8 Steps for Starting Your Recruitment Agency

The rapid growth of the global economy is fueling the creation of new businesses and the expansion of existing ones. People are taking the bold step and turning their visions into reality, launching startups or establishing companies. This surge of business expansion provides a great opportunity for the recruitment industry as companies and organizations have an exponentially growing need for new talent. 

With empty positions waiting to be filled while many candidates are looking for better career opportunities, it is safe to say that recruitment agencies are more crucial than ever. For those of you willing to take the step and launch your recruitment agency, we have developed a complete guide to maximize your chances of success.

Without further ado, here are eight key steps in order to start your recruitment agency.

8 Critical Steps You Should Take to Launch Your Recruitment Agency

Step 1: Determine Your Niche

Before starting a business, research the market and understand the factors that affect your future success. That will help you decide what direction to take and choose your niche.

Although you can choose to start a recruitment agency with a broad scope that seeks job applicants across all levels and industries, the data will show whether that market is oversaturated. In that case, you might prefer to minimize the risk and narrow your operational approach, opting for something more specialized.

Thus, if you’re not a veteran yet in human resources, it’s better to know what you’re getting yourself into before opening a company. Knowing the relevant facts and industry-related insights will help you be more careful and ensure you’re not rushing or overlooking details.

Even if you have substantial experience in the HR field, the latest reports will make your decision-making data-driven and result in a business that has higher odds of success. Once you gather the information you need for a well-informed decision, it’s time to determine which type of recruitment agency you want to establish.

Perhaps you could be an IT-focused agency or a retail business-oriented staffing team. Consider your network, knowledge, and expertise when choosing a market to provide your service.

Also, think about the candidates you worked with in the past or kept in touch with. – Are they fresh graduates or seniors? Ask yourself these questions to get insights that will help you better position your business.

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Here’s a list of the five types of recruitment services commonly offered by agencies in the market.

1. Executive Recruitment 

Alternatively known as ‘executive headhunting,’ executive recruitment is a type of recruitment service that seeks out high-qualified candidates for senior or executive positions across the industries such as CXOs, directors, etc. These are passive candidates who already have huge expertise and experience in their field. At the same time, executive recruitment also sorts after and recruits specialists or highly skilled candidates for specific and competitive job positions such as the best Data Scientists.

Usually, companies or organizations rely on leading executive recruitment agencies like Korn Ferry International, N2Growth, JB Hired, Heidrick & Struggles, Egon Zehnder, Spencer Stuart for their executive search. Headhunters would usually scout for talents who are working for competitors or organizations in the related industry. Once candidates are identified and the shortlist has been made, the executive recruitment agency will then approach candidates and offer them the opportunity to join their client’s team. Executive recruitment firms usually support their clients during the whole recruitment process, the offer stage and will keep in touch with the candidate past the onboarding to ensure that all parties are satisfied.

The typical fee for executive recruitment services is between 25 to 35% of the candidate’s total annual income for their first year of service. Contracts can also include a retainer for the headhunting agency to begin the search and exclusivity rights (meaning that only one agency is offered to work on the job).

2. Temporary Recruitment

As the name suggests, this recruitment service revolves around employment for companies or organizations that require a workforce in a specific role for a limited amount of time. This type of recruitment is under a fixed contract. The demand for temporary employment arises when a company is in need of additional workforce in response to increasing workload or when full-time employees are on maternity and/or sick leave. In some cases, companies require temporary staff for special projects requiring a specific skill set for a limited period. 

Agencies that provide temporary recruitment like Manpower, Randstad, Adecco, Aquent, or Kelly would advertise open job positions via their websites, social media platforms, job boards, and mass emailing. Once they have sourced candidates, an agency will conduct background checks and interviews, and finally, offer work contracts. Once candidates are employed, those agencies usually take care of payroll and employee benefits.

The regular fees for temporary recruitment service are between 20% to 75% of temporary staff’s compensation. 

3. Vertical / Niche Recruiting 

Vertical recruitment refers to recruiting for a specific market, such as agencies specializing in the IT staffing industry. Niche recruiting goes even a step further by narrowing down even more. For example, an agency that focuses on “Executive Directors for Nonprofit Companies”.

Keep in mind these companies are specifically dedicated to serving their target market and do not operate outside of their realm apart from larger recruitment agency groups that will have teams specializing in certain roles or industries. 

As such, recruiting agencies that are offering vertical recruitment services must have expertise and knowledge of specific markets and industries. The appeal for companies to use these types of recruiting stems from the fact that these recruiters have a strong network and expertise in their industry.

When it comes to niche specifically, the problem for most recruiters is that they are generally not too narrow, but rather not narrow enough. Going deep into a chosen niche will allow you to gain the benefits of credibility, name recognition, and momentum.

Some examples of niche agencies are Aquaculture Talent which specializes in aquaculture or seafood-related jobs, and Niche Recruitment which focuses on digital, creative, marketing roles, head office and management, and HR roles.

Fees vary per agency and specialization but usually, these agencies will charge a percentage of each placed candidate’s yearly package.

4. Mass Recruitment 

To exemplify what mass recruitment is, take for instance fast-growing e-commerce companies like Amazon. These companies’ rapid growth leads to regular high demand for new warehouse workers and delivery drivers. This is the challenge mass recruitment agencies aim to tackle, the recruitment of a large number of people for both permanent and contract positions in a short time frame.

A company carrying out mass recruitment by itself faces many challenges due to the inherent scale of mass hiring. It takes time and effort to recruit a single employee so imagine multiplying that by a hundred for each opening. Agencies specializing in mass recruitment are able to overcome these challenges through meticulous planning, systematic execution, and streamlining each step of the recruitment process such as the sourcing of candidates, screening and assessing applicants, setting up interviews, and onboarding candidates.

Agencies like Robert Half and Allegis Group are examples of companies offering mass recruitment services.

Once again fees can vary depending on the role and headcount for each position but are usually calculated based on the package of each hired candidate. Fees can also be tied to performance metrics such as “how many candidates were selected by the client”.

5. Social Recruitment  

Social recruitment takes a rather different approach to candidate sourcing than other types of recruitment. Even though some agencies have made it their point of focus, more often than not social recruitment is more of an extra channel that any agency can leverage rather than the sole candidate acquisition channel.

The idea is as follows, instead of having recruiters doing the sourcing, openings are shared on as many platforms (like social media) as possible and invite people to refer relevant candidates by offering to share revenue for each successful placement. Thus in order to guarantee a steady flow of candidates, is it key to grow or at least maintain your community of referrers, and market a large number of openings.

The positive side of social recruitment for an agency is that it reduces the costs associated with sourcing candidates as fewer recruiters are required.

Social recruitment agencies usually charge their clients on a placement basis, between 15% to 25% of the candidate’s yearly packages, and then share a percentage of that revenue with the referrer.

Step 2: Assess Your Competitors

Once you decide the market and type of recruitment agency you want to establish, assess your principal competitors. Never enter a game without knowing its rules and whom you’ll encounter while trying to build your position and land clients. 

That’s why you should start by researching the principal players in your target market, their reputation, accomplishments, and business history. Find out what makes their agency different from what you envisioned and how you can use the gaps they fail to address. 

Use the SWOT analysis to determine your strengths, weaknesses, opportunities, and threats. Also, use the four Ps of marketing assessment to identify how you stand out and where you should improve your business. That way, you’ll know what to expect and how to use your unique value proposition efficiently.

As one ancient Chinese saying states, “know the enemy, know yourself, and in every battle, you’ll never be in peril’’. Hence, the first step towards being ahead of your competition is understanding their actions, strong points, and potential pitfalls. 

Step 3: Assess Your Finances

Although starting a recruitment agency doesn’t require as much money as most other startups, you should still know what resources you have at your disposal. Be intentional and find out what it takes to run an HR-related business efficiently, or you’ll launch your business blindly and without the necessary means.

Consider costs like office equipment, digital tools, staff, insurance, etc. Gauge your finances, identify how much money you have available, and whether you could ask for a credit loan or help from the state.

If you decide to introduce a third party to the process (e.g., investors or lenders), you should first know how much you need. Create a budget spreadsheet and seek financial advice to ensure you cover the essentials.

Don’t hesitate to seek help or even partnerships with other people, but calculate whether you can pay off loans. When you have someone to back you up, that can lead to a more efficient and productive workforce, especially when you’re just starting.

However, avoid debts and financial commitments to third parties if possible. Otherwise, you could put your recruitment agency at risk before even starting. 

Step 4: Research Laws and Regulations

Just as much as you should research the market and competition, you should also know the law and regulations of the industry. Without that data, you risk breaching the law unwillingly or missing critical steps. 

If you want to run a successful recruitment agency, you need to arm yourself with data and hire the relevant team that can help you inform yourself about the latest policies and rules. Thus, most companies depend on lawyers and counsel to take care of legal business. 

Yet, as the founder of your agency, you should continuously spend time researching relevant laws and regulations to prevent future juridical problems. For instance, recruitment agencies should strictly follow GDPR regulations focusing on data protection.

Knowing the industry-related legislation is crucial as it helps you protect and prevent your company, clients, and candidates from legal issues that could arise. Besides researching manually, you can also consider investing in top-notch software that helps you track the latest policy changes and requirements. 

Step 5: Develop Marketing Plans

Before launching your recruitment agency, it’s essential to have a well-thought-out marketing plan and ensure people can discover your business. Otherwise, you’ll find it hard to reach people and land clients. 

Because of that, you should establish an online presence that aligns with your company culture, values, and mission. That includes creating a logo and marketing material that embodies your agency’s style and qualities. 

Develop a website, set social media channels, create relevant content, and leverage SEO and AdWords. Think about whether you’ll use organic or paid marketing, and establish a consistent and efficient strategy. 

The visual, content, and advertising efforts should align with the tools and skills you can use. For instance, you can use various graphic design tools for creating images. 

You should also determine your target audience and decide how to reach out to them and spark their interest. For example, you could use LinkedIn or organize webinars and attract your first clients.

Thus, consider company diversity, equity, and inclusion when establishing agency policies and procedures. Leverage your website to express your commitment to DE&I values, and make most of your career pages to highlight your employer branding and perpetuate a company culture that people would want to work in.

Ensure you pay attention to detail and present yourself well because it takes 0.05 seconds for people to form an opinion about your website. But if you follow these steps, you’ll be surprised at the number of quality candidates that will attract.

Step 6: Set Up Business Goals

Do you strive to go big? – That’s a great spirit, but objectivity is the key.

A successful staffing agency relies on positive experiences and a large number of candidates but also clear business goals. Adopt a comprehensive yet flexible business model for your agency.

Establish short- and long-term goals to motivate your recruiters and give them direction. For example, you could strive to increase stable clients by ten percent in two months. Or, maybe you’d like to expand your service area during the next half year.

Besides, you should create relevant KPIs that help you track progress and pinpoint bottlenecks to achieve more. After all, numbers and figures are essential for a thriving business.

Step 7: Invest in Tech Tools

Recruitment agencies and technology have an interconnected relationship nowadays. Because of that, you should invest in the right tools, as that way, you’ll end up saving a great deal of time and money. 

The Applicant Tracking System (ATS) is one of the most popular and reliable digital software recruiters use. For example, Manatal’s ATS allows you to automatically collect candidates’ LinkedIn profiles, score out the best candidate, and track candidates’ status with ease. 

If you opt for this solution to accelerate your recruitment agency growth, you’ll understand how faster and simple it is to manage your talented applicants and organize work. Furthermore, Manatal has dual functionalities, encompassing a reliable recruitment CRM

That way, you’ll also get to continuously communicate with clients and generate more sales for overall company success.

Step 8: Invest in People

Finally, you hire stellar recruiters and continuously invest in their development and knowledge. For example, tips on recruiting a recruiter could help you reach and hire recruiters with substantial experience. 

However, avoid giving up on junior recruiters. Instead, spot each recruiter’s strength and help them thrive, as that way, you’re also doing a huge favor to yourself. Having the right people on board will help you tie together your entire recruitment system, and you’ll reap the rewards faster than you know it.

Recruitment Agency Startup Checklist

Starting a recruitment agency is an exciting and rewarding venture, but it also requires a lot of planning and preparation. To help you get started, here is a checklist of some of the key things you need to do before you launch your business:

  • Choose an industry or niche: What kind of candidates and clients do you want to work with? What are you good at and passionate about? Pick a specific market segment that matches your skills and experience, and that has enough demand and potential. This will help you differentiate yourself from other agencies and attract more business. Check out our podcast episode on developing your niche as a recruiter.
  • Do your research: Learn as much as you can about your industry and niche. Find out what the rules, taxes, licenses, and trends are in your field. You also need to study your competitors and see what they are doing well and what they are missing. This will help you find your unique selling proposition and the gaps and opportunities in the market.
  • Register your business: Decide what legal structure you want for your business, such as sole trader, partnership, LLP, or limited company, and register it with the relevant authorities. You also need to pick a business name that reflects your brand and vision, and check if it’s available and trademarked.
  • Set up your website: Your website is your online storefront and one of the most important tools for marketing your recruitment agency. You need to create a professional, user-friendly, and SEO-optimized website that showcases your services, expertise, testimonials, and contact details. You can use a website builder or hire a web developer to help you with this.
  • Get cloud-based recruitment software: Cloud-based recruitment software solutions will help you streamline your workflow, manage your candidates and clients, automate your tasks, and track your performance. You can choose from various options depending on your budget and needs, such as JobAdder, Indeed, or Davidson Gray.
  • Create a business plan: A business plan is a document that outlines your goals, strategies, finances, and risks for your recruitment agency. It will help you clarify your vision, set realistic targets, secure funding, and measure your progress. You can use a template or a tool to help you write your business plan, such as LivePlan or Bplans.
  • Secure funding: Starting a recruitment agency requires some initial investment for things like office space, equipment, software, marketing, and payroll. You need to have enough capital to cover these expenses and sustain your cash flow until you start generating revenue. You can look for various sources of funding, such as personal savings, bank loans, grants, crowdfunding, or investors. Make sure to gather as much data on your target market, competition, projections and costs/revenues as possible to ensure transparency with investments.
  • Build your network: Networking is crucial for finding and retaining candidates and clients for your recruitment agency. You need to leverage your existing contacts and connections in your industry and niche, as well as create new ones through social media, events, referrals, and partnerships. You also need to maintain regular communication and follow-up with your network to build trust and loyalty.

These are some of the main steps you need to take to start a recruitment agency. Of course, there may be more specific or additional steps depending on your situation and goals. However, this checklist should give you a good overview of what you need to do to launch your business successfully.

Other Important Things You Should Know About Launching Your Recruitment Agency

Regardless of how passionate you are about starting your recruitment agency, finances often dictate how realistic your plans are and whether you have all it takes. Because of that, we’re sharing what costs you should consider in the beginning:

  • Recruitment agency registration
  • Mobile phone and an affordable plan for calls and internet
  • The recruitment agency insurance, professional indemnity, and liability
  • Website domain name
  • Buying or renting an office space
  • Website development and maintenance
  • HR Software (e.g., ATS, CRM)
  • PC or laptop and printer
  • Logo creation and other branding content
  • Office software package
  • Relevant certificates, partnership agreements, etc.

Additionally, once you are certain of the type of services that you would like to provide, take a good amount of time to consider your service fees. Also, calculate how much you will have to spend on advertising. It could be short-term as you begin. Make a six-month plan where you will put your investment in terms of advertising. Study where would be the most effective and suitable channels to market your services. It could be physical ads on newspapers or magazines or digital ads on websites or social media platforms. 

After that, make a plan on expanding your network. As a service provider, it is important to always broaden your network to attract more customers and create more business opportunities. Business expos and conventions are a good place to start. Try to meet as many people in the industry. This is a good chance for you to introduce yourselves and your company to potential clients. Don't hesitate to exchange name cards while verbally advertising your services. The name cards you receive will be the foundation of your network. 

Finally, think about the appropriate amount of recruiters you should hire for the scope of your business. This goes back to the consideration for your cost before launching a business. When the number of your staff is settled, the next step is to calculate your cost for how much each of your staff would be paid per month.  

Once you cover the essentials, you can take action and materialize your plans. However, do not forget to continuously track your progress and ensure your recruitment agency is growing and that this growth is sustainable.

In conclusion, starting your recruitment agency can prove to be a highly successful and fulfilling endeavor when done well. Not without risk, but with careful planning, the right technology to support your agency, and a well-crafted strategy it is possible to maximize your probability of success.

Once you have everything ready, it’s time to start your agency. To find out how Manatal can support you and your team at managing leads, clients and candidates, book a demo now with one of our experts or sign up for a 14-day free trial (no credit card required).

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