Should you start a recruiting business?
If you’re a corporate recruiter, you’ve probably talked to friends in the agency world that have made big money in the business. If you’re an agency recruiter, you’ve probably wondered why you give 50, 80, or 92.676% of your revenue to your employer.
Starting your own recruiting business is tempting. The open seas call to you: $60,000 a month checks! Short hours! Vacations once a year in the south of France! No boss!
Before you take to the seas, take a step back. Breathe.
Here are a couple of considerations before you quit your day job and start a recruiting business:
- Health Insurance. Health insurance. Health insurance, said three times because it’s a massive anchor to pull each month. It’s not impossible to pay for out of your own pocket, but it’s a big consideration. Paying $1-$2,000 a month is like a second mortgage… Can you buy a second house at the same time as starting out in your own business?
- Paperwork nightmares: Chances are there is a lot more to running a recruiting business than you realize. Even direct hire placements require contracts, invoicing, and candidate forms. Consulting and staffing work is so difficult that you probably have to outsource it to a “back office” staffing provider (that of course takes a cut.) Add in banking, payroll, and taxes and many small business owners feel like just paperwork is a full-time job.
- Recruiting bandwidth: If you’re running “both sides” of a recruiting desk, you’re used to doing everything yourself. But most people have some form of help – someone sourcing names for them, calling clients for them, adding to the database, etc… You may not be able to produce the type of volume that you are used to if you go out on your own. Even if you hire recruiters and other staff, your productivity goes down because of increased management oversight and paperwork.
- Job board Costs: With all the talk about the decline of job boards and the prevalence of names on social media, it’s interesting that the cost of candidate data has gone up. To start off in a recruiting business of your own, you probably need a real candidate database. Linkedin is great, but you really need thousands of names, immediately, with phone numbers and full fleshed out resumes and contact information. Big job boards like Monster and Careerbuilder are expensive, even with fairly limited plans. Expect to drop a $1,000/month or more for a solid candidate search subscription.
- Perks: All the little things that your employer provides you, gym memberships, matching 401k plan, long and short term disability, etc… add up to something real every month.
- Client development: The recruiting industry has changed a lot in the past ten years. A good recruiting salesperson can easily get small to mid-sized clients no matter the size or reputation of their business. However, the mid-enterprise level clients are a very different story. Recruiting has gone through a consolidation and formalization of procurement practices over the past ten years. Many large firms have VMOs, RPOs, and other acronyms that are meant to standardize recruitment processes and procurement. Small firms can have a hard time “getting in” to these companies without proving national presence and/or formalized recruitment processes and metrics.
That’s a lot of doom and gloom… will you ever be able to start a recruiting business? Will you ever sail off into the sunrise on the south of France?
Here’s the reality: starting any kind of business is tough. It takes a lot of work, discipline, and personal sacrifice. The only reason you start a recruiting firm is if you can’t see yourself doing anything but that.
We listed some of the practical considerations, but in the end, starting any kind of business isn’t a practical decision. It’s not for everyone or even for 95% of people. For most people, the best idea is to blow the doors off your company’s commission plan or bonus program and stay with a great employer.
If you do start your own recruiting company someday, be prepared to hang on for dear life. In the meantime, enjoy your paycheck and be sure to concentrate on your own immediate success – that’s what will build your future.