Profitability doesn’t happen by accident. It’s the result of disciplined execution, data-driven insights, and a commitment to fundamentals. For IT and engineering staffing firms navigating a flat or declining market, success hinges not on chasing elusive revenue spikes but on managing the variables that truly drive margins.

That was the central theme as Rick Carlson, Founder & President of Harvyst Consulting Partners, and Sean Gilligan, IT Staffing Executive in Residence at TechServe Alliance, explored the latest benchmarking data from TechServe’s annual Operating Practices Report (OPR) and real-world strategies shaping the industry. Their message was clear: firms that know their numbers, control expenses, and focus on productivity can thrive even in leaner times.

Why Profitability Is Under Pressure

The numbers tell a sobering story. Across the industry, EBITDA dropped sharply from 2023 to 2024, and pressure has continued into 2025. As Carlson explained, “Profitability was really under pressure in 2024, and it continues in 2025. All firms saw EBITDA fall, and firms tied heavily to VMS and MSP business struggled the most.”

The difference between high-profit and typical firms was not margin percentage. High-performing companies didn’t necessarily sell at higher rates, but they controlled costs, shortened collection cycles, and made sure gross margin dollars translated into bottom-line results.

The SG&A Imperative

If there was one recurring theme, it was the critical importance of managing selling, general, and administrative expenses. Carlson illustrated the point, noting that “If a typical firm brought SG&A down from 23.5% to 21.3%, they would double their profit. It’s that impactful.”

Gilligan reinforced the urgency from the field, adding that “Everyone’s struggling to grow revenue right now. The only thing that consistently separates high-profit firms from the rest is expense control and collection discipline.” Staffing leaders may not be able to control broader market demand, but they can and must control the levers inside their own business.

Compensation and Productivity: Getting the Balance Right

Another theme was compensation effectiveness. Rising salary expectations, underperforming producers, and costly new hires can all drive up expense ratios without corresponding revenue gains. Carlson cautioned leaders to monitor what he calls the effective compensation rate, the percentage of gross margin dollars consumed by producer pay.

“If you’re outside the 25–40% range, there’s a problem. Too low, and you risk losing people. Too high, and you’re probably carrying underperformers or paying too rich a plan.” Gilligan noted that underperformance is becoming more common, even among previously strong salespeople. “The biggest issue I’m hearing is underperformers. Clients are struggling, and so are their reps. It’s driving compensation ratios higher and eroding profitability.”

For firms trying to strike the right balance, both speakers recommended accountability, smarter plan design, and the use of management-by-objective bonuses instead of inflated base salaries.

Sales and Recruiting Benchmarks

Profitability also depends on productivity, how much each producer contributes relative to their compensation. Benchmarks from TechServe Alliance’s reports provide a roadmap. Gross margin per producer shows high-profit firms average around $36,000 per month, while typical firms lag at $34,000. When producers consistently exceed $30,000 per month, it’s often time to add staff to prevent missed opportunities.

Senior sales reps should target 30–38 client meetings per month, with at least four placements, and recruiters should consistently generate quality submissions, with senior recruiters aiming for one placement per week. While attrition has climbed to 8–10%, high extension rates remain the strongest indicator of consultant quality and client satisfaction. These benchmarks aren’t just numbers. They provide practical guardrails for assessing performance and identifying bottlenecks.

Headwinds and Tailwinds for 2026

Looking ahead, firms face both challenges and opportunities. On the headwind side, economic uncertainty, reduced federal spending, persistent skills gaps, and the growing issue of fraudulent candidates are top concerns. Yet there are also promising tailwinds, including emerging technologies, demand for green engineering and healthcare IT, and efficiency gains from AI-driven recruiting tools.

 Gilligan sees technology reshaping how firms source and engage talent, observing that “Internal databases are going to surpass job boards in the next two years. With new tools, firms can finally leverage their own systems like LinkedIn at a fraction of the cost.” Carlson encouraged leaders to stay disciplined and forward-looking, saying, “Fundamentals are everything right now. Know your numbers, manage expenses, and build your forecast. The market may be flat, but there’s still plenty of business out there for firms that execute.”

Turning Insight Into Action

For staffing leaders, the message is clear. Profitability doesn’t hinge on predicting when the market will rebound. It depends on running a disciplined business today. The data and strategies discussed point to several immediate action steps:

• Audit SG&A monthly and treat every expense line as an opportunity to protect margin
• Evaluate compensation effectiveness to ensure plans drive performance without overpaying
• Measure productivity rigorously, tracking time-to-fill, job order fill rates, and gross margin per producer
• Leverage your data using benchmarks to spot red flags, manage underperformers, and know when to hire
• Stay focused on fundamentals, with training, accountability, and consistent execution making the difference

As Carlson summed it up, “Revenue cures a lot of ills, but it has to be profitable revenue. If you know your numbers and manage them well, you can win in any market.”

TechServe members can view the original webinar here.