6 Tips When Starting Your Own Recruitment Agency

When a recruiter decides it is time for them to break away from being an employee of a recruitment agency and begin their journey of being their own boss, the decision is often based on money and ambition. Being drawn to making money for yourself instead of lining the director’s pockets and believing in your own ability to build a successful business is enough to start the investigation process of starting your own agency.

However, in our experience of setting up several new start agencies over the years, we have given lots of help and advice to these budding entrepreneurs to ensure they are going in with their eyes open and understand (and hopefully avoid) the pitfalls that may come along the way. Below are a few tips that we give to new agency directors when they want to start their own recruitment business:-

Be able to source new clients and candidates

When starting your own agency, there is always the belief that the clients and candidates you have been dealing with previously will follow you to your new business based on the rapport and relationship you have built up. However, your previous agency will have clauses in their client contracts to avoid candidates from being transferred to another agency and/or restrictive covenants in your staff contract to stop you from having contact with your old clients and candidates (often for around 6 months). There is also the possibility that the client may not want to change agencies so you cannot rely on them to follow you to your new business. Being able to generate new clients and candidates is key to the success of your new agency – don’t fall into the trap of relying on your previous relationships or you may come unstuck.

Have at least 3 months salary behind you

When a new agency starts there will often be a lead time until the first placement is made, another lead time to when the placements starts and then a further lead time for the fee payment to arrive. However, as most recruiters will have come from a secure environment where they receive their salary on a monthly basis, it can be a big wakeup call when they realise that they can only take a salary/dividend when the company starts to make money, and more importantly once there are sufficient funds in the bank account. It is often advisable to have at least 3 months’ salary put aside (6 months would be better) and reduce your personal spending patterns until the company has enough cash to support a regular payment to yourself.

Be able to motivate yourself

The early days of starting your own agency can be a very lonely time, especially if you are the only director. Even if you start your own agency with a business partner, when they are at a client meeting or on holiday then the work environment can be a very quiet place to be. Having the ability to work and self-motivate yourself is a key skill requirement, especially as you will be the main (and perhaps only) beneficiary. Sometimes working in a shared office environment can help eliminate the loneliness as there are often other entrepreneurs in the same situation, but don’t let this distract you from your main aim and focus, i.e. your new agency.

Don’t discount your fees to win business

When you start your own agency it is often tempting to offer undercut either your previous agency or another agency to win some business from your clients. However, clients will often then expect that this is the normal practice and trying to increase your fees later on can be difficult. It is best to keep your pricing to what you feel the service you are providing is worth and come up with a more unique recruitment offering that sets you apart from your rivals.

Don’t get bogged down in setup details such as websites and business cards

When starting your own agency there are a number of things that you need to have in place in order to start generating sales such as a company, a bank account, insurance, contracts, laptop and phone. All the other aspects can be arranged as you go along and as they are required. Many new directors, however, will use excuses that they cannot start until they have their website set up or until the funding is in place but these delays can cost you money for every day you are not on the phone trying to win that first placement.

Ensure you remain compliant and protected

Every new agency needs to ensure that they are protecting themselves and working compliantly from day one or they could end up losing their business before even starting. Registering the company correctly, having insurance in place (public liability and employers liability insurance), getting a data protection certificate, registering with HMRC (PAYE and VAT) and having new and up-to-date contract templates will ensure that you are protected and compliant. The implications of using old contract templates alone could mean you are not complying with current legislation and could leave you open to loss of fees and/or employment tribunals.

Over the years TBOS has helped over 100 new start agencies on their journey from an initial idea to them being a fully-fledged recruitment company. TBOS works with the new recruitment directors to ensure they understand what is required to start a recruitment agency to give them the best possible start. The service includes company formation services, bank account setup, HMRC registrations and introductions to various suppliers of insurance, contracts, job boards, databases and other services. TBOS also continues that service with our TBOS Complete solution by providing the day-to-day support to the business to allow the agency staff to make placements, whilst TBOS ensures they remain compliant and protected.

For more information on how TBOS can help start your own recruitment agency, please contact our office.