If you’ve been thinking of starting a recruitment agency of your own, you’re probably already aware of the importance of developing both a good business plan and a good marketing plan. Here are three other important considerations:
1. Have enough money. Conventional wisdom states that you will need to have enough cash reserves to support your new business for 18 months with no revenue. Historically, half of new business start-ups fail within the first five years, and a significant portion of those failures are due to being undercapitalized. Before starting a recruitment agency, figure out where the money will come from – personal savings, loans from family or a business partner, conventional financing, etc. Trim your personal overhead as much as possible so that you can still pay your household bills on a greatly reduced – or nonexistent – income.
2. Have a plan to run a business, not just a desk. If you’ve been a successful recruiter working for someone else, it’s easy to think that starting a recruitment agency of your own will increase your personal income. That’s not necessarily true. When you’re working for someone else, you’re responsible for your personal production. You may have help in the form of administrative or research support, or even business development, which allows you to spend your time on what you are good at — making placements. When you go out on your own, your budget may not allow for administrative or research support. You’ll be responsible for business development (which does not include the clients and candidates belonging to your former employer, right?). And you’ll have to do all the other things that come with running a business like bookkeeping, paying taxes, and dealing with service providers (website developer, telephone provider, ISPs, etc.). All of those things leave less time for making placements, which probably means less money.
3. Decide if you want to go it alone, purchase a franchise, or join a recruiting network. Starting a recruitment agency is a risky venture, just like any other start-up. There are different business models to consider, which can impact the risk:
- Go it alone. Use your own knowledge and a “bare-bones” style such as a laptop and Skype from your home when starting a recruitment agency. This option allows you to be completely entrepreneurial and requires the least amount of upfront cash. It’s also the riskiest option, because you won’t have any support to keep your fledgling business moving. What if it takes 6 months to land your first client? A year to make a placement? Can you survive that long?
- Purchase a franchise. A recruiting franchise provides you with infrastructure for your business, training, possibly software, advertising, market penetration, and other support. However, there is a very high cost of entry — anywhere from US $25,000 to US $200,000 — and you’ll be paying franchise fees (typically 5% – 9% of your gross revenue) every month. It can be difficult and expensive to leave the franchise if it’s not working out for you. It can also limit your autonomy as a business owner. If you like a corporate model with lots of training, a franchise can be a great option.
- Join a recruiting network. There are formal and informal networks, free and paid. A recruiting network provides you access to candidates, jobs, trading partners, and peer support. All of these can make starting a recruitment agency a little easier. You can provide candidates for your trading partners’ jobs, or rely on partners to source candidates for your jobs. And it’s invaluable to be able to call up another recruitment agency owner for advice. Your partners will lift you up when you struggle and celebrate your successes.
Starting a recruitment agency is an exciting prospect with a high income potential. Do your homework, develop a great plan, and look for options that provide affordable support to increase your odds of success!