Who Should Start A Recruitment Agency?
Each year there are thousands of new recruitment directors who start their own agency believing they can build a successful business.
Whilst setting up a recruitment agency can be fairly simple, to be successful it is advisable that you have worked within the recruitment industry to ensure you understand the process of making a placement.
Ideal candidates to start their own recruitment agencies are:
- Self-motivated self-managing individuals
- Senior 360 Recruitment Consultants
- Team Leader/Managers/Directors within Recruitment Agencies
- Recruiters who have built recruitment desks from scratch
Whilst anyone else can start their own agency, it can be harder to be successful if you have not worked in the industry or understand the recruitment process.
Planning Your New Agency
Before starting a new recruitment agency it is advisable to develop a business plan by answering the following questions:
- What type of agency you are going to build? Permanent/Contract/Temporary?
- Which industry sector? Local/National/International?
- When can I start -Do you have any restrictive covenants in your existing or prior employment contract that would affect you starting a new recruitment agency or contacting old clients/
candidates? Who are your typical customers going to be?
- What level of fees or margins are you going to charge?
- How are you going to get those customers? Direct sales, indirect marketing etc?
- What resources do you need to get those sales? Staff, website, marketing etc and how much will they cost?
After answering the above questions, you should be in a position to create some basic financial projections (for at least the first year). This will be based on potential placements and estimated costings for overheads required to run the business such as staff, premises, insurance, telephone, job boards, CRM systems, accounts and finance etc.
Although the projections will be based on estimates of income and expenses it will be a useful tool to monitor your own actual performance against the plan. REMEMBER No one will be managing you from now on!
Registering Your New Company And Domain
Choose a name for your new business. Consider the following;
- Is there somebody out there trading under that name already?
- Do you want to include words in the name that describe what you do (recruitment, resources, staffing, etc.)?
- Do you want to include words in the name that describe the sector you are in (IT, accounts, health, etc.)?
- If possible, keep the name as simple as possible (or that can have a short abbreviation)
- Check whether the name is available at Companies House (if setting up a limited company)
- Is the domain name available?
Once the name has been decided the company needs to be registered at Companies House which can be done on the Companies House website or using a formation company. Once registered the Certificate of Incorporation and company formation documents will be issued.
Buying the right domain name is important as it will form the basis for people finding the company online and sending emails. The domain name should be short, memorable and easy to take down over the phone. Buying the .co.uk and .com domain names to secure both domains is also advisable.
New companies are automatically registered for Corporation Tax and issued a Unique Tax Reference (UTR) number. You will need to register the company for VAT which allow the company to reclaim any VAT on expenses and also charge VAT to clients. You will also need to register the company for PAYE which allows the processing of salary payments for the directors, staff and candidates. These registrations can be completed by the director or the company accountant.
Source A Business Bank Account
Choosing the right business bank account for your company is important and there are many to choose from all offering offers to new business owners.
The main functions of a bank for a recruitment agency are the ability to receive funds from clients and make payments to supplier and candidates (if making contract/temp placements) so all banks should be able to help.
The main driver when sourcing which bank to use should be how easy their online banking portal is so it is advisable to get a full demonstration before signing up to ensure you can make the payments without having to use telephone banking. The secondary consideration is ongoing costs. Check what price incentives the banks are offering for new start-ups.
Currency accounts and the ability to make international payments may also be a consideration.
Arrange Company Insurance
Company insurance is a requirement for any business and recruitment agencies will require Public Liability and Employers Liability as standard.
However, depending on the industry that the agency is recruiting into and client’s contractual requirements then there may a requirement for the company to Professional Indemnity Insurance. It is best to speak to an insurance broker who can source you the best price for the insurance levels you require based on your industry and business needs.
It is also best to get the lowest levels of required cover and increase this if there is a contractual requirement in the future.
Implement Some Basic Marketing
Being able to find your company online is important in order to generate new business and attract candidates and potential staff to work with your agency.
Once you have your logo designed, it is best to commission a basic website explaining the recruitment services you offer and how clients and candidates can contact you. REMEMBER often the first thing a potential client, candidate or future staff member will do is check out your website.
You can set up your social media accounts on LinkedIn (personal and company pages), Facebook, Twitter, Instagram, etc to help improve your Google rankings and start using these free functions to advertise your jobs and engage with your clients and candidates online about your new recruitment agency.
Source Robust Contract Templates
It is important that you have up to date contract templates when starting your new agency to ensure your business is protected when making placements.
As the recruitment industry has many unique legislations that need to be followed such as AWR, IR35, GDPR and the Code of Conduct Regulations it is important that your contracts protect your agency, your clients and your candidates.
There are a number of legal suppliers to the recruitment industry who can provide a pack of templates covering permanent terms of business and contract/temp contracts for PAYE, Umbrella or Limited contractor placements.
Find A Good Back Office And Accounts Provider
As many new recruitment directors come from a recruitment consultant background, the idea of raising invoices and managing accounts can seem very alien to them so looking at outsourcing this function will not only avoid wasting valuable sales time on these mundane tasks but ensure this is done correctly and compliantly.
Whilst there is of the shelf accounts software available it is only as good as the person entering the data and does not mean that this is being done correctly. REMEMBER Good recruiters are rarely good bookkeepers or accountants!
Using an outsourced provider to look after the back office element will ensure that all aspects are looked after correctly and can be much more cost effective than the director doing this themselves or paying an internal administrator to do this.
Sourcing a recruitment specific accountant who can provide monthly/quarterly management accounts is also vital so that the directors know how the company is performing in order to grow their new business.
Arrange Invoice Finance (If placing temp/contract positions)
If the new recruitment agency is making contract or temporary placements then there is often a requirement for funding. This is due to clients paying invoices on 30-45 day payment terms but the candidate expecting to be paid within 7-10 days from submission of timesheet.
Invoice finance is a type of funding used by a large portion of the recruitment market where the funds to pay the candidates is advanced based on the value of the invoice raised to the client.
There are many different providers to the recruitment industry offering Pay-And-Bill, Factoring and Invoice Discounting facilities which work depending on the size of your contractor/temp book to provide the required funding.
Getting quotes from 2-3 providers would be ideal to ensure you are getting the facility your agency needs at the right price.
Start Contacting Clients And Registering Candidates
Making that first placement is the first milestone when starting a new recruitment agency so it is important that once the company has been formed that you start contacting clients and registering candidates as soon as possible.
You will need to consider how you store and record the information on your clients and candidates which could be using a simple spreadsheet or database. You may also want to consider using a full recruitment CRM system which will not only hold your data but also potentially streamline processes and aid you with making those all-important placements.
An agency does not need to have a business bank account, VAT registrations or a website in place to make that first placement so there should be no excuse on starting to make those initial calls to make that first placement.