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A pretty good rule of thumb – one we’ve written about before – is that it can be 3-6 months before a new recruitment agency has enough placements to cover their costs, even with great back office support and skilled recruiters with plenty of contacts from the start.

Obviously, if your business plan doesn’t have contingencies in place to survive at least those first six months, you’re in serious trouble.

So, what can you do to make sure your chances of survival are as good as they can be?

Start Strong

It’s essential to hit the ground running. The more lasting placements you can make in the first month, the less you’ll lose in the months that follow – buying you more time. If you can get a line on a recruitment drive at a potential client, focus your energy on your contacts there; those early placements could be the difference between business life and business death in the short term.

Review Financing Caps

Financing arrangements tend to have higher fees the higher the cap, so there’s an incentive to keep your arrangements low early on, but – as obvious as this may sound – make sure your agreement has a high enough starting cap to fund all the placements you’ll need to break even.

Relying on being able to raise it in time will be an option later, but before your agency is stable, it’s a gamble.

Stay Pro-Active

It’s always worth spending some time looking for potential contractors in your industry sector, but as time goes on and your agency develops a reputation more and more of your contractor pool will come to you.

At TBOS we’ve often seen experienced recruiters start their own agency without realising that, as much as their personal reputation will help, they no longer have the extra name recognition of the firm they used to work for.

More of your working time, early on, will need to be spent rebuilding your network and your contact list. Speaking of which…

Budget Your Working Time Realistically

In the opening months of any new business it pays to spend more time at work – but only if you’re working smart. Take stock of your assets in terms of your contact pool and your skills – administration, networking, matching posting to CV, talking to clients, talking to contractors – and draw up a schedule which gives enough time to perform well even in your weak areas.

Be Honest with Yourself About Your Capital

For those first three to six months you’re going to be losing money, and if it all goes wrong and you’re not honest with yourself about how much you can afford to lose, you can end up losing it all rather than pulling the plug in time to save some of it.

You need to take stock of how fast your income is rising and how close you are to running out of money to make the call, and you don’t want to pull the plug while you still have a chance to recover – but if you realise you can’t turn things around in time, it’s time to accept that and get clear.

TBOS has seen clients make some or all of these mistakes, and some survived – but others didn’t, and everyone was worse off for having to overcome them. Before you start up a recruitment agency, have your plan in place.