How to start and grow your own recruitment company

If you’re dreaming of taking the plunge to start your own recruitment company, then you’re not alone. Last year a record number of new businesses were registered with Companies House, pushing the total number of recruitment agencies in the UK to around 40,000.

Whether it’s a wish to be your own boss, you have a vision for doing things differently, or you’ve spotted a niche market you want to capitalise on, there are many reasons why you may choose to go down this path. There are also an equally high number of considerations and challenges you’ll face along the way if your business is to be a success. 

So, what might the journey from start-up to an established business look like? 

Here we’ve taken a closer look at each stage of the process and what you need to think about on the route to building a profitable recruitment company.  

Turning ambition into profits - 5 steps to success

1. Starting your recruitment company

Being an outstanding recruiter is one thing, but being a successful entrepreneur is quite another! Before stepping out alone, there are some key questions to ask yourself.

Are you ready? 

It’s a good idea to have worked in recruitment sector in a 360 role, exceeding targets and possibly moving into a leadership role. This will ensure you have a strong insight into how it all works and importantly the regulations, codes of practices and legislation that apply. 

In the early days, you’re likely to be doing it all; from marketing to handling your accounts, creating a website, identifying CRM’s and a back office, contracts, terms of business, dealing with admin, making the tea, and everything in between! You won’t only need to know how to find candidates and secure clients, but also to understand the ins and outs of running a business. This includes staying on top of compliance and what you need to do to keep HMRC happy.

So, you must be prepared to work hard. The good news is all the hard work you put in will ultimately be for the benefit of you and your business.

Have you done your research?

It’s vital that before you take the plunge, you have a plan. Research, research, research, as that way you’ll be putting yourself in the strongest possible position. As part of your planning, think about what may lie ahead and set some goals. 

And don’t forget to check your contract. If you’re currently employed then there are likely to be some restrictions within your contract, especially when it comes to working with existing clients. You need to be mindful of these! The last thing you want to be facing as a start-up business is a legal stand-off with a former employer.

Do you have the finances? 

When you start your own business, you won’t earn a penny until you start billing. Luckily, recruitment is an industry where - provided you make enough of an impact - you could start generating revenue pretty quickly. But you’re still going to need a safety cushion to cover your personal overheads. Ideally, for at least three months. 

There will also be some unavoidable start-up costs you’ll need to cover, including insurance, phone and internet bills, professional accountancy, and all the costs associated with having a website. (Even off-the-shelf sites will come with costs for hosting and email inboxes).

You may also need to think about outsourcing your whole back office function, meeting the bank to discuss invoice-discounting, managing timesheets, invoicing and credit control.

Do your sums so you know exactly what you’re going to need to spend, as well as how you’re going to market yourself and start generating income.

2. Taking the stabilizers off

If all goes to plan, then it shouldn’t be long until you hit your stride. Your new business will be up and running and you will have started to build a pipeline of candidates, clients, and vacancies. 

The day will finally come for you to issue your first invoice – an exciting moment in the life of any business! And from there, it’s about building on those foundations and further demonstrating you have a viable business proposition. 

What will typically follow is a period of stabilization, where money is consistently coming in and going out, you’re invoicing and paying contractors, and starting to think about growing the business further.  

This is the perfect time to review and re-evaluate. How have you done so far? What lessons have you learned? Where might there be gaps in your knowledge you need to fill? What systems do you need to put in place?

Look at your original targets and ambitions and update them where necessary. Reassess your priorities and be clear on the direction you are headed. Once you’ve defined both your short and long-term goals, think how you’re going to achieve them. 

3. Team building

The next stage in the growth of your recruitment business is likely to be hiring your first employee. Again, this is an important milestone for any company. 

It’s important you find someone who is going to be a great ‘fit’. This is especially true in a small team, where you’ll be working so closely together. Your first hires may also go on to become company directors of the future, so you need to ensure they share your vision and ambition.

One trap new businesses in particular can fall into, is hiring for as low a salary as they can get away with. But this can be a false economy (as the saying goes, you get what you pay for). 

It’s important than any new hirers add real value to the business. You want someone who really cares, who has good experience and is excited about the prospect of joining the business in these early stages. 

Also, consider what impact hiring your first employee will have on the business, your workload and responsibilities, and prepare. For example, you’ll need to manage another person, track what they’re doing (how will do you this?) and potentially provide training. Plus, there will be all the additional costs and administration to stay on top of.

4. Nailing your niche

By now you should have a strong pipeline and solid team in place, generating consistent revenue and healthy profits. The experience you’ve gained to date and the market share you’ve carved out for yourself puts you in a great position to think about specializing further. 

So, what do we mean by that? Aiming to become a market leader, a truly trusted partner to your clients with deeper industry and candidate knowledge than your competitors, and a truly credible track record. Imagine for a second you started out in IT recruitment. You may, therefore, say you specialize in IT. However, underneath that umbrella, there are multiple specialist roles you might have covered and many niche areas you can now look to capitalize on. 

To secure a niche requires a strategy for how you are going to attract the right candidates and customers. It may also call for additional technology and infrastructure to be put in place. You need to think about which systems and processes you should now be investing in.

5. Scaling-up sustainably

By this stage, your team may have swelled to around 5-10 people and for some companies, that will be a level they are happy to maintain. For others, this will only be the start and they will want to grow that number from 10 people to 100 or more. They may have visions to increase turnover, enhance productivity, grab greater market share and potentially enter new markets or territories.

Scaling up successfully can be a challenge for any ambitious business and it’s important the right strategy and infrastructure is in place. It takes an innovative business model, a great service that customers are continually delighted by, a clear vision for where you’re headed and maintaining a competitive edge through innovation or diversification. 

From an operational perspective, your systems and processes need to be fit for purpose and able to evolve with the changing needs of the business. One popular option is to outsource key business functions, such as marketing, IT, legal, and accounting. But did you know there are also specialist outsourcing options for the specific back-office functions that recruitment companies need to perform? This includes support managing cash flow and issues of compliance.

Whichever way you choose to go, with the right systems in place you can have complete peace of mind that your operations are running smoothly and efficiently, leaving you to focus on what you do best – growing the business. Be bold, be strategic and good luck.