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Step-by-Step Guide for How to Start a Recruitment Agency

by | Nov 14, 2016 | Recruiter Training, Top Echelon Blog

This is a good time to start in the recruiting business. After all, placements in the Top Echelon recruiting network are up nearly 20% from this time last year. In addition, a total of 22 recruitment agencies joined the Network last month. But should you start a recruitment agency?

If you’re just starting out as a recruiter or if you’re only contemplating starting a recruiting business, there’s a lot to think about. It’s not like you can wake up tomorrow morning, drink an exceptionally strong cup of coffee, and say, “I think I’ll start being a recruiter today!”

Kick-start your recruitment agency!

No, there’s a bit more to it than that. In fact, there are a ton of steps involved in starting your own recruitment agency. Well, perhaps “a ton” is a bit of an exaggeration. At the very least, there are these 15 crucial steps for starting your own recruiting agency:

#1—Determine if recruiting fits your personality

Maybe you’ve done some recruiting before. Maybe you haven’t, and you’re trying to figure out how to start a recruiting business from scratch. If you have, then you probably have some sort of idea of whether or not it’s a fit for you. If you haven’t, a word of warning: recruiting is NOT for everybody. The profession is filled with peaks and valleys and ups and downs. In fact, it’s often referred to as a “roller coaster.” If you like a steady paycheck every two weeks more than you like recruiting, then starting a recruitment agency is probably not for you.

#2—Examine your recruiting (and business) experience

Once again, if you don’t have any, then there’s not much to examine. However, if you do have experience, reflect on that experience and extrapolate it. Remember, a recruiting firm owner has many more responsibilities than an agency recruiter working for that firm. If you’ve never run your own business before, that is going to increase the degree of difficulty involved. That’s because as an owner, you’ll have to be a recruiter and also run a business.

#3—Strengthen your recruiting (and business) skills

Okay, so now that you’ve completed your self-examination and assessment, now it’s time for improvement. If you’ve already worked as a recruiter for an agency, then you have a foundation of experience. Will you know how to train recruiters if you haven’t been trained as a recruiter yourself? If you haven’t worked for a recruitment agency before, you might want to work for a recruitment firm before starting your own agency. Regardless, there are plenty of recruiting webinars, training materials, and recruiter training videos available for those who are interested.

#4—Determine the services you’ll provide

There are many different types of recruiting firms. If you already have experience in the industry, then you probably have an idea of what kind of agency you’d like to start. Below are examples:

  • Firms that only place candidates on a direct hire employment (full-time) basis
  • Firms that only place candidates on a contract (part-time or temporary) basis
  • Firms that place candidates on both a direct hire and contract basis

There many other services you can provide as a recruiting agency. Study other firms and conduct additional research to determine which ones appeal to you.

#5—Identify both your industry and niche

The most successful recruiters and recruiting firm owners are the ones who work within a niche that has a great demand. In other words, a niche containing employers that are having difficulty finding highly sought-after candidates. Basically, you want a niche where there are only so many candidates who can do what employers want. As a result, they are more than willing to pay you a recruiting fee to recruit them away from their competition.

#6—Assess the competition

Okay, so you have a great niche, one with plenty of demand. How many other recruiting firms are working in that niche already? That’s the second part of the equation. Sure, the niche might be promising, but if it’s already overflowing with firms and agencies, then it will be more difficult for you to carve out a space in that niche.

#7—Calculate start-up costs

Okay, now we’ve reached the business portion of this whole endeavor. Starting a recruiting agency costs money. It costs money to start and it costs money to operate. Here are some examples of things that will cost money:

  • Staff members (if you have any to start)
  • Insurance
  • Marketing
  • Office space (if applicable)
  • The usual expenses associated with a business of any type

If you don’t already have the funds to get this party started, then you might consider a small business loan or even small business grants, if you can secure them.

#8—Select a physical location for your recruiting business

Will you be working out of your house? In an office setting outside of your home? In which town or city? How much space will you need? Will you be able to claim any small business tax deductions while starting out? What would be the best and most economical choice? A lot of questions, to be sure, but they must all be answered.

#9—Select a geographic area for your services

There are many different types of recruiting agencies in this regard. Some are only regional, say in one state or a cluster of states. Some operate all across the United States. Some operate in both the U.S. and Canada. And some are world-wide. The physical location of your recruiting office might be in downtown Cleveland, but you could place candidates at employers all throughout the country.

#10—Research applicable laws and regulations

We’re talking not only about laws and regulations concerning your business, but laws and regulations about a recruiting business in particular. They aren’t one and the same. If you’re based in Cleveland, what are the laws for Cleveland? If you’re based in Cleveland, but you place candidates at employers in multiple other states, what are those implications? Here are some other things to consider:

  • A business license
  • Equal Opportunity Employment laws
  • Laws regarding various types of insurance, especially if you have employees
  • Laws related to business taxes

Once you’ve done your research, map out how these various laws, rules, and regulations will affect you.

#11—Research available tools

There are many tools available to those who are opening a recruitment agency. Here are some of the tools that you should consider:

Recruitment website design—A website is essential for recruiting firms these days. You lose credibility without one. When you get one, be sure to include a recruitment job board, which allows you to advertise your jobs on your site.

Posting boardsSpeaking of which, if you have open job orders, you’ll want to give them as much exposure as possible. In addition to posting your jobs on your website, you can also utilize select job posting services to get them in front of qualified candidates.

Recruitment softwareAnd how will you keep track of all your job orders, candidates, and contacts? With an applicant tracking system for recruiters, of course! You’ll want to select one that is not only online, but is also simple yet powerful. You don’t have time to be mired in minutiae.

Recruiting networkSometimes you need help filling job orders with qualified candidates. Or maybe you have qualified candidates, and you need job orders instead. Whichever the case might be, a split placement network can cure what ails your recruiting desk.

Contract staffing services—To truly maximize that desk and bill more, you should consider making contract placements. It’s easy to do, even as a one-person operation, if you use a contract staffing back-office. The back-office will take care of all the tedious details associated with making contract placements.

#12—Create a business model

Now that you have all of your pieces, parts, and tools together, and know how to start a recruitment agency, you must decide on a business model. In short, you must decide how you will make money. All of the research you’ve conducted regarding the services you plan to provide, the niche in which you plan to work, and the tools you choose to use will help. It’s important to identify all of the piece involved in the process and map out how your model will produce the kind of income you seek.

As part of your business model, you will also have to decide on the structure of your business. Will you be a sole proprietor? A limited liability corporation (LLC)? An S-Corp? If you don’t know what the heck I’m talking about, then research is in order. And don’t forget to research the local, state, and national rules and regulations regarding each (#10).

#13—Create a marketing plan

There are three parts to this step:

  1. The companies to which you will market: You’ll have to research these companies, or if you’ve already been in the recruiting business, then you already have an idea of who they are. You might even have a list of who they are.
  2. The candidates to which you will market: If you don’t have a database of qualified candidates, then you will have to assemble one. You can’t market your jobs to them if you don’t have them in the first place.
  3. The method in which you will market to those companies: These days, the methods are nearly endless. The Internet has opened up a whole new world, and leveraging the power of your recruiting website (see #11) is a good place to start. But it’s just the beginning. There’s email marketing, cold calling, recruitment agency introduction letter to client via “snail mail,” and online advertisements.

#14—Assemble corresponding marketing materials

Now that you have your plan, you can carry it out with the necessary materials. In addition to a website, your firm will need a logo. That logo should be placed on all marketing materials and correspondence. And let’s not forget business cards. These days, an email newsletter for clients, candidates, or both is nearly essential.

#15—Hire staff (if you plan to have staff)

Hiring staff is an optional step. There are many different types of personnel that you can bring on board. They include the following:

  • Administration staff
  • Researchers
  • Marketing staff
  • Other recruiters

Different owners choose different avenues with staff, depending upon their business model and the niche in which they work. Some owners are “solo operators,” which means they basically do everything. Other owners hire a number of staff and set themselves up as the “rainmaker,” or the person who is responsible for making placements and closing deals. Of course, growth is a factor. You could start out small as a one-person operation and then grow to the point where you have a full staff.

Other tips for starting a recruiting agency

Okay, you’ve got the steps. Now what about other tips? Any endeavor as complex as starting a recruiting agency is going to be wrought with tiny nuances and unforeseen considerations. Some of those considerations are listed below:

Social media—Sure, you have personal accounts on LinkedIn, Facebook, etc. But now you need company accounts for all of them. In fact, you might need to set up accounts on social media platforms with which you’re not even that familiar. Social media is a growing part of recruitment, and it would be a mistake to ignore the role that it plays within the profession.

Hiring outside vendors and/or contractors—You’re a recruiter and a business owner, but are you also an accountant? A lawyer? Probably not. What does this mean? It means you must hire an accountant and a lawyer, plus every other person in a professional capacity that has the knowledge necessary to help you run your firm.

Banking—Choosing the correct bank can make or break you, especially during the early stages of your business launch. Research banks carefully, but even better, get recommendations from others who work in the recruiting business. You usually can’t go wrong with referrals.

Settling into a new work routine—There are two parts to this: settling into the typical working recruiter routine and devising a routine that works the best for you. After all, if you work a national desk, you have to take other time zones into consideration. That means if you work on the East Coast, stopping work at 5 p.m. is probably not an option. And if you work a global desk . . . then be prepared to make and take calls at all hours of the night.

Well, that’s about it. You can absolutely dig deeper into these steps and tips (and you should), but they provide a solid framework for how to start a recruiting agency.

Considering the uncertain nature of the profession and the fact that there are human beings at both ends of the sale, it can’t possibly prepare you for everything you will face.

But some things you just have to learn on your own.

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