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.
Having someone who has “been there, done that” to help can be absolutely invaluable, not just with the initial business set up but also for the ongoing challenges the business will throw at you. However finding someone you can trust who has the experience isn’t easy, so to help those who don’t have this luxury of having someone to work with as a coach or mentor I’ve put this checklist together.
I stress now this isn’t 100% comprehensive, it’s for recruitment start ups in general, and there will be some sectors or situations that warrant things that aren’t on this list. It’s also impossible for me to know the priorities of the business start-up without knowing what the client and candidate attraction strategy needs to be to compliment the recruiters style and sector.
It also helps massively to know what sort of business you want to build e.g. it may start as a very phone sales based business, but do you want it to become digital marketing and SEO led to allow for easy recruiting of new staff and removing reliance on the business founders? Is the business going to be set up on a tight budget? If it is, I’d ask you to think hard if you should take more time to build start-up capital or find an investor. 4 out of 5 new recruitment business start-ups don’t last 2 years, so it’s hard enough fighting for your business survival without going into this with one arm behind your back. It’s also far harder further down the line to grow your business if it’s built on cheap foundations.
Trying to remove the variables as best I can, here’s what I feel is a good checklist that will help all start-up recruitment businesses: –
Will it be a sole trader business, partnership, LLP or Limited company?
Although the choice on this may only have a small impact on the growth and set up of the business, it’s a decision you have to make otherwise you can’t form the business on a legitimate footing. Businesses have to be registered for a number of reasons, and primarily for tax and vat declaration purposes. The decision on which of these options you use for your business usually comes down to two questions; which is the most tax efficient of these 4 for the businesses growth, and do the founders need to be protected against loss if the worst should happen and it go bump. There is an added advantage with LLP’s for tax efficient equity share for additional partners but I’m at risk here of getting into real detail.
I’m not trying to over complicate it and most businesses start as a Limited company, but it is a choice that needs to be made so you can form the business, so take advice if you can.
Choose a name and form your business
Forming the business once you’ve chosen your name isn’t that hard, an accountant can do it for you or if you research on Google you should be able to work it out. The naming however may take more thought. When I discuss this point with the Recruiters I help with their new recruitment businesses they often have no idea what to call the company. In this situation I advise the name is usually of no real importance, as long as it’s not one that will cause you an issue getting past the gatekeepers, your decision makers usually don’t care what your business is called; it’s all about you and how good your service is. Also pick something that is easy to spell and doesn’t have different ways of spelling, this could hamper you being found in Google, from word of mouth or emails going missing from misspellings of business name in your email address. However, avoid getting carried away on your name until you check if the company name is available, you can’t call yourself the same name as one already registered. Also don’t forget to also check if the web domain is available.
If your business has an investor(s) or there are more than one shareholders, I strongly advise you get a shareholders agreement drawn up. This contains the rules that govern the business, share of profits, share of sale value, who has what power for what decisions, and the list can go on. Again I don’t want to over complicate this, but trying to put together a shareholders agreement after you hit a disagreement is not dissimilar to getting house insurance once you’ve been burgled.
How are you going to run your accounts?
Unfortunately all businesses have to pay tax so this is essential. How will you generate your invoices, file the business and personal tax returns, will you charge VAT and if so how will that be handled? See if you can find a recommended accountant who will answer a lot of this. However budgeting for the various tax and VAT bills that come at different frequency and timings is down to you, so make sure you put a plan in place for this. I’ve seen far too many decent businesses come unstuck with unexpected tax and/ or VAT bills, so you have been warned!
Are you going to charge VAT?
Depending on your turnover you don’t have to charge VAT, but if you don’t it will tell your clients you’re a very small company. You do have to pay back the VAT you charge to the Inland Revenue, but you can either claim back the VAT you’ve paid on purchases for the business, or use the governments flat rate scheme which means you pay back your VAT at a lower rate but don’t claim VAT back on business purchases. If your turnover will be below £300,000 and virtually all your clients are based in the UK, ask your accountant if the flat rate scheme is the most efficient for you and if you qualify.
Get some! Again using the insurance analogy, you only want it when you need it and IT down time can cost you a lot of money in lost revenue. IT support can set up your emails and data back up, so unless you are pretty hot on IT this will tick two boxes.
It wouldn’t be appropriate I recommend which insurances you should have or need; however you should check. Of the more common business insurances there are Employers Liability, Public Liability, and Professional Indemnity & Contents.
Get a Recruitment Specific Database / CRM System
This is also mentioned in my blog Most Common Recruitment Business Start Up Mistakes. A lot of new recruitment businesses start using spreadsheets rather than a CRM, but this is where the principle of building your business on solid foundations comes in. A recruitment specific database will help in accessing records for lost fee’s, finding previous candidates for current job matching, building company mailshot lists, storing job specifications and helping your team share the previous work done in sourcing, and the list goes on. For market specific recruitment businesses your database should become your cash generator for years to come. Each new candidate and new client added is adding money to the bank, and will make your business an easier and easier place for you and your staff to make money. To me it’s a totally false economy trying to save money by investing in a recruitment specific database further down the line, do it at the start.
I would certainly have this on your list of priorities. However how much you spend on your site depends on what you are using it for. My thoughts on websites would take up a blog in itself, however to help you decide what sort of site you need and what your budget should be ask yourself this question. Is the site for people who you’re in contact with already, or is it for new contacts to find you through search engines such as Google? If you do want to be found through search engines this will mean investing in optimising your website, but before you do that try and find out how feasible it is to get a good ranking for the search phrases you want to be found under. If for example you wanted to be found under anything followed by “job” you won’t stand a chance. Think of all the big job boards and how much they spend on getting found under terms that end in job, so don’t even try. Having said that, getting a good ranking can be done. 50% of the businesses I’ve set up through Davidson Gray rank top of Google for their chosen search phrases; however it took time, money and expertise, so think hard before you set off on what could be an expensive fool’s errand.
How you want your business to be seen through your logo and your website is something to add to your list. However going back to whether you want to be found through SEO, if your website is only for people who use you already then the branding isn’t as much of a big deal as it would be if their first contact with you is finding you on Google.
A very quick and easy tip for specialist market recruiters, look at your biggest clients branding and lean toward that. People like to buy from people they feel are like themselves, so if your branding is a like your clients they’re more likely to see you as someone to do business with.
Terms of business
Having good terms of business is hugely underrated. They can get you paid quicker, lower any money you give back to clients, reduce lost fee’s, increase fee sizes with smart clauses, and reduce bad debt; it’s not just about your rate and your rebate scheme. Invest time and money if needed in getting your terms written well, it’s a job you won’t have to review for a long time if done well. Then put your terms into a PDF file and DON’T amend them every time you negotiate terms with a client. Altering terms can lead to clauses becoming invalid, your terms having holes in and previous saved changes spreading. Instead, add your negotiated change to the narrative in your terms confirmation email.
Do you really need them? I ask because a) they usually demand a minimum annual spend into the thousands or you can pay per credit however they then charge a lot per advert b) if you track back your last 12 months of placements you may need them less than you think c) if you used the time you have spent writing job adverts, going through responses and ringing average quality responses, you may get a better return on your time investing in making direct approaches.
LinkedIn Recruiter seems to have come into fashion. However as at the date of this blog, I have yet to see an example of anyone who has got enough value to justify the massive increase in cost from the other Premium levels. Note though LinkedIn is releasing a new version of Recruiter over the next few months so this opinion may change depending on how it evolves.
Get a Mentor or Non Exec
When you set out to run a business it’ll help you to accept from day one, you will make mistakes and things will go wrong. However having a good mentor will help reduce both of these by having answers to dig you out of your mistakes, make smarter decisions to save and make money, and importantly give you someone to bounce your ideas off.
Having a good mentor can also reduce your stress levels. This may only be having someone to give you reassurance you’re making the right decision, removing that feeling of being on your own and knowing you have someone to turn to when you need it.
Also having a Mentor or Non Exec will increase how quickly you improve in the very challenging role of Owner Manager.
Having a mentor is the most undervalued of all the inclusions on this list. If you haven’t run a business before you are in effect taking on a completely new job that your livelihood depends on, with no one to show you what to do. The quality of your mentor will influence strongly your chance of success or failure, how much or whether you enjoy running your own business, how much profit you make, how fast your business grows, how resilient your business is and what your business becomes. If you think you will ultimately want to have a business you can semi exit or sell, a good Mentor or Recruitment Non-Exec is a must.
As I did explain earlier this is a guide, and is not meant to be a comprehensive “one size fits all” checklist. However not only have I built my own recruitment businesses, but the business I now concentrate my efforts on, Davidson Gray, does nothing else but help recruiters build profitable successful recruitment companies. Consequently this guide is compiled from my knowledge of successfully building various different types of recruitment businesses so should give you a very good head start.
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.