How to start a recruitment agency – a practical step-by-step guide

Posted: 21st April 2015

1.   Before you start

Spend as much time preparing as you can.   There is an old adage “those that fail to plan, plan to fail”.    

It may sound dull but putting together a marketing plan and financial forecasts could ultimately save your business.   It is a common mistake, particularly with temp recruiters, to under-estimate costs.  Under cutting your competition may win you business but will it make you money?  “Turnover is vanity, profit is sanity”.  If you are unsure how to put together forecasts then find someone who can help you.  It really is a business essential before you start a recruitment agency.

2.   Set up a company

You don’t need to set up a Limited Company but it looks more professional and there may be some tax advantages.   The other main reason is that you are not personally liable if things go wrong.

It’s not hard to do this yourself at Companies House.  Just follow these steps. 

3.   Get VAT registered

Again this is not essential but it adds to your credibility.  Apply for a VAT number as early as possible, as it may take some time.  Click Here to apply online. 

4.   Get an accountant

You will need someone to manage your accounts and payroll for you and your workers.  You are better off with a specialist who knows the industry.  They can also make sure that you manage all the legal requirements as well.  If you are a temp recruitment agency it’s much better to outsource all your administration so you can concentrate on building the business.

Macla Money provide back-office support through their Payfactory Service and bookkeeping through their NumberFactory service.

5.   Brand your business

You may think that only big businesses think about branding, but considering your brand at the start will give you a feel for what you want your business to be.   Your branding should convey what is special, or even unique, about your company.  Thinking about your branding means that you think about and develop your own USPs.  This sets the foundation for your business.

6.   Put in place good systems and procedures 

In some respects this is the hardest part for an entrepreneurial recruiter.  “Procedures are for accountants.   That’s what I am getting away from”.   That’s fine if you just want to work on your own but if you want to grow the business and start employing and managing people, you will need good systems.   Sales and marketing are essential but to grow successfully you need to be efficient.

You can outsource some of these systems, for example implement a decent CRM.  A good idea is to see how a similar recruitment agency operates. 

7.   Employ great people

Richard Branson once said “Put your staff first, customers second, and shareholders third".  He excels at surrounding himself with great people.  You don’t need to be the greatest sales person in the world if you are employing the greatest sales person in the world.   Great businessmen aren’t great at everything, they can’t be, but they know how to employ, manage and motivate people.  Take your time, get it right, don’t employ people like you, employ people who compliment you.

8.   Sort out your finances

A perm recruiter may be able to grow with minimal funding, although their growth will need to be measured and moderated.  A temporary recruitment agency will inevitably need either a lot of capital to start or a working capital facility as they grow. 

The most appropriate source of working capital for a temp recruiter is an Invoice Finance facility as the finance is matched directly to the requirements and growth of the company.

We hoped this helped you in setting up a recruitment agency. You may find our blog on 'Why Should A Temp Agency Use Factoring?' interesting too.

Macla Money are specialists in funding recruitment businesses.  Click Here to find out more.