As part of our 600 Interesting and Useful Things for Recruiters series Stewart Roberts, Commercial Director of TBOS Limited, shares his thoughts on the ten most common mistakes which crop up time and time again when new agencies are starting up – and which should be easily avoidable.
1. Misinterpreting Client Loyalties – recruitment professionals are usually confident by nature, but this can lead to a misplaced belief that if they leave their job at an established agency and set up their own new business, their clients will jump-ship and follow. However this is usually not the case, since it will be easier and more stable for the client if they remain with one agency.
2. Miscalculating income and spend – this confidence can also lead to over estimating the number of placements they can make as a new agency, resulting in inaccurate financial projections and then cash flow difficulties.
3. Pricing to undercut – a common idea new agencies have to draw customers away from their competitors is to simply charge less than them. Not only does this result in diminishing returns for the recruitment industry at large, but also to individual agencies not making enough profits because their clients get a ‘deal’ every time.
4. Spending earmarked money – it can be easy to get carried away with spending when a large invoice payment drops into the bank account, but it’s important to remember that there are other things that the money may need to be prioritised for, such as tax or other creditors.
5. Getting locked into long contracts – when setting up an agency there are so many things to think about, it’s easy to get carried away with signing contracts and skip the small print. This can leave you in a precarious position of facing large financial penalties if you need to get out of the agreements.
6. Spending money before it is accounted for – a new agency owner will usually have just come out of a position within a large agency, where they get paid on a regular monthly basis, regardless of the business’s ups and downs. When it’s your own business, you have to wait until the money arrives before it can be spent.
7. Not having sufficient contracts – using old, incomplete or otherwise unsuitable contract templates which may not apply with all the most up to date regulations may leave you open to some difficult situations in the event of a dispute.
8. Misguided priorities – when you are suddenly exposed to every cost the company incurs, it can be very tempting to spend a lot of time and effort on trying to cut costs each month. That time should be instead spent on growing the business and making new placements.
9. Employing too many staff – staff are a huge expenditure for any business, as not only do they cost their salary, but it’s common to provide a commission structure, there’s the cost of equipment, and also tax. There is also a time investment for any training they may require, and regular performance evaluations.
10. Lack of focus – when a business is new, it’s very important that strengths are capitalised on to make the most of the assets available. However it’s common that the owner’s attention will be spread and they’ll be trying to do everything, from accounts to admin, leaving less time to focus on their actual job of recruiting and growing the business. Outsourcing any tasks which aren’t directly making money can be an easy way to avoid this pitfall .
Total Back Office Solutions Ltd regularly provide content in our Start Up Centre and offer packages designed to assist people starting their own new recruitment business, to back office services and long-term financing arrangements.