Most new recruitment agencies are set up and run by top-billing recruitment consultants who have previously been employees working for another director. 

The change from being an employee to a director can be a hard one to adjust to so here are our tips to help with this transition:

If You Don’t Make A Placement, Then You Won’t Be Able To Pay yourself

Although this may seem obvious when you run your own agency, however, if you don’t make those all-important placements then there won’t be any funds available to pay yourself. It is advisable that when you start to have some savings available until you make that first placement and then plan how much to take in order to survive without taking all the funds from the business. 

You Won’t Get Paid Commission Anymore

When you were working for another recruitment agency you would have been paid a salary and commission based on your billings for the month. However, when you run your own business the commission element becomes redundant as there are overheads and taxation that need to be considered and instead your earnings will be based on the company's profitability.

A Placement Is Only Completed Once It Has Been Paid By The Client

Although there is always a buzz when you make a placement, or when the candidate starts, you have to get used to not being able to celebrate until the money is in the bank.  When you were a consultant, you would always get your salary whether you had made a placement or if money was still waiting to come in, but this is not the case when it is your own business.

You Have To Take Into Account Taxes Before Taking Money From The Company

When you have been previously paid as an employee, the funds you have been given have already had taxes accounted for. However, when you run your own agency there are numerous taxes you need to consider before this can be achieved so you do not fall behind with HMRC. UK invoices raised will be paid with VAT, any profit the company generates will be subject to Corporation tax and if you manage to take dividends then you may also need to pay personal tax on these drawings.

The First Year Is Going To Be The Most Difficult

If you speak to any director of an established agency, they will say that the first year of trading is always the hardest.  This is the year when you have to set up the company and its infrastructure, generate new clients, candidates and the company brand as well as manage the cashflow and profitability of the business. During this time, you will make mistakes, learn many lessons and work longer hours than ever before, but it will all be worthwhile as you will be building your new business for yourself and your future.

All of the new start-ups that work with TBOS are supported and advised on all of these scenarios to try and ensure that the first year of trading is as smooth as possible. With TBOS’s help, we believe that the transition from employee to director can be achieved and that the new agency will be a success.

Image Source: Pexels