Starting a recruitment agency

[colley614]

I've been doing a lot of thinking about gaps in the market in my area. One area I've found is that all the recruitment agencies in the area don't seem to do themselves any credit.

I myself work in a place that uses temporary staff and is let down on a regular basis. My otherhalf works in a factory that usually employs about 50 temp staff. Her company seem to do a lot od chopping and changing.

Does anyone have any experience running a recruitment agency supplying temp staff?

 

[singhabhishek251]

I think that this is the best idea of business if you have proper management and the recruitment business is on the boom. There is a lot of money in the market and possibility as well, if you can make good contact with the hiring companies.

 

[Ian J]

I don't have any experience in running a recruitment agency but plenty in arranging the finance for others who have just set up a recruitment agency and I regret to say that as many fail as end up successful.

The successful agencies seem to be those that are run by someone who has a few years of experience and many loyal clients who are happy to continue to use him when he moves off on his own.

Whilst many see the concept as fairly simple and easy to operate on low overheads from home it isn't quite so easy to attract customers which is where most fail

 

[colley614]

I don't believe any business venture is easy. They all take passion, motivation and dedication.

I don't have any experience at running a recruitment agency. However, I do have experience supplying contract cleaners. Similar in the fact that you are proving an employee to a company and charging a fee. With the cleaning though it was one person for a couple of hours a day. But this would be supplying for example 50 staff 24 hours a day to some clients, this is were I need to research.

 

[APOS Recruitment]

I think the one problem you may have is cashflow to start off and I say “may” as I don’t know the full story.
If these staff want paying weekly then it could pose a problem. I believe you said 50 staff 24 hours a day. Let’s say they work 5 days a week and for simplicity are all on £7 per hour. That is £42000 a week that you will have to pay staff working on behalf of you.
You’d have to have your terms and conditions stated very clearly and agreed that you may be want paying 7 – 14 days from invoice date. The problem being that companies want to keep hold of their money as long as possible so would want a minimum 30 days to pay you.
As mentioned if your staff do want paying weekly, before you even receive your first payment (30 days from the date of your fist invoice and assuming the customer pays on time) you would have shelled out 5 times £42000 = £210000 (as you would have to wait until the end of the first week to invoice to know the exact claim you are making, timesheets, overtime etc).
As I say this is only a maybe scenario as you may already have thought of this.
Best of luck with it all though.
Rob

 

[Ian J]

I think the one problem you may have is cashflow to start off and I say “may” as I don’t know the full story.
If these staff want paying weekly then it could pose a problem. I believe you said 50 staff 24 hours a day. Let’s say they work 5 days a week and for simplicity are all on £7 per hour. That is £42000 a week that you will have to pay staff working on behalf of you.

cashflow is actually the easiest part as factoring will cover that and is one of the reasons that contract recruitment is the biggest market sector for factoring companies.

Far more problematic than funding the operation would be actually obtaining the contracts for the 50 operatives that you mentioned in your post

 

[APOS Recruitment]

As I stated it "may as I don't know the full story". I didn't see factoring mentioned anywhere.
What kind of % of fees would the factoring company want?

 

[Ian J]

What kind of % of fees would the factoring company want?

That depends on turnover but I'm currently placing recruitment companies for about 2.5% of turnover with no minimum fees or interest to include full payroll / back office and with just one's notice required

 

[colley614]

Hi Rob,

Thank you for the input. Yes, I was worried about such high figures before even getting paid a penny from the client. It is one of the reasons I joined.

The 50 employee figure I got from researching a local factory. Someone I know told me the company uses 50 staff on each shift. These employees are dropped for a couple of months from time to time. My local area has lots of factories that use agency workers, it's probably the biggest sector in my area. A sales strategy is also something I will am also interested in researching. I enjoy networking which I guess is a good start. I presuming cold calling would be off the cards? Maybe a telemarketing scheme?

Ian, my nose would grow if I said I knew what the term factoring meant. Could you elaborate for me please?

Keith.

 

[Ian J]

Ian, my nose would grow if I said I knew what the term factoring meant. Could you elaborate for me please?

Hopefully this website will explain what factoring is all about http://whatisfactoring.org.uk/

It does seem to be the financing tool of choice for new start recruiters.

Taking the example used by APOS you would need to find £42,000 per week to pay the contractors and it could well be six weeks until the customer paid you meaning a total outlay of £252,000 in wages before you got a penny back.

Assuming that you are charging the men out at £8 per hour you will be invoicing £48,000 per week plus vat of £9,600 making a total of £57,500 per week.

The factoring company will advance 90% of the total invoice values so you would receive £51,840 per week which is more than enough to cover the weekly outlay in wages.

The factors will run the sales ledger on your behalf and chase up any invoices that are overdue and once the customer pays you become entitled to the balance of £5,760 less the factoring company's charges

 

[NickGrogan]

I've been doing a lot of thinking about gaps in the market in my area. One area I've found is that all the recruitment agencies in the area don't seem to do themselves any credit.

I myself work in a place that uses temporary staff and is let down on a regular basis. My otherhalf works in a factory that usually employs about 50 temp staff. Her company seem to do a lot od chopping and changing.

Does anyone have any experience running a recruitment agency supplying temp staff?

Why do you think the existing recruiters let them down on a regular basis?
Where are you going to find reliable staff?

Those are the 2 questions you need to answer, before worrying about financing it.

 

[Richie N]

Coming from a recruitment background, I would suggest getting experience in recruitment before setting up on your own.
It's not as easy as most think, even if you have the contacts, you still need to know about employment law, AWR, immigration and much more.

 

[colley614]

Nick,

Swot Analysis?

I think that it's because the other companies are from out of town. With regards to the recruiting respectable staff. I would advertise in places where only motivated individuals would be looking for employment.

Richie, how would you suggest getting experience in the industry?

 

[Richie N]

Join another recruitment agency would be the best thing to gain experience.

 

[colley614]

What job role would be the easiest to obtain? Possibly part time?

 

[colley614]

Don't even mind if it were voluntary as long as I got experience and could earn a living at the same time

 

[Richie N]

Trainee Consultant, I doubt you would find a part time job doing this, unless you were an administrator. Although any agency wouldn't allow you to set up your own business on the side.
You really do need experience though before going it alone, too many agencies fail due to the lack of experience.

 

[colley614]

I wouldn't be setting up my own business whilst working for someone else. I have found a trainee consultant job, I'll apply tomorrow.

 

[NickGrogan]

Nick,

I think that it's because the other companies are from out of town. With regards to the recruiting respectable staff. I would advertise in places where only motivated individuals would be looking for employment.

Where do you think that would be, and why aren't the other recruiters advertising there?

 

[colley614]

As I say, I don't think it's because the other firms in my area are advertising in the wrong place or using the wrong personnel or any other extraneous variable. I think it's simply because they don't have their finger on the pulse of my area. There are agencies in my area but they are much more interested in the big cities around my area. I have never met a member of a recruitment agency whilst out networking and I've got hundreds of local business cards in my desk.

 

[Guy Ryckaert]

Hi Colley,

You have hundreds of business cards in your desk so why not do the following : set up your recruitment office, get into touch with these contacts and see if you can supply a couple of temporary staff to the businesses. As you are already providing cleaners, existing clients will be trusting you. Once this has worked for a year, you will have more experience and then you can contact some new clients. Only after this you will be in a position to contact a company that has the need of 50 temporary staff, no business is going to take your word that you can do a good job without a history

Have patience, determination and you will get there

 

[garyk]

I've been doing a lot of thinking about gaps in the market in my area. One area I've found is that all the recruitment agencies in the area don't seem to do themselves any credit.

I don't think that is area specific, recruitment agencies don't do themselves any credit period.

 

[colley614]

Guy, I have been thinking about starting out slow and paying to hire a desk somewhere.

Gary, you sound like you have experience of recruitment agencies. Do you have any advice based on experience?

 

[Scott@KarmaContent]

Recruitment is an absolute nightmare, I'd tread very carefully if I were you. What sort of recruitment are you looking at?

I used to work in recruitment and you'd be entering one of the most competitive industries there is. It's a thankless task to be honest. You mentioned where your wife works they use a lot of agency staff and they're always chopping and changing. That really isn't surprising. Is this the sort of work you're looking at doing? Contracts like that, that are probably minimum wage, with little or no chance of people being made permanent are a nightmare to run. Good candidates will eventually get jobs elsewhere and you're left with the merry go round of people who will always be temps. They'll turn up for a week or so, then do a disappearing act. You'll have phone calls at 5.30am in the morning from people too pissed to go to work at 6am, leaving you ringing round (and driving round) trying to find someone so your not letting your client down. Then there's the people who swear on their own lives they'll be there on time and you never hear from them again.

If you're looking at specialist recruiting, such as IT, medical, scientific or financial, then there is still some decent money to be made (not as much as there used to be though). If you're looking at supplying industrial and other minimum wage staff, then you are looking at working very, very hard for little or no reward and giving yourself a load of grief in the process.

Sorry for being quite negative, but that's the way it is really. And recruitment is changing too. Apart from running nightmare contracts like the one I've used above, what services do traditional recruitment agencies provide that a company can't realistically do themselves? This, taken into account with the rise of fixed-fee and other online recruitment based businesses will leave the traditional recruitment agency redundant if they're not careful.

 

[garyk]

Guy, I have been thinking about starting out slow and paying to hire a desk somewhere.

Gary, you sound like you have experience of recruitment agencies. Do you have any advice based on experience?

I worked as a contractor on and off for 20 years so yes *alot* of experience.

I don't like getting calls about 'opportunities' which normally then turns into a 30 minute conversation where the agent doesn't actually have a specific job but wants to fish and obviously grow their network.

Sorry I just don't like them full stop and vowed a couple of years ago I would never ever use an agent again. They all have too much flannel and sales patter for my liking. Strip it back to basics; match jobs to skills and don't waster people's time schmoozing.

 

[colley614]

I have been making a few phone calls to do a little market research however I can't seem to get an answer to how much these companies charge.

 

[Faevilangel]

I have been making a few phone calls to do a little market research however I can't seem to get an answer to how much these companies charge.

as @Ian J said, you would charge your "staff" out at a higher rate than you pay them e.g.

unskilled labour is normally close to the minimum wage e.g. £7 an hour is a nice round figure, you then charge them out at £9 an hour to help you make some profit.

You could also then charge "client fees" for setting the client up with staff (administration charges) and other stuff like that. It has to be competitive for the employer though.