How to avoid common mistakes when starting a recruitment agency

How to avoid the common mistakes in starting a recruitment agency

If you’re considering starting a recruitment agency, then you must know that it’s not as simple as hiring a recruiter, getting clients, and sourcing candidates. Did you know that 50% of new businesses fail within five years of operation?

There are numerous things to consider. Finding out what your business model is and how to scale it, choosing a fitting name for your agency, scoping out your competition, and being compliant with local and international regulations are just to name a few.

It can be overwhelming to be handling so many different aspects of the organization, but you can find a way around to be on the other half of the success percentage in starting and growing your business.

By strategizing ahead and learning from the common mistakes others have made, you’ll find yourself yielding the rewarding fruits of your new venture in terms of fulfillment and financial success. You just need to know what the common mistakes are and do your best to avoid them at all costs.

Read on to find out what those common mistakes are!

(RELATED: How to Start a Recruitment Agency in 2020)

7 Mistakes to avoid when starting a recruitment agency

Mistake 1 – Not having a well-planned USP

Unique selling proposition or USP should not be underestimated. It’s helpful for all types of business, and that still goes true for recruitment. If you want to stand out from the market and make your recruitment agency more prominent, then you need to establish a strong one.

The first to avoid this mistake is by scoping out your competition. When you know what else is operating, then you would know what else you can offer. Take advantage of this finding identity gaps in the market.

Alternatively, you can also listen to what consumers need and want. You can give out surveys to back up your market research. Try to talk to various groups of people: professionals, job seekers, entrepreneurs, and others.

These can make all the difference! For example, you might notice that more and more hotels are popping up in your area. Check out if the need for a staffing agency is needed. Are there a lot of competitors? What gives them the edge? What else can you offer?

Think about this as you go through your business model. Knowing what your differentiators are and establishing a strong branding that you people will remember your agency for will be key to your triumph.

Mistake 2 – Having too many “overhead costs”

According to Freshbooks, “Overhead costs refer to all indirect expenses of running a business. These ongoing expenses support your business but are not linked to the creation of a product or service.”

It is nice to go all out as you start your firm. However, that is not the case monetarily. You have to remember that resources are limited and must not be maxed out immediately.

Overhead costs in recruitment can include employee payroll, various taxes, compensations, office rental, additional equipment, advertising costs, etc.

While these all are important to impress the market and potential clients, it’s vital not to invest too much in them too early. These can drain what you have and become a big problem later on. 

You can start with a small office that’s enough for you and your recruiters. And, speaking of recruiters, make sure that the number of your employees is just enough to get you a headstart.

The fewer overheads in your first few years are optimal. When you see the need for scaling, that is when you expand your territory. That is when you spend more on such costs to be able to deliver to clients satisfactorily.

Mistake 3 – Not integrating technology

This is pretty common for startups. In the early stages, having only a few recruiters and a few clients only entails manual labor. It makes sense. The entire operation is fairly straightforward and there isn’t much data to process.

However, you have to think of it as an investment. Even at the first steps of your business, you should be using recruitment software like Applicant Tracking System (ATS). It’s a great tool to store and manage candidates from the get-go.

Take Manatal for example. Our ATS ultimately helps source candidates across multiple channels and funnels all incoming applications into a centralized platform.

Since everything is stored online, users can access all the data anytime and anywhere even years after. This makes it more organized to keep track of all activities relevant to the hiring strategy.

It also smoothens and optimizes the recruitment process by providing an all-in-one solution using various tools and features. This improves day-to-day operations greatly by giving users a seamless experience from sourcing candidates down to obtaining reports & analytics.

Other software and tools that you can use are screening and assessment tools, career page builders, and more.

Cool, right? And, in the long run, you’ll see how valuable it is. You won’t have to do laborious and repetitive tasks, plus all you need will be stored online. Say goodbye to physical documents that might get lost or misplaced.

If your recruitment agency starts with this or integrates technology ahead, you’ll see a massive difference in your output.

You can read more about our thoughts on recruitment software here.

Mistake 4 – Not maximizing your database

More or less if you want to start your recruitment agency, you must have your own database or professional network.

From your years of experience in working, you and your recruiter have probably come across several talented individuals. You might even have your own database that you compiled earlier on. Don’t neglect this.

Even if you can easily get candidate data directly from sources like LinkedIn, you can be more profitable if you fully maximize your sourcing capabilities.

When you’re trying to fill a position, it doesn’t have to be filled by someone entirely new. It can be someone you have already met or a candidate that you previously rejected. This new job vacancy may be right for them this time around.

Not only that, but you’ll also save more time if you maximize your database. You already have the information that you need from these people. You know what their skills and experience are, you understand what they’re looking for in a role and company, plus you are aware of their salary expectations.

Let your recruiters take all the possibilities out there to ensure more sales for your business. You never want failed hires because it will cost you a lot. However, if you train them well, your staff will surely be able to find ways and meet their client’s requirements.

Don’t forget to use your database well right from the start. If you embed this into your hiring strategy, there will be a system to follow. Your existing team’s operations will be much smoother, and it will be the same for future recruiters as your business expands.

Mistake 5 – Having a high price

Of course, if you want to be a successful recruitment agency, you have to have a lot of clients.

First impressions last. Don’t forget that. If you start by scaring your potential clients with a high price, no one would avail of your services. The scarier part is when word of mouth spreads. 

People talk and they talk fast. If this reaches their network, it will be hard for you and your team to find people to work with. That is why you have to think about the price of your service very carefully.

In one of our previous articles, we’ve talked about the cost of recruitment agencies. You can use this as a guide to give you an idea on how to price:

Deloitte mentioned that the average cost per hire is $4,000. It can be lower or higher, depending on the role and how you go about your recruiting processes.

  • There are numerous factors that affect these digits. They are:
  • – Number of positions to be filled
  • – Type of industry to be filled
  • – Type of job position
  • – Type of job hire (full-time, part-time, etc.)
  • – The expected salary of the job position
  • … and many more!

Undercover Recruiter added that recruiter agencies typically charge 15% to 25% of the prospective employee’s first-year salary.

There are many opinions on this, so do your own research. Scope the market and see how your rivals price their services.

Decide in a way that you know it’s fair for the market without undermining your value. If you’re confident that you’re able to deliver excellent results, then that can be a good justification. 

Mistake 6 – Not being legally secured

Nobody wants to face a legal problem. It’s a headache and can turn into something serious if the right remedy isn’t presented.

As you start your recruiting agency, be wary that you’re safeguarded against these kinds of concerns and are legally secured. You must be guaranteed that your data and the clients’ and candidates’ are protected.

How can you do this? We have recruiting tools that can help you in this regard. Here at Manatal, we assist talent acquisition professionals in information security and data compliance with local and international regulations like the GDPR, CCPA, PDPA, and others.

  • How does this help?
  • – Automate data processing consent gathering from candidates via emails
  • – Modify and track candidate consent status directly from a candidate’s profile
  • – Check the consent status of your whole candidate pool
  • – Modify, extract and permanently delete data when requested by candidates
  • – Share your organization’s privacy policy and compliance terms on your career page
  • – Gather data processing consent when candidates apply on your career page
  • – Out-of-the-box compliance reports and analytics
  • – Top-tier encryption and daily back-ups of system databases
  • … and many more!

This is a major box that should be on your checklist. You’ll thank yourself one day that you did!

Mistake 7 – Just trying to “go with the flow”

As much as “playing it by ear” sounds like a good idea, it won’t be enough. Sure. It’s good to be responsive and adaptive to your environment, but you should have a structured or methodology in place.

You may think that putting up a recruitment firm and running it is simple and direct. You might say that there are not many sophisticated operations involved. However, there’s more to it than meets the eye.

You have to think about your business model, the growth and satisfaction of your employees, the foreseeable recruitment trends in the next few years, the costs of all your activities, the must-haves as a recruiter, and more– basically everything on this list!

If you don’t prepare and think about this stuff, you’ll encounter problems that you won’t be ready for. You’ll waste time and effort trying to solve a problem, which can lead to your demise. It’s a stressful scenario.

You can avoid that by not trying to “wing” everything. By being prepared in all ways, you can save yourself all the trouble and smoothly go through phases. You’ll be able to make clients satisfied, negotiate well with candidates, and become an effective bridge between them.

As you create your own business, you’ll see the importance of being steps ahead in the game. Not only will this benefit you in sales, but also in terms of self-fulfillment.

Anticipating Future Success as a Newly-Formed Recruitment Agency

Now that you have this on your list, you can avoid countless issues that others have experienced. Struggles will be inevitable, but there are many that you can surely skip. With all these in your arsenal, you’ll be glad that you’re climbing the ladder without doubts and instability. 

Just remember that starting a recruitment agency can be arduous, but with the right guidance and preparation, you’ll be able to successfully deliver remarkable results to your clients as you scale.

Enjoyed this topic? Click here to read more of our insights on recruitment and HR technology, or here to explore our 14-day free trial.

Share this article: