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Are You Ready to Own a Recruitment Firm?

by Veronica Blatt

I love talking to recruiters about how they got into this business. It’s almost always accidental, and it’s fun to hear all the different stories. Many agency recruiters go on to own a recruitment firm of their own. If this sounds like you, how will you know when you’re ready to hang your own shingle? Here are three important things you should consider before starting your own venture:

Do you want to run a desk or run a business?

Being a successful recruiter does not automatically make you a great business owner. Assuming you’re successful at recruiting, do you know how much support you have that allows you to focus on your strengths? For example, who brings in new clients/new jobs? If it’s not you, have you ever done it? If you haven’t done it, how will you go about it? Do you have research or admin support that allows you to spend your time on moneymaking activity? If yes, can you afford to pay for it when you own a recruitment firm? Or will you have to take on these necessary tasks? If it’s the latter, recognize this will leave you with less time for recruiting.

If you just want to run a desk for yourself, how much the overhead will be? Figure out what tools you are using and how much they cost. This will include, at a minimum, a computer, wifi, email, software tools, phone/Zoom. These will cost money every month whether you make placements or not, so be realistic about your costs. You may be able to opt for a lower tier subscription but understand what features/functions you’ll be giving up as a trade-off. Businesses without a website are viewed as less legitimate / less trustworthy, so you’ll need to plan for a website as well. Remember to include monthly hosting fees in your budget. You’ll also need to create a legal entity for taxes, so plan on at least some minimal costs to incorporate, register a business and perhaps some accounting.

If you want to run a business that you can potentially sell, there are a host of additional considerations. The biggest is that you probably can’t be the only/major source of revenue when you own a recruitment firm that you want to sell. On top of that, you will be the person that handles bookkeeping, insurance, payroll, HR and all the other tasks that go along with running and building a business, which will leave you even *less* time for recruiting. Do you have a plan to replace your personal production? Or can you afford to hire someone to do those other tasks?

Cash and Cashflow

Running out of cash, or having poor cashflow, is the main reason new business ventures fail. If you want to own a recruitment firm, make sure you have enough cash to sustain your startup costs and monthly overhead for at least 12-18 months until you start making money. It will take time to find new clients, make a placement, and then wait 30-90 days (or more!) for payment. While you’re waiting, you’ll still be spending money. If you don’t have sufficient cash on hand—including reasonably reducing your personal overhead while you have a lower income—you’re not ready to open a business. On top of that, you have to understand profit and margins on every part of your business. A rudimentary understanding of accounting and finance, including how to read financial statements, is definitely recommended.

You have a solid network of entrepreneurs and mentors

It’s hard to overstate the value of an established peer network of other entrepreneurs like yourself. Support from other recruitment firm owners can help you avoid common pitfalls as you launch your business, share advice and resources, and help you establish performance benchmarks and metrics. Experienced business owners can offer coaching and mentoring. It’s hard to go it alone, so if your network is underdeveloped, spend some time here before you own a recruitment firm.

Recruitment is a rewarding business with a low barrier to entry. That doesn’t mean it’s easy. Set yourself up for success by doing your homework well in advance of opening up your own shop. For more information:

  • 12 Steps to Follow to Start a Recruiting Business
  • Marketing Needs for a New Recruitment Business
  • Legal Requirements for Recruitment Firms
  • Insurance Considerations for Small Recruitment Firms
  • Starting a Recruitment Business: Define Your Focus
  • Identifying Recruitment Competition in Your Market
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Tags: starting a recruiting business | Posted in: Recruiting Resources

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