How much do I need to start a recruitment company? Part 1
During the opening conversations with a prospect who is looking to start their own recruitment business, one of the most common concerns is always around personal cash flow. There’s always a rightful anxiety around the subject & it would be ignorant & naïve of SSG to not to respect & understand that.
And honestly no matter how clear it might be, to both parties, that SSG can enable the recruiter to achieve all that they want to in their own business, whether that be providing all the tools they need to go out & “do it” or provide all the expertise & support necessary, or a wonderful combination of both; without a clear financial plan to support themselves in the opening months – the need to pay the rent, eat, keep warm & keep the kids clothed will always stop a quality recruiter making the exciting leap.
So – how much money do you need to set aside to cover the everyday demands of life, while your new business ramps up? Once you understand how much money you need, we then need to understand your MAP – in other words, where is this “hard cash” going to come from? But for now, let’s focus on what you need.
1. Your Projections
Before we delve into understanding your MAP & where this money is physically going to come from, we need to calculate exactly how much we need. Makes sense, I guess!
It’s tricky for SSG to assume when it comes to putting a number on how much a venture should aim to have behind them, before making the leap. After all, each venture is slightly different, each recruiter has slightly different personal commitments & financial MUSTs & therefore to naively say that every recruiter would need £X amount to start with, would be wrong.
However, we do know that it always comes down to two key variants: how much money do you need to cover the absolute basics each month & how long, in the market you’re in, will it take you before you start to make placements.
The latter is, of course, an area that SSG can offer assistance in understanding further. Since 2003, the average recruiter working through SSG placing perm’ workers tend to take just over 2 months to invoice & get paid. But to be sure, let’s round that up to 3 months. The average temp’ recruiter tends to have GP ready & available within the first month. Our advice is based upon the average history of our guys – of course there is an element of luck involved & other variables such a restrictions & payment terms, but generally speaking that’s what we suggest.
2. Your Launch
If you give SSG the opportunity to support your business - as an investment into the recruiter & their new business, SSG offer a free business launch. &, as the old adage goes – nothing in life is free…apart from an SSG business launch. I think I read it in a fortune cookie once as well.
When projecting the launch costs of your business, you don’t need to set any money aside, you don’t need to spend hours tirelessly tweaking your cash flow projections to include website development, CRM access, email hosting costs, job board access & legal advice & support.
When we say, you have no business launch costs - honestly, we mean it. We would look to meet with you, understand the tools you need, the support you are rightfully demanding from us & your ambitions. We would then spend time drafting agreements & talking you through the process to make sure we are both fully aware of what you need & what you are expecting from SSG. We commit to provide all of this & more – free of charge. With the hope that SSG would make their money through the on-going success of that venture.
We would also entrust in the recruiter that they are 100% clear on how they are going to support themselves during the first few months. Infamously known as the “Baked Bean period”.
3. Baked Bean Period
Every start-up business has a baked bean period. Every start-up business has a few months of financial uncertainly & an opening period when your bottom line is a big, fat, understandable £0. Aren’t you glad you embarked on this exciting journey?...
To help our ventures estimate how much they would need to set aside to cover this period of the business, all you need is: a pen, a pad & an understanding of your financial commitments. In fact, why don’t we do it right now? So please, go get a pen, a piece of paper & let’s get started!
- Write a list of all the fixed costs you can’t avoid each month (let’s call that £X)
Mortgage/rent, kids, heating, electricity, Sky (BT Sport…?), gym membership, the Aston Martin DB11 insurance. You get the idea.
- Write down the market you are looking to work in & clarify whether this will be a perm’ driven business, temp’ only or a combination of both.
- Consider what we spoke about above (about the average recruiter supported by SSG) & work out how many months you would need £X for, before payments start coming in. (Let’s call that Y)
- Do that maths: £X x Y = Our magic number
So, now that we understand what that magic number is – we need to understand your MAP. Your massive action plan to solve the money puzzle of business ownership.
A puzzle that we will look to explore in the next instalment of this two-part series. But if you just can’t wait to get started & you’d love to hear more & explore the option in a bit more detail, then pick up the phone & give us a call. Or LiveChat with us on the right-hand side of this blog, or find us on Linkedin.
Whatever you do, if you’ve made it to the end of this piece of waffle then some part of you must be seriously considering taking the leap. Give yourself the gift of understanding more & explore the option further.