple, visual dashboards that highlight key performance metrics and trends. High-performing firms focus on understanding the story the data is telling—then act on it. 

“If you can’t see the forest through the trees, you’re going to miss what actually needs fixing,” Nunn said. 

Leading Indicators Reveal Profitability Before It Shows Up 

Michael Allen expanded on the importance of tracking leading indicators, not just financial outcomes. Metrics such as job orders, submittals, interviews, placements, and stop ratios provide early insight into future performance. 

“Leading indicators tell you what’s coming before it shows up in your financials,” Allen said. 

By monitoring ratios like fill rate, submittal-to-interview, and interview-to-hire, firms can identify breakdowns in their process long before revenue declines appear on a P&L. Allen emphasized that firms using this data daily or weekly—rather than reviewing it once a month—are better positioned to course-correct quickly. 

“The difference isn’t who has data. It’s who actually uses it,” Allen said. 

Benchmarking Turns Internal Metrics Into Competitive Insight 

One of the most impactful themes of the discussion was benchmarking. Internal metrics are useful, but without context, they only tell part of the story. Comparing performance against industry peers reveals gaps, strengths, and blind spots that internal reporting alone cannot uncover. 

Gilligan highlighted how benchmarking allows leaders to understand not just whether performance is improving, but whether it is competitive. 

“For the first time, firms can see how they truly stack up against peers in real time,” Gilligan said. 

Allen added that effective benchmarking removes emotion from performance conversations and creates clarity across leadership teams. 

“Clear scoreboards create accountability—and accountability drives improvement,” Allen said. 

Cost Structure and Scalability Matter More Than Ever 

Steve Norris shifted the focus to cost structure, emphasizing that many small and mid-sized staffing firms carry disproportionately high back-office expenses. Data from TechServe’s Operating Practices Report consistently shows that firms under $20–30 million in revenue often overspend on internal infrastructure relative to their size. 

“Smaller firms are paying a much higher percentage of revenue for back-office costs, and it directly hits profitability,” Norris said. 

He explained that outsourcing non-core functions can reduce SG&A expenses while increasing enterprise value. Even modest reductions in operating costs can have an outsized impact on EBITDA—and, ultimately, firm valuation. 

“Every dollar you save today also increases the value of your business tomorrow,” Norris said. 

Run Your Firm Like It’s for Sale—Even If It Isn’t 

Across the discussion, panelists repeatedly returned to one principle: firms should operate as if they are preparing for an eventual exit, regardless of their timeline. Clean financials, diversified client concentration, scalable operations, and reduced owner dependency all strengthen both profitability and resilience. 

“The most valuable companies are the ones that don’t rely on the owner to run day-to-day operations,” Norris said. 

Nunn reinforced that improving producer productivity and holding teams accountable is one of the fastest ways to improve margins. 

“Holding on to underperformers is far more expensive than making tough decisions early,” Nunn said. 

Gilligan closed by urging leaders to involve their teams in the data conversation rather than using metrics as a policing tool. 

“When teams understand why the data matters, it stops feeling like surveillance and starts feeling like a roadmap,” Gilligan said. 

The Path Forward 

As IT staffing firms head into 2026, profitability will depend less on market conditions and more on operational discipline. Firms that focus on execution, track meaningful metrics, benchmark intelligently, and build scalable cost structures will be best positioned to withstand volatility—and grow when conditions improve. 

To watch the full webinar, click here.