What’s Stopping You From Starting Your Own Recruitment Business?

By Tony Restell

I had a really interesting meeting these last weeks that made me stop and think – what is it that holds my recruiter contacts back from setting up in business for themselves? Having served the recruitment sector for 15 years, I’ve seen a number of friends transition from successful recruitment consultant to successful owner of their own recruiting business. But what strikes me the most is that so few have taken the leap. Which got me thinking – what is it that stops a recruiter from setting up their own recruiting business?

The spark to write this blog post came from a meeting with John Buckman and David Simons, respectively the Chairman and Managing Director of Recruit Ventures (@RecruitVentures). They’re actively investing in and supporting start-ups in the UK recruitment market through a joint venture model – and it was understanding their approach that really got me thinking about the obstacles to setting up in business for yourself.

Things That May Be Holding You Back

Several key themes emerged from our chat. Recurring reasons that hold recruiters back from taking the plunge. How many do you recognise – and indeed are there others you’d add to the list? Please feel free to comment below.
 

The financial hit. By the time you’ve become successful enough to feel confident about setting up your own recruitment firm, you’ve probably also reached the point where you have financial commitments in your life. Going from a well-paid job to a start-up where it could be many months before you can draw a salary is a bridge too far for many.
 

The need to secure financing. The nature of recruiting is usually such that you get paid for the results you deliver many months after you first started working on that assignment. So securing finance to bridge this gap is usually something that a recruitment business will need to succeed, particularly if you have aspirations of it quickly becoming more than just a “one man band”. More often than not, securing such financing means putting your own home at risk – which for someone already taking a financial hit to their salary is often a risk they’re not prepared to take.

Focusing on what you’re best at. Lots of recruiters I know are excellent sales people and excellent recruiters. What they excel at is winning new assignments and then filling those positions. But many have no experience of other aspects of running a business such as accounting, payroll, finance, credit control, IT, HR, office management and procurement. Taking these responsibilities on can mean a leap into the unknown – and also creates anxiety that the recruiter may become bogged down in these tasks rather than being able to focus on what they’re really best at.

Having the confidence to tackle restrictive covenants. What can and can’t you do when you leave a recruitment business to go and set up for yourself? I know friends who’ve had quite daunting clauses in their employment contracts. But without paying for expensive legal guidance, it’s hard to feel confident you can set up for yourself without opening yourself up to a claim by your former employer. And even where the law appears to be on your side, it’s yet another worry for the would-be entrepreneur.

This list is by no means exhaustive. But what strikes me is that the traditional route of setting up for yourself is only likely to appeal to people who have a high propensity for risk. Intriguingly, I think the Recruit Ventures approach addresses these points through its joint venture model. They provide the finance, the back office, a salary for the founder, etc. The recruiter is left to get on with what they do best – selling and recruiting. If that enables a new wave of recruiters to set up in business for themselves then great!

A couple of my own additional thoughts on becoming an entrepreneur follow. But I appreciate I may have got some readers intrigued about Recruit Ventures, so I'm providing a contact form for them below (note: my understanding is they’re currently only working with UK recruiters who place temporary staff):

 

Final Thoughts on Becoming an Entrepreneur

I’ve spent the last 15 years setting up a series of entrepreneurial ventures in the recruitment space. Not recruitment agencies admittedly, but I’m sure much of what I’ve learnt is nonetheless directly relevant.

A couple of things strike me as being absolutely key. Firstly I would emphasise how critical it is to give yourself an adequate financial buffer before starting out. That doesn’t necessarily mean raising finance – indeed my most successful ventures have been self-funded. But it does mean ensuring you have adequate finances in place to be able to work on the business for many months without income coming in. Start-ups invariably take longer to generate income than you’d anticipated. Plus you often find that once you’re in the market as an entrepreneur, the business opportunity is actually different from the one you’d envisaged when you first started out. So you need to build in time to allow yourself to adjust – and to be able to make the right decisions for the business without the risk of financial worries causing you to make bad judgement calls.

My second piece of advice would be to be ruthless about outsourcing or delegating work. A pitfall that often catches entrepreneurs out is becoming involved in every aspect of the business. Whereas in reality there are just a handful of tasks that will really make or break the business in the early years – and it’s on these tasks that the recruiting entrepreneur must really be focused. Leave website design, accounting, social media and everything that is secondary to your success to others. Focus on winning business and then delighting your clients and candidates. That’s what will see you succeed!

For anyone inspired by this post to think more seriously about setting up in business for themselves, may I wish you every success. I’d also love to hear your thoughts and any additional insights in the comments section below. Thanks – and good luck!
 

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