Starting a recruiting agency can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful recruiting agency.
Importantly, a critical step in starting a recruiting agency is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Recruiting Agency:
- Choose the Name for Your Recruiting Agency
- Develop Your Recruiting Agency Business Plan
- Choose the Legal Structure for Your Recruiting Agency
- Secure Startup Funding for Your Recruiting Agency (If Needed)
- Secure a Location for Your Business
- Register Your Recruiting Agency with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Recruiting Agency
- Buy or Lease the Right Recruiting Agency Equipment
- Develop Your Recruiting Agency Marketing Materials
- Purchase and Setup the Software Needed to Run Your Recruiting Agency
- Open for Business
1. Choose the Name for Your Recruiting Agency
The first step to starting a recruiting agency is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own agency:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your recruiting agency.
2. Develop Your Recruiting Agency Business Plan
One of the most important steps in starting a recruiting agency is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your recruiting agency.
- Company Overview – this section tells the reader about the history of your recruiting agency and what type of recruiting agency you operate. For example, are you a recruiting agency specializing in a specific type of job, such as technology or healthcare jobs, or are you a generalist that places employees for any kind of job?
- Industry Analysis – here you will document key information about the recruiting and staffing industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your recruiting agency? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your recruiting agency make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Recruiting Agency
Next you need to choose a legal structure for your recruiting agency and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the recruiting agency and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to start a recruiting agency together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a recruiting agency include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a recruiting agency is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your recruiting agency, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your business banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Recruiting Agency (If Needed)
In developing your recruiting agency business plan, you might have determined that you need to raise funding to launch your own business.
If so, the main sources of funding for a recruiting agency to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a recruiting agency that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location for your recruitment business, you’ll want to find an area that has a lot of potential employees. You’ll also want to find an area that is affordable and has good transportation options. In order to find this location, you’ll need to do some research on the surrounding areas. You’ll also want to talk to people in the area and do some test runs of your own by going into different buildings during peak hours. This will give you an idea on what the commute is like and how easy it is to enter and exit buildings.
Once you find your location, you’ll need to negotiate a lease with the landlord. This will be a long-term agreement so make sure that both parties are more than satisfied with the terms of the agreement before signing anything. You can use other real estate agencies to help with this process. Once you have signed the lease, you’ll need to install office furniture and fixtures. You’ll want open spaces for employees to work and comfortable seating for visitors.
6. Register Your Recruiting Agency with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your recruiting agency’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your own recruitment agency to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing a small business loan and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
In order to start a recruiting business, you will need to obtain a business license from your local government. You will also need to register with the state workforce agency and complete an employer application. You will also need to register with the IRS as an employer and obtain an EIN.
10. Get Business Insurance for Your Recruiting Agency
You’ll need business insurance for your recruiting agency.
Types of business insurance policies you should consider for your recruitment firm include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Recruiting Agency Equipment
First and foremost, you’ll need a computer with internet connection. This will be used to manage your files and keep track of your clients and employees. You’ll also need software that can handle payroll and scheduling. As for hardware, you’ll need a printer, scanner, and fax machine. You may also want to invest in a good quality phone system.
12. Develop Your Recruiting Agency Marketing Materials
Marketing materials will be required to attract and retain customers to your own recruitment business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your staffing agency. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional recruiting agency website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media platforms will help customers and others find and interact with your recruiting agency.
13. Purchase and Setup the Software Needed to Run Your Recruiting Agency
There are a few software programs that are necessary for the operation of a recruiting agency. The first is a customer relationship management (CRM) program, which helps to keep track of interactions with potential and current clients. The second is a job board software program, which allows the agency to post jobs and receive applications. The third is an accounting software program, which helps to manage the finances of the business.
14. Open for Business
You are now ready to open your own recruiting agency. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Recruiting Agency FAQs
Is it hard to start a recruiting agency?
No, it's not hard to start a recruiting agency. In fact, it's a great business to start if you're looking for a way to be your own boss and make your own hours. There are a few key things you'll need to do in order to get your agency started, but once you're off and running, you'll be able to bring in new clients and help them find the best employees for their businesses.
How can I start a recruiting agency with no experience?
There are a few things you can do to get started in the recruiting industry with no experience. First, read up on the industry and familiarize yourself with the terminology and concepts. Secondly, attend industry events and meetups to network with other industry experts. This can help you learn from their experience and find mentors. Finally, start volunteering or interning with a recruiting agency to gain hands-on experience.
What type of recruiting agency is most profitable?
There is no definitive answer to this question as it depends on a variety of factors, such as the size and location of the agency, the type of recruitment services offered, and the level of competition in the area.
However, among the most profitable types of recruitment agencies are those that specialize in executive or high-level placement. Executive recruiters act as liaisons between hiring managers and talented professionals, helping to connect the right people with the right companies. Because they work higher up in the staffing process than other types of recruiters, their services are often more expensive. Their expertise can be invaluable when the stakes are high and a company is looking for a specific skill set.
How much does it cost to start a recruiting agency?
Starting a recruitment agency typically costs between $5,000 and $10,000. However, the exact cost will vary depending on the size and scope of your business. Some startup costs include:
- Office space
- Advertising
- Computer equipment and software
- Training for staff members
- Licenses and permits
- Insurance policies
- A recruitment website
What are the ongoing expenses for a recruiting agency?
Some of the most common expenses for a recruiting agency include advertising and marketing, employee salaries and benefits, office supplies and equipment, and legal and accounting fees.
How does a recruiting agency make money?
Recruiting companies make money by charging their clients a fee for finding the right employee. Some recruiters charge by the hour, others set a monthly retainer fee, and others charge an annual fee. The company size, the amount of work that's required to fill the position, and the experience of the recruiter will affect what they charge for their services.
Recruiting agencies also make money by charging the employee a fee for finding them a job. A recruitment agency's fee includes a commission (percentage of the annual salary of the employee they place). Commission structures vary by company, but generally range between 6% to 20%. When a recruiting agency places a candidate in a job, the agency will conduct an interview and test that candidate, then pass them on to their client. The recruiter's fee is deducted from the employee's first paycheck.
Is owning a recruiting agency profitable?
Yes, owning a recruiting agency can be profitable. However, there are a few things to keep in mind when starting a recruiting agency. First, it is important to make sure you have a good marketing strategy. You'll also need to be able to attract and retain top talent, as well as build strong relationships with clients. Additionally, it is important to keep up with industry trends and changes so that you can continue to offer the best possible service to your clients and job candidates.
Why do recruiting agencies fail?
There could be a number of reasons recruiting firms fail, but one of the most common is a lack of focus on the client's needs. A good recruiting agency will take time to learn about their clients' business and what kind of candidates they are looking for before searching for candidates. They also need to be effective communicators, both with their clients and with potential candidates. If an agency can't keep their clients updated on the progress of their search or can't find the right candidates for their clients, they will likely lose to other recruiting businesses.
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