Guide to setting up a recruitment business - Image

Guide to setting up a recruitment business

Entrepreneur James Caan set up recruitment firm Alexander Mann when he was 25 and relatively inexperienced. By the time he sold the firm in 2002, it was worth tens of millions of pounds, and his success helped secure his position as one of the UK’s leading entrepreneurs.

Nearly thirty years later, it’s easier than ever to follow Caan’s example by establishing a recruitment company. That’s why there are so many new, small recruitment businesses chasing vacancies and candidates.

But while all you need to start out is a computer and a telephone, it takes much more than that to succeed. Many of those new, small recruitment businesses are one-person operations and relatively few of them will grow into anything larger. Many will quietly fold up and disappear within a year or two of starting to trade.

If you think you’ve got what it takes to set up and run a successful recruitment business, here’s a reminder of some of the most important issues you need to consider.

Get the right experience. Almost every recruitment firm is founded by someone who’s already working in the business. They’ve seen what goes on behind the scenes, learned a few tricks and made great contacts.

Before you decide to go it alone, think about the gaps in your own knowledge and find ways to fill them.

Choose an area of speciality. In the early days, you may be tempted to chase every opportunity in order to land a deal. But if you look at successful small recruiters, they are experts in a particular field. It could be healthcare, IT contracting, automotive, sales or any one of a myriad others.

By focusing on one specific area, you’ll find it easier to win a distinctive reputation.

Familiarise yourself with the law. Running your own business means you become responsible for everything, including the rules and codes of practice governing your line of business. These include the Agency Workers Regulations and the Guidance on the Conduct of Employment Agencies and Employment Businesses Regulations 2003, issued by the DTI.

Recruiters do not need to register with any industry or professional organisation, but there could be useful benefits from being a member of a body like the Recruitment & Employment Confederation.

Set and work towards clear goals. Businesses do better when they create targets and measure how well they perform against them. It brings focus to what they are doing and helps them to understand what works and what needs to be changed.

Targets are at the heart of your business plan, and should be written down, even if only informally.

Develop an organised method of working. Much of a recruitment firm’s performance is down to how well it manages data. Candidate CVs, job specifications, communication logs and client contracts all need to be carefully maintained and accessible at the right time.

Entrepreneurs are not always the most organised people. If the thought of building and using systems worries you, it could be that you need some external help to solve the problem.

Secure your working capital. There is likely to be a two to three month gap between issuing your first invoice and getting it paid. That’s today’s reality, especially if your clients are larger organisations. During that time, you may need to pay your contractors, pay rent or subscriptions, and draw money to live on.

Many recruiters use invoice finance because it’s an effective way to bridge the gap between sending out a big bill and getting it paid – view our visual guide on invoice finance for the recruitment sector for more information.

Whatever approach you take to preventing cash flow problems, act early to ensure you’re laying the right foundations for your continued success.

Here are some recruitment businesses which currently benefit from using invoice finance

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