The Top Ten Mistakes New Recruitment Agencies Make

Starting up a new recruitment agency is always going to have a number of challenges to face. TBOS has had many years’ experience of setting up new businesses and here are some of the most common mistakes that new start up agencies have made which in some cases could have been avoided:-

  1. Believe a client belongs to them – Recruiters will often believe that a client is loyal to them and that they will follow them to which ever agency they move to but this is not always the case as clients like stability and often do not like change.
  2. Over project and under deliver – Recruiters will believe that they can make the same number of placements they made at their previous agencies and produce projections that they often under deliver on causing strains on cash-flow.
  3. Undercut other agencies fees – New start up agencies will believe that they can undercut other agencies but this often leads to a trend of the client always getting a discount and the agency not making enough profits.
  4. Spending money in the account which isn’t theirs – Recruiters will see a large invoice payment received and believe that they can spend this immediately without realising that there are taxes like VAT, PAYE and Corporation taxes payable or other creditors due.
  5. Signing up to long term agreements early on – Signing up to office leases, company car contracts and invoice finance/loan arrangements can tie you in immediately and if the business fails you might be facing large financial penalties to get out of the contracts. Using a short term funding solution like Fund My Contractor is ideal instead of signing up for a long term factoring arrangement.
  6. Spending money that hasn’t yet arrived – When working for a large agency, recruiters are used to being paid commission within a month of a placement being made but when it is your own business you have to wait until this arrives before it can be spent.
  7. Using “old” contracts – Using old contract templates can leave you exposed should they not comply to current regulations or if they do not cover you in a dispute.
  8. Concentrating on cutting costs instead of building the top line – Too many recruiters over analyse their costs each month instead of spending this time building up new business and making placements
  9. Take on too many staff early on – Staff are one of the largest costs on a business as they include salaries, commission, employers NI and desk costs (computer, furniture, office space, stationary, database licences, etc.) so ensure you can afford paying them before taking them on and also manage their performance to ensure they are profitable as quickly as possible.
  10. Believing they can wear all the company hats – Any new business owner should play to their strengths and outsource anything that takes them away from making money. Outsourcing your back office and accounts (to a company like TBOS) is one example of ensuring you spend your time selling instead of dealing with invoicing, credit control and accounts.

Total Back Office Solutions Ltd offers recruiters help to set up their own successful recruitment agencies by looking after the back office and accounts so that they can concentrate on what they do best… sell!