How to Set Up Your Own Recruitment Agency

How to Set Up Your Own Recruitment Agency

If you are considering starting your own recruitment agency you may be wondering how exactly you set yourself up in business and begin trading (legally!). Here are some things we hope will add some clarity to the process as you get ready to set up your new recruitment business:

Name your company

This can actually be one of the toughest decisions to make! You business name defines you, your brand and needs to be something you are proud of.  So take your time, get it right and make sure the domain and business name is available on Companies House if you intend to operate through a Limited Company.  Even if you are starting out as a sole trader, it is wise to register your company name with Companies House so it is ready for you if you decide to incorporate at a later date.

Where do you work?

The simplest and cheapest way to get started is to work from home.  Although if you plan to recruit or are going into business with a partner, then this may not be suitable so you will have to take on premises.  Some locations are much more expensive than others so weigh up the importance of having a prestigious office address from day one against keeping your overheads as low as possible while you get your agency off the ground. Shared working spaces can be a great location, with the ability to upscale or downscale your workspace over time.

Get a website

A website adds credibility to your business, allows you to be found online and offers your clients a place where they can find out a little more about you and your agency. There are websites out there which enable you to design one yourself or find a web designer to do this for you.  If you do opt to find a web designer get a few quotes so you know you are paying a fair price and always look at examples of their work to ensure their style is right for your business.

Create a Business Plan

A business plan is your roadmap to success.  It sets out your sales plan for finding your first placements, as well as including cost estimates and a cashflow forecast.  It will allow you to work out start up funding required, when your business will start becoming profitable and when you will be able to begin taking a salary.

Sole Trader or Limited Company?

Starting out as a sole trader is absolutely the easiest way to start your business.  HMRC need to be notified of your change in circumstance, which you can do online, and you can start trading straight away.  The world of recruitment is very competitive so you may feel forming a Limited Company will bring more prestige and help to give the impression you are larger than you really are.  Find out more about Choosing the Right Business Structure here

Take out Insurance

Consider your need for Professional Indemnity insurance and, if you are taking on a employee, Employers Liability.  There are plenty of websites who can give you quotes online, the premium can also be paid in monthly instalments which means you avoid having to pay a large amount up front.

Open a Company bank account  

You will need to collect money and pay bills, so don’t forget to open up a business or Company bank account.  Many banks are offering free accounts for a year, amongst other freebies, so look around and find the bank that is right for you or ask your accountant to make a recommendation.

Terms & Conditions

Find a solicitor with experience in the recruitment world who can help you get the right terms and conditions in place for your agency.  We don’t want to think of things going wrong, but you must do all you can to protect your agency in the event of a problem.

VAT Registration

If your turnover goes above the threshold, currently £81,000 you will need to register for VAT.  However, you may choose to register voluntarily because this hides the true size of your business.  If you are making placements in large organisations they will be VAT registered themselves and used to being billed with VAT on top of the placement fee.  You will also be able to claim VAT back on allowable business expenses such as your computer, subscriptions to job boards or marketing materials.

Temporary or Permanent Placements

Depending on the direction your wish to take your recruitment agency and the industry you are in you may elect to do both or either.

Permanent placements can bring in larger sums of cash but may be more competitive to close.  Temporary placements can bring funding and administrative requirements because your temp staff need to be paid before your client pays you for the work they have done.  If you intend to make temporary placements we advise to make sure you have a business plan and forecast in place so you know you have the cash flow or right funding facility in place to keep you business going.  Depending on the number of placements you may want to consider finding a day to day accountant who can work part time or on a freelance basis to help with your invoicing and administration.

Invoicing System

Make sure you know how you will bill your clients.  One simple way is to opt to bill straight from an accounting software like Xero, there are ready made templates within the system which will pick up your Company details, registered office, VAT number, VAT amount and bank details.  There are legal requirements to show certain details on your invoices so make sure you use an invoice that includes all the right things.

Taking on an Employee

Depending on your business plan, you may intend to take on an employee at an early stage in your business.  Your accountant will make sure you have a payroll scheme in place and don’t forget you need to pay Employers NI on top of their salary as well as make a pension contribution on their behalf.  If they are on a commission scheme consider how you monitor their performance and have a system in place to work out their commission each month so it is ready in time to be added to their payroll.  You may consider paying their commission one month in arrears to give you enough time to calculate their commission and allow for the payslip to be printed – your accountant will be able to advise on what works for you and them.

Focus on Selling

What you sell and how much ultimately determines the success of your business, how you cover your costs and then pay yourself.  So don’t get stuck in the trap of focusing on your costs and Company administration.  Let everyone know you are in business, exploit your network and any other personal relationships you may have (unless you are bound by any non compete clauses).  

Find an Accountant

When you are setting up your own recruitment agency you will be faced with decisions to make on choosing the right structure, how to pay tax, pay yourself tax efficiently as well as creating a business plan and monitoring your agency’s performance.  Finding the right accountant who has experience within the recruitment industry will help move your business forward and save you money.  It will leave you to focus on top line sales and not get bogged down in administration.  If you opt to work from home, check your accountant has facility for you to use their registered office address.