Starting a recruitment agency is a big decision and as with starting any business, is one that should not be taken lightly. A recruitment agency can be relatively cheap and easy to start in comparison to many other businesses, however going in unprepared will inevitably lead to failure.
Although experience of working as a recruitment consultant does not have to be essential, there are many examples of successful recruitment agency owners without this experience in particular those with expert knowledge of their sector, experience of working in or managing a recruitment agency will more often than not be a huge advantage. With experience you should be familiar with the processes, contractual and legal obligations and have to confidence to know you can be a success.
As with any start up extensive research and planning is essential, if you already have the experience of working as a recruitment consultant then you will already know which sector, which job roles and types of roles (temp / contract / interim or permanent) you will be specialising in. Often consultants starting their own agency will have good contacts within the industry, both clients and candidates. If you are starting the agency by yourself then the important thing to remember is you are still a recruitment consultant not just a business owner, if you are have been successful working for another agency then you will need to put in the same effort and then some as you did previously.
Recruitment agencies can relatively low cost to start up but without serious financial planning you will be destined to fail. If you are starting up by yourself then the costs can be quite low, for example if you are working at home, already have a computer, internet access and a phone line then you already have the basics, however it will be a struggle without spending money on a professional website and advertising. A very important consideration is how you are going to fund yourself, will you need to take money out of the business to pay for living costs or do you have enough savings? Planning and managing cash flow, particularly in the first year or two can be difficult, if you take too much money out can your business survive a tough month or two? What happens when clients are late paying?
When most people first decide to start a recruitment agency they will know if they are going to specialise in supplying temporary staff, placing permanent candidates or both. If you are supplying temporary staff then it will be your responsibility to pay them weekly, even if you have agreed monthly terms with your clients. Therefore you will need to ensure you have sufficient funds to make payments, plus holiday pay and national insurance contributions. An alternative is to use a factoring company but this can affect profits. Permanent placements will result in straight profit, but often rebate terms will be include so this has to be taken into consideration, permanent placements can often be less frequent so a cash flow forecast must reflect this.
In the UK legislation regarding employment agencies and businesses, employment and immigration has a huge effect on the industry and every agency must ensure they comply or face serious penalties. In particular agencies supplying temporary staff must ensure all their candidates have proof of identity and right to work in the UK, are qualified for the jobs they are sent to and are treated by the agency and the client according to legal requirements. By joining an organisation such as the REC or by seeking professional legal advice and support agencies can ensure they are compliant.
Richard Navin is a successful recruitment consultant and owner of UK engineering recruitment agency RJN Selection. For more information please visit http://rjnselection.co.uk