It makes sense to want to build your own business in recruitment. After somewhat of a lull, the global industry is booming once again, growing year on year and currently worth around US$521 billion. In a largely digital age, it’s also easier than ever to run a successful recruitment business from home or on the go should you wish, without needing to splash out on office space.

Whether you’ve worked in recruitment for a number of years and are looking to take a natural next step in your career, or you’re a serial entrepreneur who sees an opportunity in this sector, there are undoubtedly some things you should know about how to start a recruitment agency, and more to the point, how to encourage growth once you’ve got the ball rolling.


Know What You're Getting Yourself In For

The first thing any recruiter will tell you about their job is that their hours are not your typical 9-5. If you currently work or have previously worked in this industry, this is something you’ll be very aware of, but for an entrepreneur from outside the recruitment sector, this can come as a big shock to the system, and jeopardise the potential success of your company.

As many of your candidates will already have jobs they are looking to leave, you should expect to be working in the evenings to really make a decent go of things, whether that’s at home or in the office. For this reason, it’s a good idea to have recruitment platforms that you can take on the go with you.

Get comfortable with the laws governing the recruitment industry – of which there are many. This legislation differs between countries, so you may need to set aside considerable time to do your research and learn the ins and outs of your local employment legislation, and may even consider taking a short course in it, just to be sure.


What Makes You Different?

Globally, the recruitment industry is projected to grow 17.66% by 2021, with new agencies appearing every year. The golden age of digital technology means that many of these have been able to operate across a wider network than ever, with many helping clients all over the country. If you’re going to become one of these companies, you need to figure out what you can offer clients in your area that they aren’t getting from competitors.

Building a fresh, exciting and engaging brand is absolutely vital. Working millenials are causing a massive shift in how companies operate across all industries. A major advantage for startup recruitment agencies is that your larger, long-established competition can easily get stuck with a business model and brand they’ve had for years, losing out on younger clients as a result.

One of the largest shifts is the increased focus on customer journey, which in the world of recruitment becomes the candidate journey. Over 75% of professionals are believed to be passive candidates in the recruitment process, so finding tangible ways you can offer an improved candidate journey that picks up where your competitors are falling short could be key in your success story as a startup agency.

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Choose Your Business Model

Before you get too ahead of yourself thinking about branding, remember that all of this needs to work with your chosen business model. Recruitment business models can take many different forms, each with their own advantages and disadvantages. The key is finding the one that appeals to your candidates while also keeping in line with the goals you’ve set for your agency. A business model that does all of this provides a strong foundation on which your recruitment company can grow.

Some common business models for recruitment agencies include:

  • The contingency model: This is by far the most common business model for recruitment agencies and likely the one you’re used to if you’ve worked in the industry before. Candidates are placed for a success-only fee, which is between 15% and 25% of the candidate’s salary.
  • Preferred Supplier Lists: Preferred Supplier Lists (PSLs) are related to the contingency model, but more selective. Typically used by large companies, it involves them creating a list of recruitment agencies they want to work with, requiring new agencies to tender.
  • Retained or Executive Search: Unlike the contingency and PSL models, agencies make money from the start with retained or executive search. Clients make an initial upfront payment to an agency of their choice and then further payments based on your delivery.
  • Recruitment Process Outsourcing: Usually more suited to established recruitment agencies, in the recruitment process outsourcing (RPO) model, your agency takes on the role of an in-house recruitment team for a client, dealing with other recruiters on their behalf.
  • Self-Service: This business model is driven by efficiency and the client only pays for the delivery of each stage of recruitment you’re providing, such as marketing the position or interviewing candidates, encouraging them to handle more of the hiring process.

What Will It Cost You?

If you’ve never set up a business before, take what you think it will cost you and multiply it a few times. With recruitment, as with any industry, it’s sensible to have enough capital to tide you over during the first few months, particularly if you opt for a success-only business model, as you may struggle to secure candidates at first, meaning you end up working for free.

Cash flow float will be your biggest expense, particularly if you’re recruiting temps or contractors. You may need to pay temporary workers weekly based on their timesheet, for example but not be able to invoice the client for your services until the end of the month, creating a need for you to have considerable money set aside to pay your candidates with. The more candidates you secure, the higher this figure is.

Calculate all your costs before you commit to your ambitions, and don’t scrimp on anything, or tell yourself you’ll be able to cut certain expenses down. Do all the maths honestly and realistically, then start thinking about registering your recruitment agency, speaking with an accountant, securing a business loan and all the rest.

It won’t just be what you can think of off the top of your head, either. What you’ll need to set up a successful recruitment agency will include:

  • A recruitment website
  • Advertising costs on recruitment job boards
  • A CRM
  • Back-office recruitment software
  • Contracts to send to your candidates and clients
  • Finance for contract recruitment
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Choose the right recruitment software

At the risk of sounding like a broken record, in case you haven’t heard, the world is digital. Recruitment software, for customer relations, your back office and more, isn’t just essential, but can actually save you money if you choose wisely. Here’s a quick breakdown of what you’re going to need.

Front Office

  • CRM: Your customer – or in this case, candidate – relationship manager is the system that drives your sourcing team, helping you create talent pools and build relationships with key talent for higher candidate retention.
  • ATS: Applicant tracking systems are similar in function to CRM, but designed for different purposes, used to manage the application process instead. They can be automated to filter applications based on keywords and essential criteria.

Back Office

  • Accounts: Secure and effective accounting software is a must for pretty much any business. However, due to the often uneven cash flow in the recruitment industry, it is even more indispensable for recruitment start-ups.
  • General: With recruitment, there’s a lot more to your back office than just keeping the books balanced and paying your own employees. For this reason, a full-service recruitment back office solution comprising timesheets, invoicing, expenses and reporting may be what you need.

Other

  • Emails: As a recruitment agency, you will have emails flooding in left, right and centre from clients and candidates alike. Having an effective system that allows you to organise your emails and uses push notifications to keep you up to date is essential.
  • Marketing: With most recruitment business models, you’re responsible for marketing the position on behalf of your client. Recruitment marketing software will be key in streamlining this process for you.
  • Video Call: Because of the digital era, many recruiters work with clients and candidates all over the country. This makes video interviewing indispensable, so you can make sure you’re sending who you think you’re sending to the client.

Get Yourself Online

Your website is how clients who are actively seeking a recruitment agency will find you, and the first thing clients you approach will look for when trying to learn more about you. Launching your website is instrumental to launching your business, and the two things should happen simultaneously, which is why we’ve put it last on our guide. If you launch before you’re ready and it’s a good website, you’ll wind up getting enquiries that you’re not prepared for.

The most important things to have on your recruitment agency website are:

  • Information about your company
  • The services you provide
  • Easy submission mechanisms for jobs and CVs
  • Clearly signposted contact information
  • CTAs and other ways of encouraging conversions

As a lot of recruitment agency work is based on location, potential clients are likely to search for their city or town – for instance, “recruitment agency Cambridge” – to find an agency close to them who can find them candidates locally. Optimising your website with advice from an SEO agency will help enormously in terms of getting you noticed as a local company offering an exceptional service.

Of course, these are just the basics. Launching a recruitment company is a long term investment that will take months of planning to realise. But if you manage to pull it off, it’s an incredibly rewarding industry to work in as an independent agent. Proper planning could take you from a big fish in a small pond to a recruiter with limitless potential.


ETZ Startup 20/20

ETZ is leading back office recruitment software designed to simplify and streamline your back office business processes to cut operational costs and improve your bottom line. We offer ETZ Startup 20/20, a specialised solution for recruitment start-ups.

Manage contractor timesheets, invoice customers and review your business performance more effectively with automation, so that you can concentrate on growing your recruitment agency. Our system has been shown to reduce operational costs by up to 85%.

Interested in starting your recruitment agency off on the right foot? Read more about ETZ Startup 20/20 here.

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