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How to Start a Recruitment Business: Step 3

by Max Jones/ Friday 2nd March 2018

How to Start a Recruitment Business: Step 3

Welcome back to part 3 of this mini-blog series around starting your own recruitment business, with the objective is to give you a step-by-step guide to starting your own agency. So far we have explored how important understanding your personal “why” is & then, with that understanding, we’ve attacked the “Money Puzzle” – how are you going to financially support yourself before your new business generates the revenue you need.

For Part 3, it’s all about understanding the best route for you to start your agency.

Whenever I have the pleasure of talking to motivated recruiters who are toying with the idea of going it alone, what’s always been evident is that starting their own recruitment business is (& should be seen as) a vehicle to help them & their family get from where they are to where they want to be in the next 5, 10, 20 years. With that mindset, understanding the best route is massively important.

After all, as a recruiter in the 21st Century, you’re in a very fortunate position when it comes to starting your own business. Gone are the days where the only two options to you were “DIY” (do it yourself) or the dreaded “bank loan”…both slightly daunting & both peppered with their fair share of complications. Fast forward 15 years & while the route of SSG is very heavily used by fantastic recruiters from all sectors, it would be wrong of us to pull the wool over your eyes & suggest we are the only option out there for you.

All we can hope is that through briefly outlining the practical options for you today, you know exactly what’s out there, so that if you choose to revisit good old SSG then we know that you’ve taken your time to come to that decision. 

So, for SSG there are 4 very clear routes in which a recruiter can take to start their own agency if the SSG route isn’t quite right for them (hard to believe I know!).

1) Self-Fund DIY

Raise the required capital yourself

Coordinate the launch of your business, everything from back office, payroll & HMRC, to branding, TOBs & legal frameworks.

Buy access to the tools you need to make money

As an alternative to SSG, this tends to be the most viable route (in our eyes). The areas in which people tends to need to focus on here are split into 3 main areas; firstly, the physical upfront cost & running costs of launching the business, the domestic costs of launching your business & keeping up with your personal commitments, in addition to the initial & on-going costs of the tools you need to trade successfully.

Of course, with the healthy pot of “cash” behind you, you can do this. There are preferential rates for start-ups & it’s worth exploring these. In our experience, these costs tend to be under-estimated unfortunately – not so much in the initial cost forecast but more the on-going  projections when it comes to a back office perspective, technical stand point & job board commitment to name a few.

2) A Franchise

Buy a Recruitment Franchise from an established Franchise Vendor

Invest your capital upfront (typically around £10,000 - £30,000)

With that investment, buy the Vendors backing & support

There are some very well-known Franchise routes out there – a quick search on the internet will give you a good starting point & although you will be trading under their branding, some options do suggest full autonomy & support in the business.

Cynically in our experience, as we have support a few recruiters over the years who have tried this route & then spoken to SSG, the considerable personal investment coupled with the lack of personal branding & ownership means that (while I can see the attraction) we tend to advise people to look at other routes first & foremost.

If this route does sound attractive to you, I would suggest doing your research. Getting past the “sales blurb” on the websites & try & understand how the day-to-day look & set up of the relationship would unfold. Things to look for are the initial upfront investment, the personal guarantee suggestions on that & the management fees of working through the franchise.

3) An Investor

Find an Investor (preferably not too “close to home”)

Present your lengthy, vigorous & water-tight business plan

Give away from of your ownership in your business in exchange for some “hard cash”

Out of all three options, personally I can see why people would look at this. There are hundreds of Private Investors out there (known in the Investment world as Angels) who would spend the time to look at your suggestions & present back the investment they are happy to make.

When looking for an investor I would always suggest talking to as many as you can, preferably months if not years before you are looking to make the leap, to get a feel for what you are looking to for, the jargon they use & what type of investment relationship would work for you.  Regardless of that though – Investors are looking for two main things from an investment; security & return on their investment. Does your outcome for your business suit an investor?

This isn’t a “warm & fuzzy” route. This can be a risky route. Investors looking to part with their hard-earned cash are looking for returns, control, growth & an exit plan. & Usually they’ll be interested, regardless of their equity share, in having some sort of say over the business.

Most Private Investors can be found online – places like Funding Circle or the UKBAA are two good places to start. If you are thinking about this route, do give us a call. Having been part of world of investment for some time now, perhaps we can leverage some of our own connections to help you?

Closing points

I hope Part 3 of this series has been able to demonstrate is that it would be irrational of SSG to suggest that we are the only option out there for budding recruiters like yourself. That’s never been right & funnily enough, never will be. In a perfect world, SSG would be the “right fit” for every recruiter looking to start their own business, but of course we’re not right for everyone & you know, that’s okay. See you for Part 4!
                                                        

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