How to start a recruitment agency

Got great sales skills and love working with people? You’ve got an immediate head start on setting up a recruitment agency.

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Millennials have gained a reputation for moving on swiftly if a job doesn’t tick all the boxes. This may not, at first thought, sound like a good thing – but higher employee turnover potentially means more business to go round for recruitment agents.

So it could be the perfect time to take the leap if you’re thinking of starting a recruitment agency.

But what else do you need to make a success of your new business? Read on for our checklist of things to consider to make sure you’re fully prepared.

1. Check you have the right skills

Starting a recruitment agency with no experience will make launching your business more challenging – but not impossible – especially if you have these key skills and qualities:

• communication and people skills
• sales and negotiation skills
• organisation and prioritisation skills
• problem-solving skills
• tenacity
• confidence and motivation
• time management
• team working skills

2. Be prepared for long hours

Your business is likely to rely mainly on people who are already working 9 to 5.30 Monday to Friday – whether that’s employers looking for candidates or candidates looking for employers.

This means there’s a high chance you’ll need to be available outside of these hours.

3. Choose whether to work from home or a business premises

One of the great things about this type of business is that it needn’t be too costly to start up, as it's not essential to have premises – starting a recruiting business from home is a realistic option.

If you decide to set up in dedicated business premises, however, there are a few extra things to consider – such as insurance (more on that below) and business rates, which you can read more about in our downloadable guide.

4. Keep motivated

Of course not every candidate you put forward for a role will be successful. That said, it’s good to bear in mind that the work you put into building relationships with candidates and employers will rarely go to waste.

If you put in the effort to make them feel like you’ve listened to their needs, they’ll be much more likely to come to you next time they’re looking to hire or be hired.

5. Decide on your business and pricing models

As setting up without business premises will give you one less overhead to take into account, you’ll potentially be able to offer more competitive rates. Just bear in mind that this may become an issue if your business grows and you decide to take on staff.

Will you charge a flat fee or will you charge commission on the successful placement of a candidate? Many recruitment agencies charge a percentage of the candidate’s salary, on a sliding scale.

Deciding on your target market will help you decide on pricing. For example, smaller businesses may prefer to pay a flat fee due to them generally having lower amounts of available cash, while larger organisations may have no issue with paying commission.

6. Find your niche

With so many recruiters out there, make sure potential clients and candidates understand what makes you unique. It can be a good idea to specialise in a key industry or industries.

If you take the time to learn their area of business inside and out, there’s a higher chance they’ll put their faith in your knowledge and ability to find them suitable candidates – or roles.

7. Make sure your business insurance covers your needs

However you decide to set up, don’t forget to consider your insurance needs. Legal action against your business may seem an unlikely prospect when you’re just starting out, but it’s better to be safe than sorry.

Key covers for recruitment agencies to consider:

• public liability insurance – in case someone is injured or their property is damaged because of your business
• professional indemnity insurance – in case you give faulty advice that causes financial loss to a client
• employers’ liability insurance – in case someone who works for you is injured or becomes seriously ill as a result of working for you. It’s a legal requirement if you employ people, whether full time or part time, permanent or temporary
• business premises insurance – in case your business premises are damaged or destroyed, paying out for repairs and rebuild costs

8. Decide on your business structure and register with HMRC

You’ll have the option to start up as a sole trader or a limited company when you begin trading in your recruitment agency business. There are pros and cons to both setups, which you can read more about in our article comparing these business structures.

It’s also important to make sure you’re registered as self-employed with HMRC so you can pay the correct tax minus any allowable expenses. We’ve also got a handy guide on setting up as a limited company with Companies House, if you choose to go down that route.

Read more about the tax deductible expenses you can claim as a business.

9. Stay on the right side of the rules

Before you get going, and especially if you’re new to the industry, it can be a good idea to brush up on the latest rules and regulations by attending a training course. The Recruitment & Employment Confederation (REC) is a good place to start.

It’s also worth familiarising yourself with the legislation governing recruitment agencies: the Employment Agencies Act 1973.

Further to this, the Conduct of Employment Agencies and Employment Businesses Regulations 2003 explains the difference between a ‘recruitment agency’ and a ‘recruitment business’ in the eyes of the law.

Have you started your own recruitment agency? Use the comments section below to let us know what went well, or not so well.