Recruitment Investors - Are they worth it?
When starting your own recruitment agency, there can often be a desire to look for a recruitment investor to provide start-up capital and support. With that said, there are a number of investors who will help new start-up businesses, especially in the recruitment industry, as the return on investment can be very lucrative. If you do decide that your new agency would benefit from having an investor, it is important to understand what the investor will actually provide you, both as financial and business support.
Below are a number of advantages to new start-up directors offered by investors of recruitment agencies:
THEY GIVE YOU KNOWLEDGE & EXPERIENCE
Often a recruitment investor will have previous experience of running a company and will hopefully be able to pass on any knowledge they have on ensuring that the agency is a success and reducing common mistakes that new business owners may make. They may also have knowledge of how to get onto PSLs, work internationally or how to get the most out of recruitment staff.
THEY PROVIDE INITIAL START-UP CAPITAL
One of the main advantages of having an investor is that they will often provide initial funds to pay for the costs to get the agency off the ground. This may be used to pay for overheads such as office space, computer equipment, furniture and staff salaries (including the directors). This can allow the agency to start trading straight away with full facilities instead of setting up the agency with limited capabilities or paying for these using credit cards or personal savings. However, this initial investment may have conditions on the level of shareholding, restrictions of when dividends can be distributed or who makes decisions on the company.
THEY PROVIDE INTRODUCTIONS
If an investor has built a number of recruitment agencies then they would often know which suppliers can be of use to the new agency, whether these are providers of software, back office and accountancy support or invoice finance. This can ensure that the agency gets a good deal and uses reputable providers for the agency’s needs.
POTENTIAL TO SHARE COSTS ACROSS BUSINESS VENTURES
If the investor has numerous investments with multiple recruitment businesses it may decide to share the cost of certain overheads between businesses. This may be using the same accounts department to run the business administration, getting an invoice finance arrangement based on the other recruitment agency turnover or using job board licences across multiple companies.
If the investor can provide all of these services, it may well be a good idea to have them as part of your business. Having said that, it is important to weigh up what cost this will come at. Often investors will ask for a shareholding in your business, which means you could lose some of the valuable ownership of the company. In the early stages of your business this may seem like a good idea but if your agency grows to a large value, you may end up sharing the rewards you have put your blood, sweat and tears into.
WHAT TBOS THINKS
TBOS has helped many new start-up recruitment agencies over the years and is often asked if having an investor is a worthwhile.
In some cases, there have been visible advantages to the agency, whereas in most cases upon our discussions TBOS has found that if the director is as good a recruiter they say they are, they should not need the help and support of an investor. The initial capital investment can either be covered by borrowing on credit cards or if there’s an option, borrow it from a family member.
TBOS has helped hundreds of new start-ups without the need for an investor. Our 10 years’ experience in the industry, delivers the ultimate start-up knowledge and support for new businesses. We provide introductions and advice without giving over any shareholding, which is why it is best to speak to us first before signing over a portion of your business before you even get started.
For more information on how TBOS can help set up your own recruitment agency without using an investor, please call our office on 0345 504 6333.
Stewart Roberts, Commercial Director
0345 504 6333