Recruitment Investors – Are They Worth It?

When starting your own recruitment agency, there can often be a desire to look for an outside investor to provide start-up capital and support.  There are a number of investors who will help new start-up businesses, especially in the recruitment industry, as the return on investment can be very lucrative.  If you do decide that your new agency would benefit from having an investor it is important to understand what the investor will actually provide you, both as financial and business support.

Below are a number of advantages to new start-up directors offered by investors of recruitment agencies:-

  • Pass On Experience And Knowledge
    Often an investor will have previous experience of running a company and will hopefully be able to pass on any knowledge they have on ensuring that the agency is a success and reducing common mistakes that new business owners may make.  They may also have knowledge of how to get onto PSL’s, work internationally or how to get the most out of recruitment staff.
  • Give Initial Start Up Capital
    One of the main advantages of having an investor is that they will often provide initial funds to pay for the costs to get the agency off the ground. This may be used to pay for overheads such as office space, computer equipment, furniture and staff salaries (including the directors).  This can allow the agency to start trading straight away with full facilities instead of setting up the agency with limited capabilities or paying for these using credit cards or personal savings.  However, this initial investment may have conditions on the level of shareholding, restrictions of when dividends can be distributed or who makes decisions on the company.
  • Provide Introductions
    If an investor has built a number of recruitment agencies then they would often know which suppliers can be of use to the new agency, whether these are providers of software, back office and accountancy support or invoice finance. This can ensure that the agency gets a good deal and uses reputable providers for the agency’s needs.
  • Potential Shared Costs Across Business Ventures
    If the investor has numerous investments with multiple recruitment businesses it may decide to share the cost of certain overheads between businesses. This may be using the same accounts department to run the business administration, getting an invoice finance arrangement based on the other recruitment agency turnover or using job board licences across multiple companies.

If the investor can provide all of these services, then having them as part of your business could be a good idea as they could be a great help to your new start-up recruitment agency – but it is important to weigh up at what cost this will come at.  Often investors will ask for a shareholding in your business, which means you could lose some of the valuable ownership of the company which in the early stages of your business may seem like a good idea but if your agency grows to a large value, you may end up sharing the rewards.

TBOS has helped many new start-up recruitment agencies over the years and if often asked if having an investor is a worthwhile and in some cases, there have been visible advantages to the agency.  However, in most cases on discussion it is agreed that if the director is as good as they say they are, they should not need the help and support of the investor and the capital investment can be covered by borrowing on credit cards or from a family member.  Also, due to the experience and support that is provided by TBOS to other recruitment agencies, this means that the director can get the introductions and advice without giving over any shareholding.

For more information on how TBOS can help set up your own recruitment agency without using an investor, please contact our office.