Having Thoughts of Your Own Recruitment Agency?

Having the cash to start

How much money would you need and have you got it? If you haven't got it, where can you get it from? This is probably one of the main areas where any new business can go wrong, including a recruitment agency. The sad thing is, if Directors don't get this bit wrong, the business may be doomed before they even have chance to start trading. build yourself a spreadsheet of expected costs and income, work a best middle and worst case scenario for each. Take the worst case scenarios and make them 15% worse and see if you're still in trading, if yes you should be fine.

There are a number of ways of raising money. If you're lucky enough to have substantial capital in the bank, good for you, but you are in the minority. The key figure is that which will carry you through to an operational profit. Many businesses are heading in the right direction, but simply run out of money before they start to make a monthly profit, a crying shame if this puts them out of business when the model itself was sound.

Borrowing money

Business, loans can be really awkward to get, you need to persuade a bank, using a full business model, that you are a good risk for their money. Unfortunately, in my experience, the people you are pitching to have never run a business in their life, they don;t understand recruitment and seem inadequately qualified to be judging you and your abilities in this department. It can be a real blow to confidence, and an unnecessary one just when you're about to set up your recruitment agency.

The other issue with a business loan is that they will want some 'security' with the loan. In other words, they want you to stake your house against it. Although you may be confident, this, all of a sudden brings the rest of your family into the picture.

Ungreeneasylife.com secured loans are a viable alternative. These are bank loans your bank will offer you without security. If you are in a high paid senior role while you plan to set up your own recruitment agency, you should apply for this before you resign. The bank will effectively take your employment as their security negating the need to go after your assets at home. If your income is high. you may be able to get enough, however, in most cases, an unsecured loan on it's own won't be enough.

Business investors

To the everyday person, it's surprising to learn just how many wealthy people there are out there looking to lend businesses money as a form of investment. Venture capitalists will lend you money in return for share in your business. However, be aware it's not money for nothing. They will want a share in your recruitment agency's profit as well as wanting their say in the way you run the business. On the plus side, if you choose your investors carefully you may end up with much added value in the business expertise they can apply to your business.

Which ever way you choose to raise money, my final word is to make sure you have more than enough. The vast majority of recruitment agencies that fail, will normally do so due to a lack of funds, and not because they were incapable as recruitment consultants.

John Bult runs job sites for Recruitment agency [recruitmentcareers.co.uk] adverts in the UK