How to start a recruitment agency in 7 steps (with benefits)

Updated 23 November 2022

If you're an aspiring entrepreneur and have some knowledge of human resources, you may consider starting a recruitment agency. Recruitment agencies employ recruitment specialists who help employers find suitable candidates and connect individuals looking for a job with suitable companies. Learning more about the necessary steps to starting a recruitment agency can help you decide if this is the kind of business you want to run. In this article, we discuss employment agencies, show you how to start a recruitment agency and share additional tips on running a successful employment agency.

What is a recruitment agency?

Before deciding whether to start a recruitment agency, it's useful to know more about organisations of this type and how they function. A recruitment agency, also known as an employment agency, is a form of for-profit business that finds suitable candidates for employers who have open roles at their companies. Clients of traditional recruitment agencies are both employers who want to hire people at their companies and individuals who want to find a new job for themselves. It's common for recruitment agencies to specialise in a particular industry, such as marketing, technology or accounting.

How to start a recruitment agency

Starting and running a successful recruitment agency requires you to have extensive knowledge of human resources and business. As an agency owner, you'd act as an entrepreneur and would be responsible for making important business and investment decisions for it. Here are some important steps to consider when learning how to start a recruitment agency:

1. Make sure you're ready for it

The first step to starting an employment agency is making sure you have the necessary knowledge and skills for it. Managing an agency is a challenging task and preparation is key. Most importantly, it's critical that you develop strong business skills and an understanding of economics, finance and accounting as well as knowledge of managing a recruitment function.

2. Learn about recruitment

Having worked as a recruiter or recruitment manager is an ideal background for anyone considering starting a recruitment agency, but it's also possible to do it without experience in HR. If you're new to the recruitment industry, you may consider completing an accredited course that would equip you with the necessary knowledge of how the recruitment industry functions.

Most importantly, you learn about effective methods for sourcing and recruiting candidates. Knowing this is vital because it can help you find qualified recruiters and HR specialists to work at your agency. You can then use this knowledge to make sure they're productive and effective when performing recruitment tasks that you assign to them.

3. Decide how you want the agency to operate

Once you make sure your skill set is strong enough for working in recruitment as an entrepreneur, it's important to spend some time thinking about the type of agency you want to start. For example, if you have previous experience in IT, you may start a tech employment agency and offer services to tech companies looking for new developers, designers or programmers. Knowing how you want the agency to operate allows you to develop your business offering and set fees you'd charge for your services.

Related: 4 types of businesses to start

4. Write a business plan

To better organise all the ideas that you have for a recruitment business, you can create a business plan. Business plans are an essential element of starting a company, especially when you're applying for a business loan. Key elements of a good business plan include:

Executive summary: An executive summary is an overview of the business and all the elements it entails. In many instances, it can be useful to write it after you've written the other components of a business plan.
Description: In this section, you can comprehensively describe the agency's core business offering, activities, objectives and the management style that allows it to achieve its goals. Here, you would also define who you want the agency's clients to be.
SWOT analysis: A SWOT analysis allows you to learn more about the different strengths, weaknesses, opportunities and threats behind your recruitment business idea. It allows you to better understand the industry and see how your agency can succeed in a competitive market.
Management team: This section focuses on the people who would help your agency achieve its goals, including management and employees. It also details their duties and responsibilities.
Financial plan and projections: One of the most important elements of a business plan is the financial plan in which you can describe how you plan to finance the agency. It also serves as a space to predict how much revenue you expect the agency to generate.

5. Register your agency

The most formal step to starting a recruitment agency is registering your business with the HM Revenue and Customs (HMRC) and Companies House. If you feel like you've got the necessary knowledge and skills, you can do it yourself. In many cases, the process of forming a company only takes a few hours, and it's possible to do it online. Another option is to hire an experienced accountant to help you with this process. After registering, you'd get a certificate of incorporation, which states the opening date of your agency.

6. Invest in branding and marketing

Knowing how to effectively market the agency and promote its services improves its chances of success. To do that, consider working with a branding manager or hiring an external agency that can help you build a website, design a logo and prepare a digital marketing strategy for your new agency. If you want to do this yourself, consider the people that you want to reach. For example, if you want to offer recruitment services to local companies, it's important to choose effective marketing methods that can help them notice your agency, such as billboards or local targeting on social media.

7. Hire recruiters

If you want to maximise your agency's business potential, you may consider hiring some recruiters who can help you provide services to the agency's clients. Employing people is a great way to scale a business but it's also a responsibility, so make sure the agency can afford it. Young agencies often decide to work with freelance recruiters at first and offer them full-time employment contracts once they have enough money to pay them regular salaries.

Additional tips for starting and running a recruitment business

There are many things to consider when starting an employment agency, including the areas of the business you want to invest in. Here are some additional tips that can help you throughout this process:

Choose your niche: Although being open to clients from all industries may seem like a great idea at first, selecting a narrow niche can help you build your agency's position in the market in less time. Choosing your niche can help you stay focused without worrying about taking care of too many things at once.
Get to know your competitors: Recruitment is a competitive field, which means that there are many successful agencies operating within the market. Learning more about how they function and whether they have any weaknesses can help you improve your agency's offering and land better clients.
Implement software systems: There are many effective software tools that help recruitment agencies process information, onboard clients or source talent. Choosing a relevant tool can help you save valuable time and streamline communication within the company.
Invest in people: When you decide it's time to hire more recruiters to help you manage the workload, it's vital you continuously offer them attractive improvement opportunities. This way, they can continue working on their skills to help your agency succeed.
Keep a talent database: Building and maintaining a talent database can improve your recruiting effectiveness, as you'd have a list of people to contact about a new job that your client wants to fill. Before deciding to store this information, make sure to learn more about local and national personal data regulations.

Please note that none of the companies, institutions or organisation mentioned in this article are affiliated with Indeed.

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