Recruitment is a business with no barriers to entry. The discussion on whether the industry should be better regulated is for another time. Many top billers think it is a natural progression to set up their own business. Take a bigger cut of the pie they think! But are they successful in their ambitions?

Strangely, many are not and the old adage that top billing recruitment consultants are not natural managers is more true than many would like to believe. But, perhaps you are one of the few who can set up your own company and make it work.

What is the secret to success?

Firstly, every successful consultant who is considering setting up their own business needs to ask themselves are they cut out for it. Your strengths most probably lie in your ability to bring in business, build relationships and source the right candidates for your clients, but have you considered the financial outlay and amount of administration involved in setting up a business that is not guaranteed to succeed?

Creating a website, branding and database takes time and money. Finding office space, paying for phones, IT and advertising are also costly. When is the money going to start rolling in? It is like building a house. You think it will be finished in six months but you don’t end up moving in until month nine. Setting up a recruitment business is the same and you need to be conservative in your predictions. Many aren’t and that is why the failure rate of recruitment start-ups is so high.

Half of UK start-ups fail within five years. Actually, I think the figure in the recruitment industry is far higher when I think about the number of start-ups that have gone on to fail in London’s recruitment market over the last 15 years. Consider also that to grow your business you will need to hire staff. The problem is that you cannot guarantee they are going to be profitable and also when you create a start-up it is very difficult to persuade someone to take the risk and join you, unless they stand to gain from a future sale. You might not want to give away equity, but it could just be the best thing you do.

Hiring does become easier though, but have you considered the time it takes to effectively manage your workforce and is this really where your strengths lie? Much to ponder! Please find below my 5 top tips to give you the best chance of success:

1. Put in place a clear exit strategy before you start your own business

Your exit strategy might be not to “exit”, but to keep the business small and make enough annual revenue to make this venture a worthwhile investment. In an industry where the value of a business is intrinsically linked to the “individual” and their relationships, this ends up being the case in many recruitment companies, regardless of whether it was the intended plan initially. If you want to sell your business one day, then you need to make a clear plan of how you are going to go about achieving this. How will you scale the business? What do you need to create to attract a buyer? Who will buy you? Why will they buy you?

2. Define your market

A common mistake recruitment start-ups make is to try and be all things for all people. The result is that because you don’t specialise in any one thing, clients will likely end up using an agency that does concentrate on finding candidates with the specific experience they are looking for. It is better to start off small and targeted and then branch out into different “verticals” at a later date.

3. Create a proper business plan and stick to it

If you don’t create a business plan, you are creating problems for yourself down the line. A business plan is not created solely for the purpose of attracting investment, more importantly it is designed to clarify thoughts and most importantly the financials. By creating the plan, you will be able to see how much your business is going to cost you for the next 12 months. You will be able to see where the break-even point is and most importantly, you’ll see when you need to start making money by. Remember to allow for late paying clients!

4. Marketing and branding

Recruitment consultancies are pretty inept when it comes to marketing and branding. Strong words and some of you will disagree. However, in my experience, recruitment managers do not understand the correlation between investment in marketing/branding and the business that you will attract as a result. Not to mention the increased candidate flow and the increase in profile of your business which down the line may lead to a better deal. Create a point of difference between you and your competitors and stand out.

5. Negotiation

Negotiate, negotiate and negotiate again. Don’t be afraid to negotiate on everything. Saving money on one ream of copier paper will amount to great overall saving in 10 years’ time. Office costs are exorbitantly high and you may only save £200 per month by negotiating, but this is £2400 a year. It sounds obvious and it is!! Greater saving increase better profit margins which adds value to the business and gives you more money to spend in revenue generating areas of the business.

About the author: David Morel is Managing Director of Tiger Recruitment, a leading recruitment company in the secretarial/administrational arena.

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