Knowledge Centre for recruitment

Setting up your own recruitment business

The Recruitment Industry is a great place to be and running your own recruitment company can be a fantastically rewarding challenge. This article provides ideas and suggestions to recruiters who are, or are thinking of, setting up their own recruitment agency.

The basics for setting yourself up:

  • Consider how you can best access the wide range of expert advice without unaffordable expense. Use free resources available on websites run by the government and professional bodies
  • Use a formation company that can help you with the basics to ensure that you are compliant
  • Find a good accountant.
  • Decide about location; the need for offices, systems, infrastructure, staff. Initially try to do as much of this as possible on a service basis rather than through hiring staff
  • Consider your brand. This may seem daunting but need not be too costly and is something that is hard to change later
  • Consider your IT needs; what sort of web presence do you want, how will your candidate and client managment systems work etc. See also this article in our knowledge centre
  • Try to plan all your first year expenses up front so that you can prioritise and make good choices

Thinking about your finances and business plan:

  • Be realistic. Put together a Profit and Loss forecast, run a worst case scenario - about 20% of your first estimate of sales. You can do an upside one as well for fun but make sure you can survive on the worst case at least for a substantial period of time.
  • Look at your cash flow. Even a successful business can struggle with cash flow issues, and this becomes particularly critical if you are in the temp or employment agency market where your contractees will need paying every week and your clients will take a lot longer to pay. Plan on the industry average of around 50 debtor days or more.
  • Get insured. Consider buying necessary insurance that you can pay for monthly. Yes, it's a little more expensive than paying up front but it helps you preserve your cash position.
  • Seriously consider outsourcing temp payroll and credit control - aim to do this on a totally variable cost basis and utilise the outsourcers' management disciplines. You need to be spending your time selling, not processing weekly payroll, dealing with C.S.A. queries and chasing debts etc. Don't hire payroll and credit control staff or buy payroll, invoicing and sales ledger systems. Get experts to do it but don't pay out up front and raise the invoices in your name.
  • Be prudent. Check out the credit rating of your clients.
  • Get your terms sorted. Absolutely clarity up front on invoice terms will save you effort and angst later on. Make sure you are clear about CVs you send to clients, protect yourself in the event that they hire people but not through you.

Thinking about your candidates:

  • Take a bit of time to consider what it is that you will be offering your candidates and what might make you the recruiter of choice. How are you going to differentiate yourself from all the other recruitment agencies?
  • How are you going to find candidates? Have you researched and costed the different options, which are likely to work best for you?
  • Set your pricing parameters up front and take care not to compromise on these in an early bid to do business since you will find it hard to recoup them later - unless you build this into a longer term contract
  • Decide - and cost - your candidate sourcing options
  • Work hard on candidate care, and just as importantly, candidate after care. How do you plan to keep in touch with the people you placed? This is critical so that they come to you if they are looking to hire (or indeed move on)
  • What service guarantees do you propose to give your clients
  • How will you prevent your clients from taking your people and not paying your fees (make sure terms and conditions are legally robust and clearly printed on the backs of your CVs)

Thinking about your Clients:

  • Take a bit of time to consider what it is that you will be offering your clients and what might make you the recruiter of choice. As a new entrant into the market you will need to think carefully - from the clients point of view - about why they might come to you.
  • Set your pricing parameters up front and take care not to compromise on these in an early bid to do business since you will find it hard to recoup them later - unless you build this into a longer term contract
  • What service guarantees do you propose to give your clients? Consider your position if your candate leaves within 1 month, 3 months, 12 months. Consider different fee structures based on candidate aftercare and retention guarantees. Consider invoicing over the first 6 months post placement (it might hit your cashflow but could give you competitive advantage and keep your fees up)
  • If you are negotiating a long term preferred supplier arrangement consider using a procurement professional.
  • Think about how you will prevent your clients from taking your people and not paying your fees (make sure terms and conditions are legally robust and clearly printed on the backs of your CVs)
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