Thinking about starting your own recruitment business?

Posted: 14th March 2016

Many successful recruitment agencies were started by successful recruitment consultants, who decided to leave their job at an established agency and start their own business. However, not all of them make it a success.

Over half of start-up businesses fail within the first 5 years, so it is important to research what makes a recruitment business a success, before taking that leap. Here we have put together a few things to consider:-

1 - What sort of recruitment business do you want to start?

There are a few options. The two main ones are to get involved with an existing franchise or to start your own agency from scratch.

A franchise option is initially quite costly with set up fees to consider and ongoing management fees payable to the franchisor. However, if you feel that you would benefit from the support and existing infrastructure that a franchise can offer then this could be your ideal choice.

Alternatively if you decide to go it alone, it will be less costly and you have complete freedom to run your recruitment business the way you want to. Initial start-up costs can be kept low if you work from home, set up a business line, fast internet connection and research your market. The downside is that you will need to establish a presence i.e. build up trust in your business and your brand.  Inevitably you will be knocking on a lot of doors to get your name recognised in the market.

2 - Do you have a business plan?

This may seem quite obvious, however starting your own temporary recruitment business is very different to running a desk within an established agency. 

As well as sourcing roles, assessing candidates, sending CVs, arranging and conducting interview preparations and so on, you have a whole host of other considerations including compliance, maintaining your accounts, ensuring your temporary workers are paid on time, VAT & PAYE responsibilities as well as remaining up to date on changing legislation.  You might be a brilliant Recruiter, but you need to make sure you are aware of all of your obligations as a business owner before deciding to break away on your own completely.

Putting together a business plan will get you thinking about branding and marketing; will you be a niche player or a generalist?   You also need to consider the administration of the business; do you have the skills (and time) to manage it yourself or should you outsource it?  Most importantly it will help you to plan your finances and cashflow.

3 - Do you have enough cash?

Again, this might seem obvious but you need to consider how much capital you have to finance your business after the initial set up and as you plan to grow.

For instance, how will you pay your temporary workers each week and meet overheads if you are waiting for your customers to pay?

An overdraft with the bank will only last so long and definitely won’t give you what you need to grow, that is why so many Recruitment business owners use a back office and invoice finance/factoring provider.

Unlike a bank, invoice finance and back office providers include many additional services and benefits:-

  • Invoicing - They prepare detailed and accurate invoices for you with your own branding, and send to your customers on your behalf.
  • Payroll – they will pay your workers each week and send professional payslips while keeping you compliant with payroll legislation.
  • Credit control – they will be an extension of your business by contacting your customers to collect the invoices when the amounts are due to keep your cash flowing.
  • They will pay your profit margin in advance to you each week.

At Macla we offer a bespoke back office and finance service for temporary recruitment agencies.  We can provide you with the support you need to do what you do best - recruit!  Our aim is to be an invaluable partner to your recruitment business.  We spend time building a relationship with you to fully understand what you need to make your recruitment business a success.

For more information about this topic you can read our other blog here or if you would like to speak to us about how we can support your Recruitment business, please call 020 3555 4545 or fill in our contact form and one of our friendly team will be in touch soon.