Recruiters toolkit

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    The Outsauce view

    Recruiters toolkitThe myths, half-truths and pitfalls of settingup a recruitment agency.

    Ten practical strategies and insights forstart-up and growing businesses.

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    Introduction

    Its a challenging market out there, for sure. But if

    youre reading this it means you havent been put o.Youll know there are opportunities for the taking; youmay even have some clients lined up already its likely

    youre an experienced recruitment professional or aseasoned operator in your eld. Or an entrepreneurwhos identied a gap in the market.

    Maybe youre well on your way and are looking for tips toachieve growth. Perhaps youre looking to launch your ownrecruitment business and you would like some advice on how

    to get started.You have faith in your abilities; youre either ready to makethe leap and go it alone or to scale up and really grow yourbusiness. The only thing holding you back is preparation anda touch of apprehension.

    The purpose of this toolkit is to provide practical guidanceto help you achieve your goals, while clearing up some ofthe myths around starting up in the recruitment industry.Well cover all the main considerations and point you in theright direction for further assistance because running yourown business doesnt mean you have to do it alone.

    Recruiters' toolkit. Introduction 01

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    Myth or truth?

    Thinking1. Setting up a recruitment agency is expensive .............

    2. Theres personal nancial risk involved ........................

    3. Its dicult to get funding ..............................................

    4. Its not a good time to be setting up .............................5. The rst few years are the hardest ................................

    pg 04

    pg 07

    pg 08

    pg 10pg 11

    Growing8. The market is volatile........................................................

    9. There are few opportunities to boost your protmargin as you grow ...........................................................

    10. Referral to an umbrella company will mean exposingcontractors and clients to dubious practices ................

    pg 19

    pg 20

    pg 22

    Starting6. The administration required to start up and

    run a recruitment business is complicated and

    time consuming ..................................................................

    7. There are too many pitfalls toremaining compliant .........................................................

    pg 14

    pg 16

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    Gary Janes, Channel Recruitment

    Ashley Percival-Smith, Norse Recruitment

    What I know now...that I wish I knew then...

    What advice would you giveyourself if you were setting up now?

    Thinking

    Very simple. Do it right and take your time. What I mean by this isthat quick success can sometimes make you become complacentand you forget why you were successful in the rst place. CRSrapidly increased revenue and prots over a two year period andnaturally wanted to continue its growth. If I could go back in timeI would be much more cynical about how and when we decided togrow. Growth is fantastic, but sometimes you can lose sight of allof the important things which made you successful just to achievea growth target. The realisation of this has provided me withmuch more focus in how I grow the business rather than growthfor growths sake. Ambition is a powerful ally, greed can be anequally powerful enemy.

    Consider what you want from your business and how you want

    it to balance with all aspects of your life. Keep your goals in mindat all times. Its easy to get greedy and work all hours, but for me,its about enjoying what I do, getting great satisfaction out ofhaving a business to call my own, but still having plenty of timeto spend with my children.

    Recruiters' toolkit. Thinking 03

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    Are you planning on recruiting for tempor perm sta?Temps and perm sta bring dierent nancial and logistical implications foryour business.

    With permanent placements, you can take your fee and move on to the next job so you dont need to worry about payroll so much as maintaining a healthy pipeline

    of new placements.

    Temps need to be paid every week and in most cases you will be paying them before

    you receive the money from your client. Deductions for tax and National Insurance (NI),as well as holiday pay obligations will also complicate matters. Employers NI is anadditional cost to your agency.

    And of course, there will be timesheets to manage.

    You will need to balance the administration and compliance burden with time dedicatedto business development.

    In all cases: cash ow is critical.

    How strong are your existing relationships with your clients and are they good payers?

    If youre just starting up, do you have any warm prospects that could be quickly convertedto fee paying customers? Whether recruiting temps or perms, consider how much workyou can expect to put through your business in the rst few months and factor in

    delays around placements and payments. Securing a steady income is a priority for youredging agency so be realistic about how, and where the money will come from in theearly days.

    Fortunately, there are options available to agencies to overcome this hurdle, including

    invoice nancing. A good nancing provider will cover up to 100% of your temp payroll,could also cover your perm billing and invoice your clients on your behalf, meaning thatyou get your money before your client pays. (See page 09 for more on this).

    Your accountant can provide useful nancial guidance to streamline your workload while an umbrella service, if your temps are registered with one, will remove NIcontributions and holiday pay burdens.

    Recruiters' toolkit. Thinking 05

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    Marketing your recruitment agencyYour mindset will ultimately decide the success of your marketing eorts. Do you viewmarketing as a cost or strategic investment? If you consider it a strategic investment then

    you need to plan around two key numbers:

    1. Average client lifetime value2. Average client acquisition cost

    Or to put it another way: How much is a client worth to you?How much are you prepared to pay to get one?

    The same model can also be applied to candidates. If you establish an acquisition cost

    model that you are comfortable with, you can then start to test and evaluate the plethora

    of marketing channels available.

    Digital marketing is the most tangible investment because everything can be measured.

    But that doesnt mean you have to restrict your eorts to just the most measurable

    activity. Its important not to confuse cost eciency with eectiveness. An email blast

    to a cold database may be very cost ecient, but how much more eective and impactful

    could a physical mailing be?

    The catalyst for growth for many recruitment businesses has been a strategic focuson becoming a voice of authority in a specic market sector. Build relationships with

    key journalists by becoming a useful and interesting source of information and opinion.

    Social media represents the greatest opportunity for a free marketing investment

    as it only requires your time. But make sure you are disciplined enough to focus on being

    productive rather than just busy on social media platforms. Like traditional networking

    there are always hidden opportunity costs to activities that just involve time. Only after

    a sustained eort can you make an accurate judgement call on the eort:reward

    ratios involved.

    Thanks to the cloud, smaller recruitment agencies can compete against large corporates

    through low rent marketing technology platforms for CRM, email etc.

    One early investment that will only reap intangible returns is your brand identity.But it is a key investment. Having the ability to build great client relationships means

    nothing, if prospective clients wont contact you if they cannot see beyond a cheap

    website, logo, copy style etc.

    As a service provider you are essentially selling the invisible. A professional brand

    identity will reduce the perceived risk of working with you and subconsciously give

    you a condence boost.

    Recruiters' toolkit. Thinking 06

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    2. Theres personal nancialrisk involved PARTLY

    TRUE

    Risk is an inevitable component of any business venture its the price of opportunity. How you managerisk ismore important than the risk itself.

    When starting a new agency, its likely youll be putting up some of the money yourself.Self-nance gives you control, but youll probably need to raise additional funds to coveryour investments.

    You must ensure you have enough money set aside to pay yourself and cover your debts.Borrow wisely and understand the benets and limitations of each method. For instance,credit cards provide easily accessible short-term cash but are expensive in the long-

    term. Paying interest on inexible loans can eat away at your nances. While a mortgageor a second mortgage puts extra pressure on your household.

    Also, be wary of signing a personal guarantee A personal guarantee is a common way

    to secure a loan for start-up businesses without a credit record. A director, who is also

    a shareholder of the company, agrees to be liable for a certain amount plus interest,including any costs and expenses.

    Persona