The recent initial public offering of the popular social network firm FaceBook provides a cautionary tale for healthcare staffing firms around the country. How in the world does the public offering of a previously private social networking company relate to the staffing industry? Three ways. Expectations, expectations, and expectations.

Just as expectations in an IPO drive investor valuation, expectations of new and exciting contracts can drive expectations across the board in a staffing firm.  In my experience in the healthcare staffing industry, nothing creates a buzz in the office more than the “big fish” that was just landed. No matter the size of the staffing firm, pulling in a client with expected revenues of more than 10% of the existing revenue qualifies as truly a “big fish”.

It is easy to be blinded by dollar signs prior to a large event unfolding. Although it is too early to ascertain the returns on the FaceBook investment, most analysts would agree that it has not unfolded with anything close to preliminary expectations.  Here are three areas to reign in expectations as it relates to the staffing industry and the “big fish”.

1. Expected increase in revenue.  A wise mentor of mine has reminded me over the years “nothing is ever as good as it seems, but nothing is ever as bad either”. This simple axiom has served me well over the years in writing business plans, establishing budgets, and valuing potential transactions. The tendency is to believe our own hype that this new deal is the best thing since sliced bread! Although I have been pleasantly surprised on occasion, keeping a realistic lid on my expectation for revenue growth has kept me in check.
2. Expected cost of additional revenue. A tragic mistake I have been guilty of is assuming the cost of the increased revenue will be accompanied by historic cost ratios. BAD ASSUMPTION! Remember that in a free market society we are not just competing with   ourselves, but the market in general. As the FaceBook IPO has shown, the market can be a cruel mistress when the collective drop the hammer! Typically the bigger the deal, the more harsh the scrutiny. Making the assumption the cost of the deal will always follow historic trends can be a fatal mistake. Leave room for contingencies! The bigger the deal, the bigger the potential
3. Expected timing of the Deal. The FaceBook IPO was in preparation for months with scores of employees from legal, administrative, and financial institutions clearing the path. Despite these herculean efforts, the deal was delayed by several hours, and in retrospect, could have been put on hold on the day of the offering. This points to another mistake often made when chasing the “big fish”. Timing is everything. Just ask the CFO of a healthcare staffing company that has increased sales by 50% with a new client that pays 15 days later than the existing clientele!  Prepare for delays, and conservatively ramp up operations with plenty of cushion for timing of the closed sale, and ultimately cash flow.