Starting your own recruitment business is an exciting step – the chance to take command of your financial future and channel years of experience into a company that you own and control.
But the process of starting up can be clouded by lack of information, misconceptions and inaccuracies.
RecruitHub works daily with experienced recruiters who are exploring their options in entrepreneurship, fielding hundreds of questions on the best way to start and scale a recruitment business.
To help bring clarity to the process, we’re sharing our conversations and tackling 10 of the biggest myths about starting up, head-on.
Without further preamble… let’s get stuck in!
Myth #10 – It’s easy to launch, scale and sell
The dream of selling a recruitment business and retiring as a multi-millionaire is a major lure for new founders getting ready to create their own firms.
It’s the ultimate step up in personal wealth creation – to go from earning a salary and a commission as part of someone else’s company, to owning and running an organisation that could be worth a life-changing sum of money.
And the dream is real – every year, successful founders around the world cash out of recruitment and staffing companies that they’ve built with their own sweat and graft, pocketing rewards that elevate them to new levels of financial security and altering the course of their lives and those of their families.
But for every recruitment business that sells, there are thousands that never do.
- Some aim to sell but fail to lock in the right buyer and deal, drifting onwards years past their target exit date and dragging the founder into running the company long beyond what they had envisaged. Key staff who had been motivated by the promised exit see that it isn’t happening and move on, leaving the founders battling a talent drain that can cause the value of their agency to shrink alarmingly.
- Others struggle to build critical mass, never bolting down a strong enough core team to scale the business past a certain size, and owners resign themselves in frustration to running a ‘lifestyle’ business because they know they’ve not created anything valuable enough for it to make financial sense to sell.
These frustrations are common across all industries, but are particularly prevalent in the recruitment sector where the low barriers to entry make it simple to set up a company, and create an illusion that it’s ‘easy’ to build and sell a high-value business.
To understand the challenge, it’s helpful to step into a buyer’s shoes.
- To begin with, buyers in the UK market are choosing targets from among some 40,000 total agencies, so competition is intense from the start.
- Secondly, buyers are calculating the probability that an agency’s commercial performance will continue after the acquisition is completed (i.e. the risk that key personnel or key customers will be lost, that the business doesn’t function post-sale as it had done pre-sale, that it can’t survive without the founder, or that new competition enters the market and erodes the revenue base).
- Lastly, buyers will need to be convinced that they agency they are acquiring (and at the price they are paying) is not something they could build themselves more cheaply – by launching a competing brand and investing in their own sales team.
These few considerations – along with hundreds more – are all part of the rigorous scrutiny that goes into exploring potential acquisitions, and to build a company which withstands these inspections and emerges in the buyer’s eyes as truly worth a mutli-million-pound price tag is no simple feat!
This article is an excerpt from RecruitHub’s Top 10 Recruitment Start-up Myths, breaking down 10 of the most commonly-discussed misconceptions around starting a recruitment business.