Pitching to Recruitment Business Investors for startup funding
If you are planning to start up your own recruitment business, then more than likely you will need to approach potential recruitment business investors to help you fund your new venture at both the startup phase and as it grows. These investors are often high net worth individuals, business angels or small specialist investors in the recruitment sector and as a result are business savvy people who are often investing their own money.
Before you consider approaching potential recruitment business investors it is essential that your preparation and research is detailed and thorough.
When pitching to potential investors you will need to keep the following in mind:
1. A Business plan is essential. Most recruitment business investors will not agree to meet with you until they have seen your business plan– the following is essential content in any business plan: Executive Summary, Business Overview, Market Analysis, Products & Services, Sales and Marketing Plan, Competitive Advantages, Management Team, Funding Requirements and Financial Projections.
2. Before meeting a potential investor, make sure you research their background – What is their background? Which businesses have they been involved in? Do you have any mutual contacts? By knowing your audience, it will be far easier to come across as a credible potential entrepreneur and make it far easier to connect with them on a personal level.
3. Any investor will want the answers to a number of key questions and will want you to provide a compelling and solid business case for your new venture. Make sure you research your recruitment marketplace very carefully. In particular make sure you know what the competitors are offering and why you will be different? How will you gain market share? How will you source the best candidates? Where is the valuation creation? Is your particular market growing? How big is your potential market? These are just a few areas you will need to think about.
4. Also remember that it is as much about you as an individual and your entrepreneurial skills. Make sure you outline your track record and successes. What are your key achievements? Have you been a top biller? Managed high performing teams? Started a desk from scratch which now bills £100k a month? All these achievements will give an investor the confidence that you have the ability to deliver on what you promise.
5. Investors also want to see enthusiasm and evidence of hard work and commitment. It always helps if you are willing to invest and risk some of your own money, this displays true commitment and provides evidence that you really believe in your own ability to succeed.
6. In terms of your recruitment business startup it is also worth bearing in mind that recruitment investors will look favourably on startups that contain the following characteristics:
a. Recruitment investors tend to favour investments in niche recruitment businesses. As client companies continue to face challenges in sourcing specialist experienced talent, specialist niche recruiters have the ability to gain a deep knowledge in their niche and develop access to key talent pools. Also, by dominating their niche they often have the ability to charge higher fees.
b. Investors also favour startups with a strong Contract Recruitment bias. The Contract and Temporary Recruitment market continues to grow and provides potential investors with guaranteed and more visible revenue streams. It also weathers downturns in the economy much better and represents three quarters of the total UK Recruitment Industry value.
c. Investors will also often have a preference for startups with a European/International element to their business revenues, especially in light of the current political and economic uncertainty following the Brexit vote in the UK.
7. If you pass all the above hurdles your recruitment investor will definitely want to undertake due diligence on you and your proposed team. They will want to investigate your experience and track record, so you need to make sure you have credible references in place from existing clients, candidates and employers.
In summary, you need to make sure you prepare thoroughly before pitching for recruitment business investment, this will give you the best possible chance of succeeding. Putting time and effort into your pitch for investment will definitely pay off – remember, you only have one chance to make a positive and lasting first impression.
Stephen Grant is an Investment Partner at TAG Capital, who are specialist investors in the Recruitment and HR Services Sector.