Starting A Recruitment Agency? 3 Questions You Need to Ask Yourself

We work with a multitude of new recruitment startups every year. Thankfully, most of these are started by former consultants who really understand the recruitment business as well as having a good knowledge of how their business is going to be funded and ran. Too many people though see recruitment as an easy way to make money, an easy business to set up and run. However, they soon realise that they are entering one of the most ferociously competitive industries in UK business. So if you’re considering setting up a recruitment agency, here are three questions you need to ask yourself.

Do you have experience in recruitment?

Some people think that recruitment is simply placing really good candidates into really good companies. It can look quite a simple process from the outside but this forgets what is going on in the background. There is a myriad of employment legislation to deal with as well as other administrative issues. This is on top of the recruitment itself, which is often compared to ‘spinning plates’ in that it’s all about multitasking and prioritising. Can you handle having all these going on in the same day?

  • Business development calls
  • Client visits
  • Searching for candidates
  • Screening CVs
  • Checking references
  • Checking right to work in the UK
  • Arranging interviews
  • Interviewing candidates
  • Following up with clients
  • Following up with candidates

These are just some of the duties most recruiters will do all or many of every day.

Permanent recruitment or temporary recruitment?

Do you know the difference? Basically, permanent recruitment is where you provide and place a candidate to a company for a fee, usually between 15% and 20% of the candidate’s yearly salary. Temporary recruitment is where you the agency provide a company with an employee and you charge the company for this on an agreed basis. You the company in the meantime have to pay the candidate’s salary. The difference is clear but many new to the industry don’t understand the difference it can have on your finances and cashflow.

Have you got finance in place?

As well as the startup cash for your initial business startup costs and marketing, do you have the finance in place for the actual running of your business? Whether you are a permanent or temp recruiter, you’re going to need some form of finance in place to ensure that you business can operate efficiently and effectively. It’s particularly important if you intend to provide temporary recruitment services.

With temp recruitment, you as the agency provide and pay the candidates for the duration of the placement, invoicing the company on a monthly basis. If they are on 30 or 60 day terms and you have several candidates with the company, you have to pay those salaries for weeks or even months before you even get paid.

Do you have the backup finance to fund your recruitment startup? If not, it’s worth looking into factoring and invoice finance or even a full recruitment finance package to include back office and payroll functions as this can ease the financial burden. There are naturally costs associated with these but they can let you access up to 90% of your invoices’ value immediately and can seriously ease your cash flow worries.

If you are looking at starting a recruitment company, it is crucial that you understand and have access to sufficient finance. For a free no obligation chat about factoring and other forms of finance, then call us on 01827 707680.

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