Starting a Recruitment Agency - Any Tips?

[db220]

Hello,

I am looking for some advice regarding starting a recruitment agency.

Are there any barriers to entry? And any marketing advice? What would your advice be and so on?

Thank you for your time.

 

[Simon-M]

Do you have any experience in recruitment?

 

[db220]

Hi Simon,

Yes I do and so does partner.

We wanted to seek people's experiences from the start up phase.

 

[Simon-M]

Do you have a database of either clients or applicants? What is your niche? Will it be general employment or specialized? Perm or contract? Will you have footfall or are you home office based?

 

[db220]

We do have a database but not the largest. Our niche is the IT sector- although relatively wide spread, we're focusing more on DBA's, Mobile & PHP Developers.
It will also be permanent employment and in response to your final question, we'll be home based to start to keep overheads low but of course, use a Virtual Office Address.

 

[Simon-M]

Do you have a contract drawn up? Do you know your rates and any claw backs for short stays? Have you worked out how you will get paid? Do you have an invoicing system? Have you considered factoring your invoices as a lot of recruitment agencies do this. What about membership to trade bodies like the IOR?

 

[db220]

Contract drawn up - not yet. Know our rates and claw backs yes.

How we get paid- sorted. Invoicing system - yes.

Factoring - not looked into factoring at present as we're a start up.

Membership to trade body - This is marked as a cost in business plan but not registered as we're not trading yet.

 

[Simon-M]

Getting requirements is going to be the easy bit. Filing those requirements is the hard bit. What is your plan for attracting people? My advice is to pick up a business directory and start speaking to IT managers. Get your requirements and then advertise them on places like Gumtree.

 

[db220]

Your method is exactly how we was going to approach everything. Do you know of any other popular advertising job websites - preferably ones that aren't costly.

 

[SimonR@Gravity]

Straight factoring may not always be the best option.

I have worked in Factoring for Recruitment Agencies looking after clients and their credit control - potential disadvantages are can easily get tied in with penalty clauses for exiting, and incur a lot of penalty charges for drawing down money, plus any severely overdue invoices or queried invoices will often be disallowed.

If your cashflow can possibly bear the outlay of staff wages upfront, a good credit control policy can make you more profitable in the long-term.
Alternatively, look at CHOCS funding but make sure your invoices are paid as promptly as possible. We have worked closely this year with a medium-sized recruitment agency doing their credit control as an outsourced function which worked well for them as they benefited from our expertise on a flexible basis without having to hire.

 

[Deleted member 138423]

You won't beed factoring if you're dealing only with permanent placements, but as has already been mentioned, you will need to source the right candidates for the positions. But first, you need to sell your services to those who will consider you knowledgeable in your field and not just another database IT recruitment company set up on a sixpence!

Recruiting is very much networking and putting the two parties together so finding the right candidates will also be v difficult. Look at your sourcing options...

 

[Ian J]

Factoring - not looked into factoring at present as we're a start up.

That's not a problem as I place quite a large number of new start recruiters

 

[Ian J]

Straight factoring may not always be the best option.

That statement is sometimes true in general but rarely in the case of recruitment companies dealing with contractors or temps.

The contractors need to be paid bang on the nail at the end of each week or month and it is highly unlikely that the company will have been paid for their services before that time meaning that funding is required.

The only asset that recruitment companies have is their outstanding debts and factoring will generate far higher levels of working capital than bank overdrafts and the funding levels will keep expanding in line with sales unlike overdrafts

I have worked in Factoring for Recruitment Agencies looking after clients and their credit control - potential disadvantages are can easily get tied in with penalty clauses for exiting, and incur a lot of penalty charges for drawing down money, plus any severely overdue invoices or queried invoices will often be disallowed.

Most factoring companies will want a minimum commission income for doing the job and if one tries to break the contract early they become entitled to the balance of the annual fee. In any event most recruiters won't want to give up their facility as it's the most appropriate method of funding for the type of business.

The "penalty charges for drawing down money" are called interest charges and are payable to every financial institution that one borrows money from.

Most factoring companies will levy a refactoring fee if an invoice becomes severely overdue (say 120 days) but this is a rarity in the recruitment industry

Alternatively, look at CHOCS funding but make sure your invoices are paid as promptly as possible.

CHOCS funding facilities have exactly the same disadvantages as those that you have mentioned for standard factoring.

Whilst I would always advise companies to ensure that their credit control is in order before thinking about factoring, recruitment companies are the exception to the rule - especially if they are new starts