Recuitment Business Startup – The Essential Guide

May 17, 2018

  1. Who is suited to starting up a recruitment business?

If you are currently working within a Recruitment Business as a Senior Recruitment Professional with 5+ years’ experience, including managing and growing your own recruitment desk, then you will already have the necessary experience to startup a recruitment business of your own. You will also just as importantly, have the required client relationships and specialist candidate contacts which will enable your business to get off the ground.

In addition to your experience you will also need bundles of drive, energy, commitment and a passion to succeed in an extremely competitive environment. However, for those with the above profile the opportunities can be great. There are many examples of success stories where individuals have gone on to grow a recruitment business of considerable size and value.

  1. What are the opportunities?

The UK Recruitment Industry is worth over £35bn per year and is predicted to grow by a further 6.9% over the coming year. Newly registered recruitment businesses are also currently growing at their fastest ever rate, with 9,000 new businesses being set up in the last year alone.

This significant rise in new recruitment businesses reflects the overriding positive mood within the industry as a whole. Recruiters are continuing to see a significant increase in the demand for their services particularly in specialist niche sectors as clients continue to face challenges in sourcing specialist experienced talent. Coupled with a continuing fall in unemployment and an increasing desire for recruiters to go it alone, this increase in new recruitment businesses looks set to continue.

  1. What are the best sectors?

The fastest growing UK Recruitment Sectors in 2018 are as follows:

  • IT & Technology
  • Engineering
  • Manufacturing
  • Healthcare
  • Construction

In all the above sectors, the principal driver behind the high demand for their recruitment services is the critical shortage of specialist experienced talent. Niche recruiters who possess the expertise to gain access to these key talent pools will almost certainly experience a higher demand for their services and as a result by dominating their niche, will also have the ability to command considerably higher fees.

  1. Funding & Recruitment Business Investors

If you are planning to start up your own recruitment business and intend to grow a business of significant future value, 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 approach such investors make sure you have developed a comprehensive business plan and in particular you need to clearly detail your funding requirements and provide financial projections (including a cash flow) for at least the first 12 months.

  1. Getting started:

In addition to a detailed business plan you will also need to attend to a whole range of administrative tasks before you can get things underway. The list below is essential but certainly not exhaustive:

– Choose a company name and get it registered. Decide on the legal status of the new company, is it to be a sole trader, partnership or a limited company?

– Open a business bank account.

– Set out your terms of business including fees charged, guarantees, refunds, payment terms and any special conditions.

– Choose a website domain, make sure it is available and get it registered. Then set up your company and personal email addresses.

– Take out the relevant insurances – as a minimum you will need to consider public and employee liability and professional indemnity.

– Consider the impacts that any restrictions in your current employment contract may have.

– Register for VAT.

– Appoint an Accountant.

– Decide whether you need office space, or you are going to work from home. A whole array of flexible office space is now available and includes serviced offices, co-working spaces, hot desking and virtual offices. If you are looking to build a recruitment business of significant scale, you are more than likely going to need to explore one of the above office space solutions.

– Decide on your recruitment software. There are a whole array of Applicant Tracking Systems available in the marketplace which are combined with a suitable CRM platform. Cloud based systems are often the easiest to set up and are certainly the most cost effective.

– IT equipment & support. Decide on what IT equipment you will need and make sure you have IT support in place. If your IT systems go down at a critical time, the cost to your business will far out way any IT support fee arrangement.

  1. Marketing Strategy and Branding

 Your marketing strategy and plan is essential to the future success of your new business. To launch and develop a successful brand in this highly competitive sector, you will need to ensure that your company has a strong brand identity and a compelling customer offering. You will almost definitely need to seek out professional and practical assistance with your website and marketing collateral design, social media marketing and CRM development.

  1. Attracting talent and building your recruitment team

Attracting the best industry talent to your new recruitment business and retaining your top performers as the business grows, is going to be key to your success. As an experienced recruiter in the marketplace it is therefore essential that you have a substantial recruiter network and an outstanding reputation and track record that will give other top performers the confidence to take the leap and join you in your new venture.

  1. Building a business of value and not just a ‘Life Style’ Business

If you plan to build a recruitment business that will create significant future value, then you will need to keep the following in mind:

  • Specialist recruitment businesses generally attract a higher value than generalist businesses and are often valued on a higher multiple of profits.

 

  • Recruitment businesses with a strong contract recruitment bias attract higher exit values. The Contract and Temporary Recruitment Market continues to grow and provides potential buyers 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.

 

  • Recruitment Businesses with a European/International element to their business revenues will also attract higher values as they lower the risk to any potential buyer. Reliance on the UK economy alone is always going to pose risks for any potential buyer, especially in light of the current political and economic uncertainty following the Brexit vote in the UK.

 

  • Finally, a strong and stable senior management team is going to be essential to any prospective buyer. Do not underestimate the value that potential buyers will place on the key leadership team.

Stephen Grant is an Investment Partner at TAG Capital who are specialist investors in the Recruitment & HR Services Sector. Previously, as one of the co-founders of Morgan Mckinley Associates, (a leading international financial services recruitment company) Stephen was responsible for growing the company from scratch to one with a £30millon turnover. This business attracted considerable investment from 3i Plc and was subsequently sold to Imprint Plc. in 2005 in a multi- million-pound deal.

 

 

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