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.