Why Tech-led firms will outperform traditional models

The recruitment industry is undergoing a seismic shift. For years, growth in recruitment businesses has been tied to headcount—more consultants meant more revenue. But that model is reaching its limits and the most successful firms are the ones embracing technology, AI, and automation to drive efficiency, scalability, and ultimately, higher EBITDA margins Mercury explains.

Why traditional growth strategies are failing

For decades, recruitment businesses scaled in a straightforward way: hire more recruiters, make more placements and increase revenue.

But this approach is increasingly unsustainable. It’s costly, resource-intensive, and in volatile markets, it doesn’t always guarantee success.

With rising operational costs and fluctuating hiring demands, recruitment firms that rely solely on human capital struggle to maintain profitability.

The firms that thrive are those leveraging technology to automate manual processes, enhance decision-making, and maximise efficiency, with some achieving EBITDA margins beyond 25%.

The key to profitability and scalability

The difference between being a tech-enabled recruitment firm and a tech-led one is vast.

Tech-enabled firms use software to assist with tasks, while tech-led firms build their entire operations around AI, automation, and data-driven decision-making and use them to differentiate their offer and reposition their client and candidate service.

The real value of AI in recruitment

The impact of these AI-driven innovations is clear: firms that leverage automation and AI can scale without dramatically increasing headcount This results in:

• Lower operational costs due to reduced reliance on manual tasks

• Higher recruiter productivity, allowing teams to focus on relationship-building rather than admin work.

• Greater scalability, as businesses can handle more roles and clients without proportionally increasing overheads.

• Stronger EBITDA margins, making these businesses more attractive for investment and acquisition

Tech-first recruitment firms will lead the market

As Chris Kendrick put it, the key question is no longer if AI will take over core recruitment functions, but how soon.

Recruitment firms that resist technology risk being left behind, while those that embrace AI-driven models will see stronger profitability, greater efficiency, and higher enterprise value at exit.

The bottom line? Best-in-class recruitment is powered by intelligent technology.

The firms that recognise this shift and adapt accordingly will be the ones dominating the industry in the years to come.

To learn more about how Mercury is helping recruitment businesses scale through AI and automation, visit: https://wearemercury.com/