REVVING UP FOR SUCCESS STARTING UP YOUR OWN RECRUITMENT BUSINESS 2018.5
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REVVING UP FOR SUCCESS STARTING UP YOUR OWN RECRUITMENT BUSINESS
CONTENTS S P O N S O R’S STAT E M E N T We are pleased to continue our association with Recruiter and sponsor our fifth Start-Up Supplement. In the recruitment industry today, opportunities for start-ups has never been greater. New firms can compete on a level playing field with large and established companies. Recruitment is truly an online industry and technology is available to all. Everyday recruitment activities – accessing professional networks; advertising on job boards; CRM software; back office services – are available in the same form to one-person start-ups as they are to the big firm you may be working at now. The real differentiator is now the recruiter is doing the work. Arguably small businesses may just have the upper hand – they are usually focused and specialised in a particular area, experienced enough to prioritise wisely and have a compact management structure that can make important decisions quickly. So why doesn’t everybody do it? Well, starting a business will be the biggest move of your career and shouldn’t be taken lightly. For some, being an employee is the right fit. However, if you have the ability, confidence and enthusiasm to go it alone, it will be the most exciting, enriching and rewarding decision of your life.
EDITOR’S COMMENT The dream of opening one’s own recruitment consultancy lives on – let us help you unlock the opportunity to live the dream. Launching a new business is never easy, and the road to riches undoubtedly has a few potholes, along with a few diversions along the way. But by following guidance of sector experts, your own discipline, belief and hard work, your drive to carve out your niche in recruitment won’t be in vain. In this 2018.5 edition of our focus on start-ups, we provide a highly informative list of mistakes to avoid, courtesy of a number of specialists who have seen how it can all go wrong, and advice on staffing your start-up. We’ll also share news and insight from our headline sponsor 3R. So in the waning months of 2018, consider your potential as a recruitment business owner and learn from the best. A whole new future might just start here.
04 Avoiding the pitfalls We show you how to sidestep the start-up mistakes many new recruitment businesses make from those in the industry who have made them themselves
08 3R has got your back Supplement sponsor 3R explains the importance of having the right back office support from the start and beyond
11 Hiring challenges Finding new staff to join you on your journey can be tough, but our experts show that this may not be the daunting prospect it first appears
DeeDee Doke Editor, Recruiter/recruiter.co.uk
T www.recruiter .co.u
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Mike Bowler Managing director, 3R
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3r.co.uk EDITORIAL +44 (0)20 7880 7606: Editor DeeDee Doke firstname.lastname@example.org Contributing writer Colin Cottell Production editor Vanessa Townsend email@example.com Senior Designer Craig Bowyer Picture editor Akin Falope ADVERTISING +44 (0)20 7880 6213: Sales manager Paul Barron firstname.lastname@example.org Sales executive Jonathan Adebayo email@example.com Recruitment sales firstname.lastname@example.org +44 (0)20 7324 2777 PRODUCTION +44 (0)20 7880 6209: Senior production executive Rachel Young email@example.com PUBLISHING +44 (0)20 7880 8547: Publishing director Aaron Nicholls firstname.lastname@example.org
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RE V VING UP FOR SUCCESS: STARTING UP YOUR OWN RECRUITMENT BUSINESS 2018.5
SIDE-STEPPING THE START-UP MISTAKES
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RE V VING UP FOR SUCCESS: STARTING UP YOUR OWN RECRUITMENT BUSINESS 2018.5
As most new businesses fail during the ﬁrst year, Colin Cottell asks the experts how to avoid the common pitfalls when launching your recruitment start-up IN AN INDUSTRY THAT ALWAYS FOCUSES on the next deal and not the one that didn’t work out, surely only a supreme optimist would start a recruitment business when all the evidence suggests that most will fail. Analysis by company formation agents Turnerlittle.com of Companies House records in 2017 revealed that across the UK economy, eight of out 10 new businesses fail within 12 months of launching. Those who invest in and advise recruitment start-ups say there is no reason to believe that the performance of recruitment agency start-ups is radically different. “My view is that a majority of recruitment start-ups fail within ﬁve years,” says Nick Hall-Palmer, director of Orchard Venture Partners. Whatever the precise failure ﬁgure for recruitment business start-ups, with more than 9,000 new recruitment agencies launching in 2017 alone, it adds up to a lot of heartache, and a lot of broken dreams. However, Hall-Palmer and others who work in this area say it is possible to increase your chances of joining the successful minority by avoiding the sort of common mistakes that they have seen time and time again.
UNREALISTIC BUSINESS PLANS “Probably the biggest mistake we see when we get business plans coming through is they are not realistic. A business plan is not what is actually going to happen in the real world,” says I M AG E S | I STO C K
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Abid Hamid, CEO at Recruitment Entrepreneur, the venture capital arm of James Caan’s Hamilton Bradshaw Group. “The business plan says they are going to do three deals a month, whereas in the last 10 years they only did two deals a month,” says Hamid by way of example. Realism is particularly important if you are looking for investment in a new business, he says. “A complete lack of realism about how quickly you can get a business up and running, and particularly what revenue a start-up can generate, is one of the things I come across more than anything else,” says Hall-Palmer. Indeed he continues: “Since I started Orchard Joint Ventures, I don’t think I have ever seen a start-up that has delivered the revenue forecast they started with.” Hall-Palmer suggests that to add a dose of realism start-up owners should take the revenue ﬁgure they started with and simply halve it.
IGNORING RESTRICTIVE COVENANTS Ignoring restrictive covenants in your contract with a previous employer can be costly, says Hall-Palmer: “I’ve talked to people whose previous employer issued an injunction against them. The consequences for them personally and ﬁnancially were disastrous.” Mike Bowler, director of recruitment agency start-up services provider 3R, adds: “Defending legal letters is something you could do without while
trying to get a new business off the ground.” He advises: “Don’t go looking for a ﬁght. Be sensible, professional and respectful and your former employer will usually be fair in return.”
TOO MUCH FOCUS ON THE NICETIES Many recruiters, who previously worked for an established ﬁrm, make the mistake of believing that it is important to have many of the niceties that their previous employers provided, says Ryan Cleland-Bogle, founder of Tempting Ventures, a company that invests in recruitment start-ups in the UK. He says an example is recruiters who obsess about the colour of their website and having the right font, resulting in a loss of focus on sales. “Three or four months later they’ve a great website, but haven’t won any clients. This is something we see time and time again,” he says. This can really hurt-start-ups. Cleland-Bogle contends: “In the end I am not sure how much your clients care about the colour of your website. They care about the quality of the service you provide and the quality of candidates.”
BEING A GENERALIST Those who enter the market as generalist ‘me too’ recruiters are likely to struggle more than those that specialise, says Bowler: “Recruitment is a very competitive market, and you should think about what you can offer to differentiate yourself and give yourself an edge.” Cleland-Bogle agrees that setting up as a generalist is a mistake. “The challenge a recruiter who starts up as a generalist has is their competitors already have candidate pools, so it is highly unlikely if they take a generalist approach they will win,” he explains. Cleland-Bogle says this is compounded by start-ups who believe they are on the right track simply because they respond to each and every new client demand – for example, a qualiﬁed accountant one week, followed by a payroll beneﬁts specialist the next week. WWW.RECRUITER.CO.UK 5
RE V VING UP FOR SUCCESS: STARTING UP YOUR OWN RECRUITMENT BUSINESS 2018.5
The problem with this “client-driven approach” is that every time they respond to a demand for a different type of candidate, “they then need to go and create a new candidate pool”. Far better, he says, is to specialise in a niche area of technology, or at a certain level in the legal market, and then build a candidate pipeline of candidates ready for whenever you win a new client.
RUNNING OUT OF CASH Many recruitment agencies fail simply because they run out of money. This can be for a variety of reasons – for example, spending too much on overheads, or not allowing for the fact that they won’t always be paid as quickly as they thought. Hamid recommends recruiters build a ﬁnancial buffer of at least three months’ cash over and above their planned expenditure: “Whatever your planned monthly run rate is in terms of expenditure you need to have a cash reserve of at least three months added to your budget while you get the business off the ground.”
LACKING A VISION Recruiters who don’t have clear vision about the type of business they are trying to build are less likely to make a success of their new venture, says Hamid. If they suddenly ﬁnd they are
doing better than they expected, they then may be tempted to hire some new staff or spend money on ﬂashy offices, “and suddenly they think ‘I can take on the world’, Hamid says. Or, despondency may set in because “things aren’t working out”. In such cases, Hamid advises: “Get back to focusing on what you originally set out to do. Step back and think ‘what I am really trying to do here? Where am I actually going?’. Don’t go off on a tangent. It’s a mistake and you will pay for it,” he warns. Being clear about what you want to achieve also helps to build a healthy relationship with your investors, says Hall-Palmer. For example, if an investor lends you hundreds of thousands of pounds in the expectation that your ambition is to build a huge business, and it turns out that further down the line this is not what you wanted after all, this will prove problematical.
IGNORING METRICS A common reason why recruiters leave their old employer to set up on their own is to get away from their previous KPI-led target driven environment. “They tell themselves ‘we are not going to drive ourselves by the same targets, and we are all about the quality of the work we do’,” says Cleland-Bogle.
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POWER POINTS Read the paperwork Don’t just take anything on trust Legal contracts are a minefield, so find a good lawyer Don’t let the desire to do the deal and get up and running blind you to the potential risks
However, in his experience this is a mistake, and “six months later they have achieved very little”. He says that start-ups that don’t use metrics, such as the number of client meetings or sales targets, put themselves at a disadvantage compared with bigger competitors. “Having some governance about your activity and knowing what the metrics are that you need to drive success are really important,” he says.
CHOOSING THE WRONG INVESTORS AND SUPPLIERS Recruiters can sometimes end up working with partners and suppliers that they later ﬁnd are not right for them, with disastrous consequences. Whether it is an investor or a supplier, be patient in ﬁnding the right people to work with, says Bowler. “Shop around, ask for demonstrations and references. Speak to other recruiters that have already used the service,” he advises. “Potential investors will do their due diligence on you, but it’s not a one-way thing, so do it on them,” says HallPalmer. “If you have a good business plan there will be more than one investor interested in working with you, so take your time, see several and pick the one that is most appropriate to you.” WWW.RECRUITER.CO.UK 7
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Sponsored p Feature
THE TECHNOLOGY BEHIND RECRUITMENT FINANCE This year has seen start-up specialists 3R release their new, improved back office software. Vanessa Townsend investigates THE GROUND-BREAKING BACK-OFFICE software forms part of 3R’s start-up offering and has proved invaluable to established recruiters, as well as their clients and contractors.
PAYROLL PROBLEMS SOLVED Director Mike Bowler explains: “Our back-office support service is a web-based, highly automated system which handles the whole back office for perm and contract recruitment. Once set up, recruiters simply add vacancy details
and then sit back and watch.” Contractors are set up online: they submit their own timesheets, which triggers a reminder for a nominated authoriser to sign off. Once it has been authorised, the payroll, invoice and recruiter statement transaction kicks in. The process is just as simple for clients to authorise perm deals online. Neil Roberts, managing director at The Recruitment Geeks, believes the service has helped grow the business: “3R has been a huge part of our success in our
firs year, allowing us to get on with what first we do best – recruit. The online approval process has made it very straightforward pro for our clients to approve invoices and fits fo well with our brand.” we Sarah Buttacci, founder of SB Digital Search, is also pleased with the payroll Se solution: “SB Digital Search may be a so small agency but it has the best freelance sm payroll solution in place to rival the pa biggest of recruitment firms. The system is big reliable, provides an audit trail for rel everyone involved and my contractors are ev ha happy to be paid within 48 hours of an approved timesheet.” ap Bowler adds: “The efficiency of the sys system enables us to pay contractors and rec recruiters quicker. We run a daily payroll fo for contractors, so there’s no need for rig rigid deadlines – contractors are paid wit within two working days after their tim timesheet is authorised.”
CASH FLOW CONTROLLED CA Wh about a start-up recruiter worrying What about cash flow or credit control? Bowler explained that the 3R system pays recruiters every Friday, so if a timesheet or perm invoice is authorised by the client by close of play on Thursday, the fee/ contract margin will be in the recruiter’s bank account on Friday. One less financial problem to worry about, then! Suraj Popat, MD at Skyline Recruitment, agrees. “With 3R you don’t get the corporate spiel of process, just enough flexibility to ensure you can prioritise your time on the tasks that make you money,” he explains. “The daily payroll is another massive plus: no more deadlines that are inevitably missed and then time wasted having to explain to the contractor that this won’t get processed for a week. The job that the team at 3R do makes it easier for us to do ours, so for that, we’re very grateful!” 3R’s back office solution also takes care of many other financial issues that concern not only start-up recruitment business owners, but also many SME recruiters. 3R also takes care of: • Free, same-day client credit checks • Credit control • Bad debt insurance • Detailed recruiter statements
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• Automated HMRC intermediary reporting • Real-time Management Information
UP-TO-THE-MINUTE TECHNOLOGY As technology is at the heart of everything 3R provides, 3R has an IT development office in Devon dedicated to improving the management and future performance of its back office solution. Safety and security is paramount, and so a number of features are incorporated to ensure the best possible performance and security. These include encrypted data transfer, disaster recovery and back-up system and database geo-replication. The back office system has three separate portals to the central hub of data: the Recruiter, the Contractor and the Client. Each portal can easily be accessed via the desktop, a tablet or a Smartphone. As well as offering each party easy, secure access, once in, functionality is simple and intuitive and, most importantly, relevant to the user. Richard Barker and Martyn Hurricks, co-founders of The Talent Locker, agree that the simplicity of use is a real bonus: “Both our clients and contractors highly rate the efficiency of the back office
system – adding timesheets is easy and client authorisation takes only two clicks. 3R’s back office technology saves us valuable time, makes our business slicker and we are able to concentrate on our clients and candidates, filling their requirements.”
BIG BENEFITS Whereas with some other back office providers the client and contractor experience is often ignored, 3R recognises that a slick, accurate and secure method of approving hours worked, invoicing and
making payments is an essential part of a recruiters’ overall service delivery. Both clients and contractors who work with 3R’s start-up recruiters can vouch for the benefits of using 3R’s back office system. As Marc Fielden, divisional manager at Prodigium Group, explains: “By using 3R’s back office my candidates, clients and my business are kept informed of payroll, authorisation and the invoicing process as it happens. This has enabled us to grow and focus on taking our business from strength to strength.”
“We may be a small agency but our freelance payroll solution rivals the biggest recruitment firms. The system is reliable, provides an audit trail for everyone involved and my contractors are happy to be paid within 48 hours of an approved timesheet.” SARAH BUTTACCI, FOUNDER, SB DIGITAL SEARCH
“3R has been a huge part of our success in our first year, allowing us to get on with what we do best – recruit. The online approval process has made it very straightforward for our clients to approve invoices and fits well with our brand.” NEIL ROBERTS, MD, THE RECRUITMENT GEEKS
“Our clients and contractors highly rate the efficiency of the back office system. 3R’s back office technology saves us valuable time, makes our business slicker so we can concentrate on our clients and candidates, filling their requirements.” RICHARD BARKER, MARTYN HURRICKS, CO-FOUNDERS, THE TALENT LOCKER
3R’s team of experts (l-r): Alex O’Donovan, head of IT systems (and designer of new system); Neil Ayton, director; Mike Bowler, director; Chris Powell, director
3r.co.uk WWW.RECRUITER.CO.UK 9
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Advertorial A DV E RTO RIAL H R G O R E C R U I T M E N T
BE YOUR OWN BOSS WITH THE BACKING OF HR GO: 2 + 2 = 6
f you dream of running your own recruitment business, or of taking an existing one onto a new level, then a joint venture partnership with HR GO could be the answer to being able to set up and compete with better-resourced businesses in the digital age. Jack Parkinson, chairman of HR GO recruitment and business services group, believes in 2+2 = 6, a formula that seeks joint ventures, branch openings and acquisitions and helps them to grow. He says: “2+2+6 is a tried and trusted formula that has helped smaller businesses and helped expand our operations over the past 60 years.” HR GO, with a turnover of over £80m, 360 staff and 40 offices, has created more than 20 joint ventures – you could be the next! “The backing of HR GO has kept us at #1 in our field.” The Liverpool branch of HR GO Recruitment is a joint venture run by Justine Jones and Mark Ward that specialises in providing staff to call centres across the region.
Staying ahead of the game After more than 45 years helping new businesses grow Jack’s enthusiasm for a good idea and a new opportunity is undiminished. “This year we have invested £1.5m in providing access to state-of-the-art digital infrastructure for all of our existing ventures. I know from experience how important this back up is to ensure that they are able to concentrate on building and maintaining the personal relationship crucial to building a successful business. We’re also growing our national sales team. “At HR GO we see it as our role to help even more people wanting to start up or expand their own companies, and be their own boss, to succeed. “Recruitment is extremely competitive, but we believe that by combining up-to-the-minute digital, marketing and branding developments with friendly personal service, crafted over the past 60 years, we can deliver on 2+2=6 to meet future challenges.” Interesting proposal? Please get in touch We’re particularly interested in talking to recruiters with a focus on the commercial and professional services sectors. ●
“When we started back in 1999, the support from Jack and the HR GO team was critical to getting us up and running quickly so that we could establish ourselves as a reliable option for our clients. Back office services such as payroll, IT and marketing from an experienced team at HR GO allow us to focus on providing a great customer service to our candidates and clients alike, and are essential to keep us ahead of the competition.”
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HR GO RECRUITMENT For further information please visit: www.hrgo.co.uk Jack Parkinson can be contacted on:
Digital expertise benefits recruitment operations Our formula for creating joint venture partnerships is not limited to recruitment businesses. In the past two years we have supported the establishment of two new digital joint ventures, Space Between, a web development company, and Discoverable, specialising in digital marketing.
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Both of these companies are experiencing strong growth in their own right but are also able to provide excellent cutting edge services and advice to our recruitment businesses and others.
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HIRING CHALLENGES Finding staff need not be the daunting prospect it ﬁrst appears for the new recruitment ﬁrm, as Colin Cottell explains
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RE V VING UP FOR SUCCESS: STARTING UP YOUR OWN RECRUITMENT BUSINESS 2018.5
RECRUITMENT START-UPS HAVE NO BRAND TO SPEAK OF, lack presence in the market, can’t afford to pay competitive salaries, provide job security or offer a recognised career path. And unlike their established competitors, consultants don’t have the comfort of existing clients and a database of candidates to fall back on when business is scarce. At ﬁrst glance, it appears the chances of newly-launched staffing companies being able to hire the staff they need to get their businesses off the ground are less than promising. As Julie O’Neill, joint managing director at rec-to-rec ﬁrm McCall, puts it: “Why is somebody going to leave their good job in a reputable agency and a regular commission pot to go into a start-up that is unknown, unheard of and risky?” It’s a question made all the more pressing, says O’Neill, by the need for newly-launched staffing companies to make sales in those all-important early days and weeks. “Typically you have the directors, the managers and the team leaders in place, but what you need is that critical mass of billers to get the scores on the doors,” says O’Neill. Although it is commonplace for those leaving established agencies to plan on a group of former colleagues coming over with them, O’Neill says typically this doesn’t work out as hoped. “They get counter-offered, they get nervous at leaving and starting afresh, or the commission pot won’t be matched.”
MARKET FOR TALENT According to James Visor, MD of rec-to-rec ﬁrm Rule Recruitment, the
problem for a recruitment start-up is accentuated by the current market. “I have been in rec-to-rec for 15 years, and I have never seen it as buoyant from a client point of view,” he says. However, Clive Carlin, director at rec-to-rec ﬁrm Carlin Hall, says there is no need for newly-launched staffing companies to despair. He acknowledges that lack of brand awareness, less job security and lack of infrastructure such as support staff can make it more difficult to attract talent, but argues that there is plenty they can do. “It’s about making their message clear about why they are unique and what they offer to employees to make them attractive,” he says. He suggests that a start-up can offer staff a degree of freedom and autonomy that is often absent in larger more corporate recruiters. “When you work for a start-up, the shackles can be taken off to a certain extent, and rather than there being limitations on the clients you can work with, and the roles you can work on, you can build your own business and go out to the whole market,” says Carlin. Similarly, newly-established recruiters may have more freedom to allow staff to work ﬂexibly and to work from home, making them attractive to prospective employees who value a better work-life balance. “The thing that recruiters value above everything else is cultural ﬁt,” adds Visor. “And on the whole people don’t want to be corporate, suited and booted – they just don’t want it.” Millennials in particular are turned off by the structure of more established and traditional recruitment businesses and more interested in the type of environment that start-ups are able to provide, “businesses that are
dress-down, digital and fast-moving”, says Visor. Luke Robbins-Wells, MD and founder of executive recruiter Chad Harrison International, says that when he launched the ﬁrm four years ago he never thought he would be able to attract experienced hires. “There was just me in a room billing. We had no brand,” he says. And while he would gladly have taken on experienced hires, at that stage in the company’s journey the money was not available to pay the salaries. Robbins-Wells found a way round the problem by working with Liverpool University, which offers a graduate recruitment programme for free for SMEs in the city.
LEADING INDIVIDUAL Differentiating themselves from other employers is vital if start-ups are to be successful in hiring. In Robbins-Wells’s case, he says there was no point in highlighting training and development opportunities because it didn’t differentiate Chad Harrison from other graduate employers. For his business, the most effective message in attracting graduates to join the company “was giving a clear focus and direction for where the business was heading”, he says. “What people did get excited about was being mentored by the MD, who has 15 years’ experience in recruitment, who will support and develop you,” he adds. Visor says the personal brand and the personality of a start-up’s founder cannot be overestimated. “In order to attract staff, you need to have someone who is personable and who people can
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BRV AND NEW STARTING STARTING YOUR RE VING UP DAY: FOR SUCCESS: UP OWN RECRUITMENT BUSINESS YOUR OWN RECRUITMENT BUSINESS 2018.5
believe in,” he says. “The start-ups that have done best have a really dynamic, passionate individual selling it. “Big businesses often ﬁnd it very difficult to engage and bring out their personality because they don’t have a personality. While they have great balance sheets, awesome offices, a great brand and support, they don’t have passion.”
EXPERIENCE PAYS While culture, working environment and inspiring leadership are undoubted magnets for talent, Carlin says the importance of salary and other ﬁnancial incentives shouldn’t be ignored. He acknowledges that start-ups ﬁnd it difficult to pay the same level of salaries as established recruiters. However, by tweaking arrangements so that consultants earn more on commission and less in base salary, he says “arguably staff can earn more”. Offering new staff equity in the business is another option, says Carlin. But this has its limitations, he says: “Usually, it’s not worth that much unless there is some sort of exit event.” Visor agrees that today’s market, where experienced talent is scare, precludes many start-ups from taking on experienced hires, and strengthens the case for hiring people new to the industry and then training them. “When you get a decent recruiter in the market everyone wants them, and you will be paying over the odds,” he says. “You can sit and wait, but by the time a good one comes along you could have trained up three graduates.”
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POWER POINTS Work out what is unique about your company Identify your target audience and communicate your message effectively If you can’t afford the cost of experienced hires consider graduates or apprentices and train them yourself Focus on hiring feeearners As a founder of the company you have a vital role in representing the brand and inspiring others to join Get as much outside help and advice you can
However, O’Neill warns that relying on people new to the industry is a risky hiring strategy. “We all know that with newbies, there is a percentage that will work out swimmingly, and a percentage that won’t. The last thing you need with a new business is people coming and going.” Graeme Read, director at recruitment and staffing growth accelerator
consultancy 3R Inside, who during his recruitment career estimates he has personally hired more than 500 recruiters, says his preference is for “someone who has transferable skills, especially sales, who can show they are commercial and who I can then go on to train in how to recruit”. In order to not put all their eggs in one basket Read advises start-ups to hire in bunches of three. “The ﬁrst one will quickly take a decision on you, or you will take a decision on them, and the cost is minimal. The second person is a 50:50 bet and you won’t know for two or three months, and the third person will probably be a star,” he says. However, Visor says in today’s market, where talent is hard to ﬁnd, it is unrealistic to think you can hire three new entrants to start at the same time. “It just isn’t possible; you need to keep meeting people all the year round,” he advises. Whatever hiring strategy a recruitment start-up decides on will ultimately depend on the individual preferences of its founder or founders. But with staff costs making up such high proportion of a recruitment ﬁrm’s costs, it is equally important that the resultant hiring plan is executed well. “If you don’t hire speedily enough you aren’t going to get that critical mass to generate the sales you need, and if you over hire and can’t afford it, the company is going to fold,” says O’Neill. In other words, hiring staff for a recruitment start-up is not only a challenge – it can be a matter of life and death.
MARCH 20172018 NOVEMBER
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