How to start a recruitment agency

With the recruitment industry booming, we look at how you can start your own agency.

Recent figures from the REC suggest that recruitment’s in renaissance, with big billers breaking records and revitalising the industry. After a tricky few years throughout the credit crunch annual revenues are now touching £30 billion, placing Britain firmly near the pinnacle when it comes to recruitment.

Arguably there’s never been a better time to set up your own agency and go it alone, so where do you start? What are the essentials? And how can you make your recruitment startup a success?

Build a brand

To be a success you’ll need to convince clients that you’re the best people to bring them candidates, and with a strong brand behind you this becomes infinitely easier. Think on your own strengths, your target market and what would appeal to them. In the marketing and creative space Major Players and Guru Careers are two companies that do this effectively – at first glance you might even mistake them for a trendy East London agency.

The result is that they seem a natural fit for their target market - creative companies and candidates after some recruitment help. Gone are the days where a new agency can get by with just a Rolodex and phone alone, at least according to Richard Prime, Co-founder of recruitment finance provider Sonovate:

“Branding is vital as it sets new agencies apart from the competition, and it embodies all you are and aspire to be. Winning candidates and clients can start long before you engage with them - everything they’ve heard or seen about you is tied up in your branding. The bigger your brand the stronger your pull so start building an online presence immediately.”

Unsure where to start? Take a look at our marketing section and pick up some tips.

But don’t forget the dull stuff

In comparison to many industries recruitment has relatively few barriers to entry, but it’s not as straightforward as it initially appears – as Alastair Millar and Joe Brown discovered recently.

Co-founders of Brighton-based recruiters Peopleforce, they set up shop in July 2013, seven years after beginning their recruitment careers at the same global recruitment company - and making the transition was tough according to Alastair:

“First we had to work out how to finance our contract payroll which was huge headache. We outsourced that in end as it made sense financially and logistically, but we still had to shoulder responsibility for all the other rigmarole – accounting, banking and all the bills involved with the essentials like broadband, databases and job boards. Let’s just say it was a little frightening and those first few months were tricky.”

Just under two years on though Peopleforce is going from strength, with the company now a three-person agency with another employee in the pipeline. So, what would be their biggest bit of advice to the aspiring startup? Joe suggests:

“Check all your expenditures with a fine toothcomb. And realise you’re not just a recruiter – chances are you won’t have the cash to outsource and you’ll need to pick up a fair bit of admin.”

Read the articles in our start a business section for some more insight on the small business essentials.

Find your finance

Thankfully Peopleforce had plenty of money put aside to shoulder the cost of their early expenses, with money saved from their previous pay packets helping to keep them in business. For them self-financing felt like the best way go about funding their agency, but as an aspiring entrepreneur this might not suit you – so what other options are there?

Firstly there’s the traditional option of seeking a loan from the banks (pick up some tips on how to succeed in this here), or alternatively you could turn to recruitment finance providers like Richard Prime’s Sonovate, who also remove the burden of contract administration. Elsewhere there’s the option of sourcing cash through initiatives like James Caan’s Recruitment Entrepreneur fund or government-backed schemes like Start Up Loans.

There’s a wealth of options out there and we’ve outlined the most common in our finance guide for small businesses, so watch that if you’re still unsure about how to best fund your startup.

Learn to live lean

Even with finance behind you it’s likely that life is going to be tough for those first few months. Not only will you face all the fresh expenditure involved with running a recruitment startup, you might even face restrictive legal covenants if you’re coming from an in-house job.

Typically lasting for around six months and designed to prevent you from taking clients and intellectual property, most recruitment companies will put these agreements somewhere within an employment contract. With this in mind be sure to leaf through these if you intend to work with clients from previous jobs, as you might face a litigation battle if an agreement is broken.

A repercussion of this is that when you initially go it alone your list of clients can take a hit, with relationships built at previous companies effectively lost or put on hold. It’s still possible to shrug this off though, as Alastair Millar of Peopleforce suggests:

“Be patient. You can always win those clients back. Starting up will bring these sorts of hardships but it’s worth it in end. Just build a leaner business and bridge the gap with new clients till you can legally get them back.”

So there you have it. Clearly recruitment isn’t easy, but it’s filled with opportunity. What are you waiting for? Get out there and start building your own agency!

Recruiter that’s been there and done it? Tell us your own tips in the comments section below

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