Written by Rhys Jones Managing Director – Davidson Gray
Rhys sold out of his previous recruitment businesses in 2012 to focus solely on helping recruiters set up and build recruitment businesses. Follow Rhys on LinkedIn or contact him direct here for help with your start-up recruitment business or for coaching to grow an existing one.
Your Sales Forecast
To allow you to write your cash flow forecast you’ll need a well thought through sales forecast.
There’s lot to consider here, a lot more than first appears. You can’t just take what you bill now and assume you can simply replicate that without understanding where your current billings come from. So below are ways to stress test where your current billings actually come from by looking at where you get both your vacancies and candidates.
Needless to say finding good candidates is critical to your placements, so you need to make sure you have thought where you will get them from. To help understand where you are currently successful I suggest you look at your last six months billings and write next to each candidate placed where that candidate came from. Was it a headhunt call, a referral from previous candidates / clients, was the candidate off the business database, were they from a job board, social media, LinkedIn, Twitter etc. This is a real life study based on you, and how you are currently successful. It’s invaluable to understand what you will be able to easily reproduce when working for yourself e.g. headhunt calls, LinkedIn etc. and parts you may need to make up for e.g. candidates who came from a database search. So this will help you appreciate how easy or not candidate attraction will be for your sales forecast. It will also help get you thinking what you can do to make up for any tools you have now in the workplace but won’t when you leave. Plus, if it’s job board centric then this is a cost you need to add to your cash flow plan. I’m not going to go into how to improve your candidate attraction here, (that will be another blog) but if you’re currently very dependent on the company database this should ring alarm bells and you need to think ahead and plan how to recruit successfully without it. And try applying these new techniques now whilst you’re still employed to perfect them so you can add their added sales value to your plan with confidence.
Client / Vacancy Attraction
At this stage it’s pertinent I bring up the potential handicap your current employment contracts restrictive covenants may have on your planned client base. The current widely accepted covenant, i.e. what the courts see as “fair and reasonable”, is that you can be restricted from trading with any clients you’ve had “material dealings with” over the last twelve months with your current employer for the next six months once you leave (any more than this is seen as unreasonable).
Now this isn’t to say if it’s in your contract that means you’re definitely frozen out from this potentially lucrative group of businesses, there could be errors elsewhere in your contract that makes this void. So get it legally checked and from a commercial angle if you can. Law isn’t black and white and getting good commercial legal advice is hugely valuable which is why I use Barrister Greg Walsh of Greg Walsh Law for my Davidson Gray Partner Businesses. I see it as that valuable to get good quality advice. But if your current clients are off limits for the first six months work this into your plan. Next, go back again over the last 6 months placements and mark where your clients/ vacancies came from as you’ve done for your candidates. Do the clients come to you for you, or because of who you work for, are they from a PSL you won’t be on, were there any from a mailshot, new business cold call etc. This will quickly show you where your current vacancies come from so you can write your sales forecast from a true picture of what you can and can’t replicate easily. Plus, if some methods you use now to gain clients are removed or won’t be as effective once you leave, you have time to plan new business development and marketing initiatives to replace this business. And as with the new candidate attraction strategies, see how they work where you are now, but maybe not too much, you don’t want too many new clients your covenants could restrict!
The sales forecast itself
Once you’ve considered the above you will be able to see more clearly what tools and advantages you currently benefit from where you work. It should now be easier for you to write a realistic sales forecast. I find it helpful to write two sales forecasts, one you feel is realistically achievable and one that you feel is the absolute minimum you’ll achieve. The bare minimum one is important in your cash flow forecast. You don’t want to get five months in and run out of cash, so if you know the bare minimum you’ll achieve you can see how much of a cash buffer you’ll need. The realistic forecast is the one you plan for with the activity you expect to hit, the KPI’s you set yourself etc. Plus this can be your motivator, as you should be earning a lot more on this forecast than you currently are very, very quickly!
So simply start with month one, and take it through to month twelve. You can’t realistically predict year two in a start-up. You will learn a lot midway through year one and you can use this learning for year two’s forecast.
Once you’ve done your sales forecast, you can use this in your cash flow forecast. I will go into this in my next blog where I’ll explain how you can get a very good idea of how much it will cost to set up a recruitment business, running costs, and net profit month by month.
Written by Rhys Jones Managing Director – Davidson Gray
Interested in working with Rhys to grow your start up?
Rhys not only provides the start-up infrastructure for your new business and all the support services your business will need, he can actually work with you to grow it. Take advantage of as much mentoring and coaching as you would like, plus Rhys considers himself a working partner and will take responsibility for the areas that you’d like him to, perhaps those you have the least passion for e.g. Finance and Digital Marketing. When working together on the business’s growth strategy, much of the effort to deliver it can be delegated to the Davidson Gray team.
Book a chat with Rhys here.
Thanks for reading our blog on the huge financial reward of starting a recruitment business. If you want more information on how you can set up, read our blog on the risks of going it alone, along with our podcast comparing the risks of starting a recruitment business with changing jobs.Our eBook How to Set Up a Recruitment Business is also a fantastic guide to getting started.