“You can’t go into recruitment thinking it’s just a job,” says Kevyn Robins, founder of online recruitment business, PeopleCompare.co.uk. Robins should know: having been in the industry for nearly 14 years and just started his second recruitment business, he is keen to emphasise that while there is money to be made in the industry, those who want to run their own agency must be aware that in recruitment, you are dealing with people’s lives.
“At the end of the day, it’s a really big decision for a 35, 40-year-old guy with a couple of kids. You’re saying to him, leave your job you’ve been in for five or six years, because I’ve got this opportunity for you. You’ve got to care, and you’ve got to be passionate about it,” he says.
And if you don’t have the passion, someone else will: recruitment is an industry worth almost £27bn, which places over 1.3 million temporary workers and more than 787,000 permanent employees in work each year.
Recruitment companies are used by a wide range of businesses – from small businesses looking for temporary cover for their receptionist to big corporations with an annual intake of 1,000 people or more which can’t physically deliver that many new employees on their own.
Recruitment agencies also operate across almost every sector of the economy, from doctors and supply teachers right through to cleaners and industrial placements. In fact, it seems the only thing clients of recruitment agencies do have in common is urgency. According to Anne Fairweather, external relations manager at industry body the Recruitment & Employment Confederation (REC), one of the main reasons clients use agencies is for speed. “They want someone as soon as possible, usually yesterday,” she says.
Clearly, then, if you’re passionate and you’re confident you can deliver results on time, there’s money to be made in the recruitment industry. Of course, there’s always the economic downturn to consider. The jobs market reported a dramatic slowdown during 2008, with an extra 70,000 redundancies.
That said, as in most industries, if you have a solid business proposition, it should just be a matter of weathering the economic storm. “I wouldn’t say we’re recession-proof or we’re credit crunch proof, but the job still needs doing,” says Robins. Fairweather is more cautious: “Pick wisely if you are setting up in the current environment, but there are still possibilities there,” she says.
The majority of people who start a recruitment businesses fall into two categories: either they are recruitment professionals who already have a background in recruitment, as well as the associated clients, contacts and knowledge of the business; or they have had a career in a certain industry, and think they have the contacts to recruit into that profession.
Which one is best? Kevyn Robins, founder of recruitment site PeopleCompare.com, says it’s better to be from a recruitment background. “People who have come from a recruitment environment will be a lot more open-minded about various revenue streams,” he says.
But Fairweather says it doesn’t matter, as long as you are aware of how much work you will need to put in to make sure you have the contacts. You can’t, she says, just start up and expect contacts to roll in the next day, so always make sure you play your contacts and knowledge to your example.
Whether you come from a recruitment background or you’ve decided on a career change, the most important skill to have in order to make your recruitment business successful is sales – because in recruitment, you are selling your candidate to the employer.
A lot of people coming from an HR background mistakenly believe they have what it takes to get into recruitment, start a business, and hate it. Without what Robins calls ‘that red streak’ of ambition, you will find it difficult to succeed in the industry.
As with all businesses, basic entrepreneurial skills are vital. When you’re running your own business, you will have to be able to manage staff, money, and respond to demands from accounts and HMRC as rapidly as possible, as well as meeting targets.
Long hours are also inevitable, so commitment to the job is essential. “During the day you’re doing the profiling and the account management,” says Robins. “You can’t actually have a conversation with potential candidates during the day in nine out of 10 cases, because they’re working. When they finish work is when they want to talk to you about a potential move, so you might be doing a 50, 60-hour week.”
Most of all, though, clients will value good service above everything else. Even if you don’t manage to fill the vacancy, both candidates and recruiters will remember you for your level of service. Without this goal in mind, there’s a good chance you will find it very difficult to retain customers.
There’s no requirement for any specific training, although industry body the REC says if you’re coming from outside the recruitment industry, doing a course might help you understand how to recognise a good CV, and how to match candidates to a client’s requirements.
Training will also help you understand the rules and regulations surrounding the industry, as well as requirements around what information you are and are not allowed to give the candidate and the hirer, as well as issues around anti-discrimination, holiday pay, and so on.
Fairweather says training could give your business real boost. “If you’re serious about this as a business opportunity, you’ve got to work out a platform from which you can sell your business as a professional recruitment service, so you really need to know what you’re talking about,” she says.
The REC offers training at all levels, from a one-day workshop in business planning to a degree in recruitment practice. Check the website for information.
The main piece of legislation governing the recruitment industry is the Employment Agencies Act 1973.
The Employment Agencies Act looks at:
For more details on the Employment Agencies Act, see the DBERR website.
Other regulations governing the industry include the Employment Businesses Regulations 2003. This puts an emphasis on the differences between an employment agency, which introduces workers to a ‘user’ or client who then enters into a contract with the worker, and an employment business, which enters into a direct contract with the worker and then contracts them out to employers.
The cost of starting an agency will depend on how much you are willing to spend. A new business can be started on a relatively small budget: as long as you have a computer with internet access, you can do it fairly cheaply.
On top of the basic costs of starting up one of your main costs will include a website to post jobs on. As you will require a specialist content management system (CMS), the website will probably cost from £500, and with the top end anywhere up to £10,000, depending on how much you want to spend.
Another cost for recruitment companies is CV databases. These are compiled by web-based ‘job boards’ like Monster, which have sections where people can register their CV. A recruitment agency can then pay to access those CVs, which can set you back anything from £500 to £5,000 a month.
If you have a bit more to spend, franchising could be a good way to get started. ‘Recruitment-in-a-box’ packages start at around £24,000, and will not only help you get your business off the ground, but will also provide you with marketing materials, advertising, and software, and, having already built up a respected profile, may have already established a relationship with businesses and candidates.
High street or online?
While the traditional agency model of a high-street shop front is still flourishing, low-cost online start-ups are beginning to take up a larger proportion of the industry.
Both have their advantages, but it depends on which industry you’re looking to recruit into. While a typical, generic high street agency does rest on people walking by and looking for work, other industries, such as the media, now depend on the internet.
Anne Fairweather, external relations manager at industry body REC, says the advantage of the internet is that it can transform a small, local agency into a national business very easily.
“For example, I know of an agency which is based in Hull but operates nationally. Increasingly, people have got mobile consultants who will go and see clients wherever they are,” she says.
If you do decide to go for premises, you will need to make sure your site has certain features. An open-plan office is essential, so you can keep a tab on what your staff are working on, and you’ll need one or two small interview rooms so you can see candidates. Tim King, who runs Surrey-based technology and financial services agency Matchking, says his premises cost about £1,000 a month.
Kevyn Robins says starting an online agency is deceptively challenging. “To launch an online business there needs to be a certain degree of quality because your shop window is very accessible,” he says. “With a phone-less business, it’s a lot more personal. At the end of the internet, you can be anybody you like. It’s a lot more difficult to convey what you’re trying to do.”
Most recruitment businesses price their services based on whether the worker they are placing is permanent or temporary. For a permanent placement, most recruitment businesses take a percentage of the worker’s salary. On a temporary basis, it’s more complicated: you will need to factor in the cost of the worker, holiday pay, national insurance, as well as the margin you are looking to take, which will depend on the level you’re recruiting on.
As well as these costs, you will need to factor in how much you need to spend on advertising the position, and how much time you spend filtering CVs and sending them on to the clients. King says he charges his clients between 20-25% of a full-time employee’s salary, while official statistics from the Chartered Institute of Personnel and Development indicate the average cost of hiring a new employee is £4,667.
Recruiters are slowly beginning to move away from this model, though. Richard Collins started his online recruitment business, Recruitment21, as a ‘no-frills’ agency model, where he charges a flat fee rather than a percentage. “Agencies have become much more efficient as they have started to use all the latest technologies,” he says. “The focus of Recruitment21 is much more efficient than the traditional brief. We’re trying to revolutionise the industry.”
If you want to join the industry body, REC, that will be another cost – but accreditation will give peace of mind to prospective clients.
“Clients like to see you are a member of the governing body, rather than just some backstreet agency,” says King.
Fairweather says REC membership goes on a sliding scale, starting at ‘a few hundred pounds at the bottom end’. See the REC website for details.