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Search the internet and there are a plethora of articles, content, comment and features on how to start a recruitment agency.

With minimal overheads, no need for an office space and relatively low barriers to entry, many consultants take the plunge armed with a laptop, phone and access to Linked In.

Simple, right? Well yes, until you have to pay your first placements and the client has agreed longer payment terms because you are a start-up, or you fall foul of a compliance issue, or your temp workers are calling you late on Sunday night because they can’t log their time sheets or your first payroll run failed Friday. That’s when you need solid support.

But don’t lose heart, Outsauce Financing has more than fifteen years’ experience in the Recruitment sector and a long tradition of helping consultants start – and grow – their business. We know a thing or two about what it takes to be a successful start-up and as we approach the final quarter of 2018 feel the time is really right for those ready to go their own way to flourish- with a little help from an experienced partner.

This is the first part of our ’Starting A Recruitment Agency’ trilogy that can help you go from employed to self-employed, to the owner of a successful agency.

Why now?

In its industry trends report for 2016/17, according to REC, there were nearly 24,000 trading recruitment companies. At the start of 2018, between January and March, a total of 1,777 new agency businesses had been registered with Companies House – an increase of 9% from 1,621 over the same period last year.

This puts the total number of recruitment agencies in the UK at 37,052 – the highest on record.

This trend is reflected across country’s start-up landscape, which is ever growing and diversifying. There are now nearly 6 million small businesses in existence in the UK that are responsible for £1.4 trillion in turnover and in 2017 contributed a huge 48% of private sector employment. Start-ups are booming!

From a recruiter’s point of view, there are other key factors to consider that might make this an easier decision.

Unemployment in the UK is at an all-time low.
At around 2% there’s plenty of opportunity there for recruiters who can provide the right talent.

Millennials will make up 35% of the global workforce by 2020
This may be a startling statistic in itself but when one considers the widely accepted job hopping tendencies of this generation, and that of Gen Z, which will make up a further 24, these two groups equate to more than half the entire workforce population. So plenty of fish in that sea!

Advance of Tech
Technology continues to dominate the market place. As a start-up recruiter you need a cheap, effective route to market and there’s never been a better time to embrace technology to provide that route than now. Google’s new jobs board functionality is already offering recruiters better coverage and engagement and through online professional networks such as Linked In, or even Facebook, Twitter and Instagram, recruiters can connect, follow and share with their target audience like never before.

Support is in abundance
Finally when weighing up the decision to make the move, consider the support that is available for recruitment start-ups. Whether you’re planning to trade in Healthcare, IT, Construction or Finance, you’ll find there’s plenty of support available to avoid the horrors we outlined at the beginning of this blog. This ranges from finance through and credit control, to payslips and payroll. It’s not difficult to access support as a start-up, you just have to know what’s available and then make the most of it.

In addition, REC is on hand to provide you with all the support you need. Their three-day Start-up your own agency course provides you with everything you need to set up a viable recruitment businesses.

 

Top tips for starting a successful recruitment agency

So having considered the options, and decided to go for it, there are a number of things you should do before you open for business.

Choose your recruitment business model

Will you be a ‘lifestyle’ recruiter; a one-man band that operates with limited overheads and a few select clients, or go all out for a recruitment business? You may have a great sales pitch, which suits a lifestyle business but as MD you will need knowledge of P&L, management, facilities and staff training.

Will you go for a traditional high street agency that has the benefit of attracting people walking by and looking for work, or use a more cloud-based, remote working model which is less expensive and in sectors that are digitally focused widely accepted as the norm.  It probably depends on which industry you’re looking to recruit into, and the amount of cash you’ll have upfront.

Set your pricing, and terms wisely
Generally, recruitment agencies will either charge via commission or just by a flat rate. The rate of commission correlates with the successful candidate’s salary and is worked out using a percentage. From then on, it works a bit like taxation; as the salary increases, so does the percentage.

Most people are familiar with this model but it’s by no means cheap and if you’re looking to target small businesses, for instance, it may put them off using you. For that reason, a lot of new recruitment firms promise a low-cost, flat-rate fee as a one off payment. This can fluctuate depending on the market conditions but the appeal to the client is obvious.  If you do choose to go down a fee-basis, you’ll need to make sure the costs will work for your business. It’s likely you’ll need to place a higher volume of candidates than if you operate a commission-model.

When setting your fee terms, don’t forget your payment terms. Having a five figure sum in fees is great, until you don’t have the cash in bank to pay the candidates, or staff, or landlord. Having a finance partner can help in this regard and ensure you always have the cash flow to keep trading.

Have enough funds to get the company off the ground.

Clearly this depends on the nature of your business; however, the general rule of thumb seems to be – make sure you can get through six months with no money coming in. And to ensure you can make a payment run, first month, engage with a reputable finance partner.

Secure a good back office company
As a small business, spending the majority of your time on admin, rather than servicing your clients or finding candidates, can have a negative impact longer term. It may seem like another thing to spend your money on to begin with, but recruiters who use the right a back office provider think it’s worth every penny.

Invest in a good CRM system

Your data is your most valuable asset; and since GDPR launched in May, (link to GDPR blog) it is also your candidates’. Ensure you can store, secure and provide access to it safely and of used properly it will also save you time and money tracking down a candidate you worked with nine months ago that is perfect for a new role a client has just asked you to fill.

Differentiate
Thinking like a marketer will be a topic explored more widely in our second blog but as with any start up, in any sector, you must be able to differentiate your business from the existing competition. With more than 37,000 competitors already trading, how will you do it better, faster, cheaper than them?