Every year, more and more recruiters choose to start their entrepreneurial journey and stride out on their own.
In fact, in 2021 over 6,000 UK recruitment businesses were registered, due in part to the pandemic and the changing nature of the global labour market.
A significant number of start-up agencies don’t last long. It’s difficult to get an exact number of how many UK start-ups, in particular start-up recruitment agencies, fail in the first two years, but estimates put this figure at around 60%. Over half that number don’t make it past year one.
But it’s not all doom and gloom!
Many start-up recruitment firms avoid the inevitable pitfalls and issues that can occur and go on to become hugely successful businesses.
So, we’ve broken down 4 of the most common reasons we’ve found lead to the failure of recruitment agency start-ups and what you can do to make sure they don’t happen to you…
Failure to plan
Failing to plan is planning to fail.
It’s tempting to just dive straight in once you’re all set up but start with a clear vision of where you expect to be and how you’re going to get there.
Putting one in place from the word go will help you set milestones and targets you can refer back to regularly to keep you on track and focused.
You can always change the plan down the line depending on how things are going.
Taking on too much
In particular, doing too many back office and finance tasks that take up too much of your valuable time.
Outsourced partners are your best friends, so leave the business-critical bits such as your admin, compliance and finance to those that know what they’re doing.
You’ll be grateful when you’ve got more time back to focus on what you do best… recruitment.
Not asking for help or guidance
Going it alone doesn’t have to mean you’re alone.
Asking for advice from those that have been there and done it is so important for a business to survive long-term.
There are any number of decisions to make throughout your journey as a business owner that will define how your business develops and grows. Chances are you’ll know someone who’s been in a similar position to you who can be relied upon to offer their advice based on their own experiences.
Lack of infrastructure
All a recruiter needs is a laptop and a phone, right?
Wrong.
Failing to invest in the right systems and tools, such as a decent CRM system or cloud technologies, that are fit for purpose and scalable has been the downfall of many.
Putting the infrastructure in place early on will give you a solid foundation upon which to grow effectively in the future.
Whilst these four represent the most common reasons recruitment agencies fail, there are a number of other contributing factors that also need to be considered.
Poor brand and identity – have a clear vision for your brand, what you stand for and what makes you unique in a crowded market.
Poor cash flow – make sure you have enough capital to cover any costs before you become profitable.
Focusing on one big client – placing all your eggs in one basket with one client can be risky – keep up the BD so that if this client does decide to drop you as a partner, you have others to take its place.
Making unprofitable placements – you might feel it’s necessary to work at a lower rate than you typically would just to get started. The trouble is, it then becomes difficult to justify increasing your rate down the line when your overheads increase. Set your rate and stick to it.
Whether you’ve just ventured out on your own or you’re planning on launching soon, it’s helpful to be aware of what lies ahead and avoid the mistakes made by so many others.
At Recruiter Labs, we can help recruiters with all the above and more to ensure that they build the successful recruitment business they’ve dreamed of owning.
If getting started is on the cards, speak to us to find out how we work and how we can help you.
Recruitment Startup
