How to Start a Recruitment Company
To succeed in starting a recruiting firm, a business owner needs to understand that profits are created by earning commissions for the placement of candidates.
Once a client company contracts for a job order, the recruiting company is responsible for identifying and pre-screening candidates, verifying their references, and generally qualifying them for the purpose of interviewing and placement. Once the candidate is placed with the client, the client company pays a commission fee. This is called a recruiting cycle.
The financial success of a recruiting company relies on the number of these recruiting cycles they can conduct during the course of one month.
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Things You'll Need
- A computer with Internet access
- Phone service and a 1-800 number
- An accountant
- A lawyer
- Business insurance
- A sales-tracking software product
- Six months' worth of living expenses
Instructions
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Get some recruiting experience. It is necessary prior to going independent. Practical recruiting experience in obtaining clients and servicing accounts as well as recruiting procedures such as salary negotiations and candidate follow-ups are key elements to a successful recruiting company.
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Recruiting companies are responsible for complying with many regulations, such as those regarding federal equal employment opportunity practices. This includes laws against employment discrimination based on race, color, religion, gender, age, national origin or disabilities. Recruiting firms must maintain hiring records in accordance to federal laws. They are also responsible for maintaining local and state regulatory laws, which vary from state to state.
Because of the variety of regulatory laws concerning employment, it is highly recommended that recruiters speak with an attorney who understands the current local, state and federal laws that regulate a recruiting and consulting firms. Having the proper hiring procedures in place is an important step in order to avoid government fines. -
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3
Talk to professionals. Find an accountant with strong business tax experience. They will help you decided which business structure---sole proprietor, S-corporation or LLC---is best. An accountant will also provide the best advice on tax benefits and deductions. Make to sure discuss liability considerations and insurance needs with an attorney.
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4
Set up your office. Managing business overhead is key to the success of any recruiting business. Many new recruiting companies start out as home businesses using such products as Microsoft Office Live for a virtual office, and phone communications are outsourced to an Internet voice response (IVR) company. An IVR offers phone services to make companies seem larger and more established. The use of a virtual office will greatly cut down on overhead and allow for greater profitability in that important first year.
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5
Network. Become a member of the local chapter of the Society of Human Resource Managers (SHRM). Network with the local human resource managers in your area. In addition, if you have previous recruiting contacts, touch base with them to let them know you have your own firm now. Some companies make their staff recruiters sign non-compete contracts, but this does not mean that you cannot be in contact socially with these former customers until the expiration of your non-compete.
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It is important to start steady revenue streams quickly, so become a member of a placement network system with other recruiters to bring in "split-fee" or "shared" commission revenues.
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Start getting clients to sign on to "retained searches," which are reserved for harder-to-place or executive-level positions within a client's company. Recruiter's normally charge a percentage of the hired executive's first year's salary, and the client pays half of the fee prior to the search and the other half once the search is completed.
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Set sales goals on a weekly, monthly, quarterly and yearly basis. A good sales tracking product will do this automatically. This will help to decide which commission fee mix (straight, shared, or retained search) combinations best achieve these goals.
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Follow up with placements and candidates during the 90-day "honeymoon" period to assure client satisfaction. A happy client often becomes repeat business.
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Tips & Warnings
During slow business cycles, consider outsourcing candidates as consultants. Even with hiring freezes in place, company managers are still open to hiring contractors in order to complete projects.
Recruiting has become an online virtual enterprise in many ways, and recruiters new to the field often forget that process of hiring, at it deepest levels, is personal. Networking is an essential part of any new business venture, but it is especially true of those seeking to start a recruiting company. Recruiters who forget the personal touch often lose their businesses during tough economic cycles while recruiting firms who have established strong company connections usually are the first choice when openings happen or consulting positions are offered.
