Bad Reasons People Want to Start Their Own Agency

Bad Reasons People Want to Start Their Own Agency

We’ve written before about when you should start your own agency instead of working for one, and we’ve even discussed the 7 excuses recruiters use to delay starting their own agency. What we haven’t discussed, though, is all the bad reasons that some people give when they think they are ready to start their own agency, and actually aren’t. If you’re on the cusp of quitting your job and going it alone, consider that the following reasons might not be as well thought out as you first hoped.

I Already Have Clients Who Will Come With Me

People in Busy City

This is the most egregious mistake a potential new recruitment start-up can make. In your current position you will have a good relationship with your clients, who might even go as far as to comment that they’d be happy working with you under your own banner, rather than with the current agency. With enough of these clients – or, even worse, a single high-paying one – any recruiter might start dreaming about starting their own agency.

The fact is that these clients won’t actually come with you when you start a new recruitment agency, and even if they do, they won’t last forever. Whether it’s restrictive covenants or just security that your clients are seeking, it’s preferable for them to stick with an agency that they already have an established relationship with than to break out with you.

If you want to start a new recruitment agency, you have to be prepared to find your own clients from the very beginning. Whether you bring clients with you or not, finding new ones is always going to be the most important part of your business, since it’s the part that pays the bills.

I Could Do the Work Cheaper

This might be true, but it ignores the bigger picture. Many people looking to start their own agency are aware that they will be in direct competition with their current agency, as well as many others in the area. One of the first thoughts has to be about how to win that competition, and cutting costs to undercut competitors is almost always the first idea.

It’s possible that you will be able to work for cheaper, but in reality, the prices that agencies charge are as high as they are for a reason. Though you may not be paying staff members, you will still have expenses that you need to pay, and which become harder to pay when you don’t have the efficiency, resources and larger client worth that your current agency has. In the end, you may gather clients with the cheaper prices, but you’ll end up struggling to actually make money.

To win against your competition, you need to offer something they don’t, or perform their role better than them. Simply being cheaper isn’t an option, otherwise clients wouldn’t be willing to pay the price they do. Think about what you actually have to offer potential clients that will win them over, rather than trying to undercut competitors.

I Could Be Making More Money

This is similar to the previous point, and deadly in combination with it. Looking at the money the client pays compared to the money you actually receive is a great way to become disillusioned with your role. It’s certainly true that you could be making more money per client than your current position allows, but you have to consider the additional expenses that come with self-employment.

From the money the client pays you, you won’t just be paying your salary. You will also have to pay taxes, of which there are a few, as well as business expenses such as equipment, travel and potential outsourcing fees. You can try to avoid paying some of these (apart from tax of course), but in truth your business will work better with these expenses than without, so you’re better off paying them. Although you will still end up with more than you currently earn, your profits won’t actually be as much as you might think.

Don’t treat the cost of your service as your pay cheque and don’t expect to get rich overnight, especially while you’re still building your business. You will end up earning more by yourself than if you work for someone else, but you must be aware of the costs of starting your own agency, and how much that will leave you with.

How Hard Can It Be?

The final major trap that recruiters often fall into is the one that comes after having already considered all of the above points. It seems like there’s just a little bit of extra admin to do, a few costs to pay and an understanding of the risks, and then after that it’s all the same.

Running your own agency requires a lot more effort than working for someone else, and starting a new agency requires even more effort still. It’s easy to expect it to be easy, or at least to underestimate the difficulty, but you will need to be prepared for the costs and setbacks, and take them seriously.

If you read the above and think that you’re ready to handle it all, make sure you think a second and a third time before embarking on your journey. If you are ready to start your own recruitment agency, Fund My Contractor can offer you specialist support in the form of funding for temporary contract placements.

For more information on how we can help you get your new recruitment start up off the ground, phone us on 0845 8811 112.