How to Start Recruiting Business | 2024 Guide

June 25, 2024
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13 Minutes
Modified on:
June 25, 2024
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Written by:
Swati Bucha
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The global economy is expanding quickly, driving both startup and firm growth. Individuals are daring enough to take the risk of realizing their dreams by founding businesses or startups. As a result of this spike in corporate expansion, the recruiting market has significant potential, as companies and organizations increasingly need new personnel.

Recruiting firms are more important than ever because there are open positions that need to be filled and many individuals searching for better career prospects. Recruiting businesses help businesses find the right candidates and assist candidates in finding their dream jobs.

Understanding how to start a recruitment agency can be an exciting journey, especially if you have years of experience in this field. However, entering this industry without prior business experience might be nerve-racking. The recruitment industry remains strong despite global economic swings and rapid technological innovation. It is anticipated to expand by $30.97 billion by 2030.

Besides, starting a staffing business in this competitive job market and growing remote work culture might be a good time. If you are an aspiring individual aiming to own a recruitment business, here's the guide for you. So, if you are an aspiring individual who wants to know how to start a recruiting business, then this guide is for you.

Types of Recruiting Services

Several types of recruiting services are geared to a certain set of demands and interests. Here are several main types:

1. Retained Recruitment Firms

Companies looking to fill senior-level roles use retained recruiting services, commonly called executive search firms. A portion of the fee is paid in advance to the recruiter by the firm; the remaining amount is due when a qualified candidate is hired.

Typically, retained recruiting agencies generate a broad list of prospective prospects, including passive candidates (those not actively seeking employment), and then select a good shortlist from this pool. The CEO recruiting process takes an average of ninety days; however, it can occasionally take longer.

2. Contingency Search Firms 

Contingency search firms are recruitment firms that work for multiple clients concurrently. As a contingency search firm, your services will be focused on hiring lower-level or non-specialist positions when a company (your client) cannot handle the recruitment requirements. This usually happens when there are several vacant positions and there is a sudden spike in employment demand. 

As a contingency search firm, you cannot ask for a retainer upfront fee; the payment is only made once the vacant position is filled. That's why most companies with recruitment needs choose contingency search firms as they don't have to pay anything in advance. 

Contingency search firms have a network to reach potential clients and meet their needs. As a contingency recruiter, you can advertise the job on multiple portals and choose perfect resumes from the online database. As a search firm, you will send candidate details to the client, and the client will screen the resumes and arrange the interview. 

3. Staffing Agencies 

Staffing companies aim to provide their clients with consultants rather than full-time workers. Often, clients needing to fill multiple positions call these firms. Additionally, to fill the roles, a deadline and a budget must be followed. 

When a job position is filled, the recruitment process ends. However, hiring is a never-ending process. There are always unfilled positions that need to be filled.

Staffing companies charge varying rates depending on the position. Fees for executive and specialty roles are typically greater than those for entry-level roles. When using a staffing agency, customers give the company the employees' agreed-upon hourly rate. The rate should be decided so that you can take your share and give the rest to the employee. In terms of cost-efficient staffing models and location, there are IT staff augmention in LATAM, marketing staff augmentation in Southeast Asia, etc.

4. Vertical / Niche Recruiting

Niche recruitment businesses are responsible for locating highly qualified individuals with specialized knowledge in particular areas or disciplines. Specialist recruiters are well-versed in a particular field and keep a database of the top candidates, whether or not they are actively looking for work. 

Specialty companies might hire people on a contract, contingent, or permanent basis. These hiring firms cultivate connections with specialized businesses inside their targeted market.

Recruitment agencies specializing in particular fields are ideal for candidates looking to build their careers in a specific field or find jobs related to a specific career. Niche recruiters typically have experience in their specialized industries and are always trying to expand their networks and talent pool.  

As a niche recruitment company, you will frequently advise applicants on polishing their resumes or ace interviews. However, a niche recruiter company may also be more stern than the typical recruiter. 

5. RPO Companies

Companies specializing in recruitment process outsourcing (RPO) are hiring agencies that will manage all or a portion of your hiring procedure. It functions similarly to internal talent acquisition and HR departments. RPO firms manage the full hiring process and sourcing applicants for specific roles.

RPO comes in two types: on-demand and full-scale. With the former, the agency takes on the role of an internal recruiter and manages every facet of hiring. Conversely, the latter indicates that the agency manages a portion of the hiring process. Comprehensive services RPO also manages the hiring, onboarding, screening, and sourcing of individuals. Only in the event of unforeseen hiring demands is an on-demand RPO employed.  

Critical Steps to Launch Your Recruitment Agency

After understanding the different types of recruitment services that you can offer if you are thinking of establishing a recruitment agency, let's look at the steps of how to start your recruitment agency: 

Step 1. Determine Your Niche.

Selecting a specialization is crucial when launching a recruitment firm. It may have an impact on how well your company performs, and there are other reasons as well, like: 

  • Expertise and Knowledge: You can put your existing knowledge to use by concentrating on a particular niche. For instance, launching a healthcare staffing agency makes sense if you have experience working in the medical field. 
  • People Need What You Offer: Consider the needs of your community. Research to find out which industries or jobs are in great demand. For example, recruits are always needed in the financial, technology, and healthcare sectors as compared to other industries.
  • Less Competition: You'll stand out more if you choose a niche that other staffing companies don't currently overrun. Making a unique offering makes you stand out. In this manner, you can draw in particular applicants and clients.
  • Strong Connections: When you specialize, you may establish a more solid rapport with applicants and clients. You have a thorough understanding of their industry, so you'll know exactly what they need. As a result, you become an extremely valuable component of the hiring process.

Step 2. Assess Your Competitors.

Examine your main rivals after determining the market and kind of recruiting firm you wish to launch. When trying to establish your position and gain clients, you should always be aware of the rules of the game and the people you will be playing against.

Because of this, you should begin by learning about the main competitors in your target market, including their company background, reputation, and accomplishments. Find out how their agency differs from your original idea and how you might take advantage of the gaps they don't fill.

To ascertain your advantages, disadvantages, opportunities, and threats, perform a SWOT (strengths, weaknesses, opportunities, and threats) analysis.

Additionally, utilize the four Ps (product, price, place, and promotion) of marketing assessment to determine your unique selling point and areas for business improvement. In this manner, you'll be prepared and able to make effective use of your distinct value proposition.

According to an old Chinese proverb, "Know yourself, know the enemy, and you'll never be in danger in any battle." Therefore, the first step to staying ahead of your competitors is comprehending their strategies, advantages, and weaknesses. 

Step 3. Assess Your Finances.

Capital is needed to launch a new company venture—a lot of capital. To avoid significant bank debt, estimate all of the expenses associated with starting a recruitment agency in advance. Both operating and capital expenditures (CAPEX and OPEX) will be incurred.

It is best to build a finance plan to understand all the expenditures and income. You must allot a sizeable portion of your initial costs for your recruitment agency to the following categories:

  • Office space
  • Employee salaries
  • Subscriptions to the top job boards like LinkedIn, Indeed, etc
  • Marketing campaigns 
  • IT Infrastructure 
  • Recruiting tools like ATS, recruitment CRM
  • Business Insurance
  • Miscellaneous business expenses

It might become too much to handle; therefore, it might be a good idea to locate a business partner and start the business with a partnership business structure. In addition to splitting the cost, a business partner may assume greater managerial duties for the employment firm.

Step 4. Register Your Business

Here are some of the steps that you will need to follow to register a business: 

1. Think of Business Structure. 

If you are thinking of launching a staffing business, choose the legal structure you wish to register under, such as a sole proprietorship or partnership. Different entity structures exist in the United Nations, and each structure has its own unique set of rules and laws. Here are some popular business ownership structures

  1. Sole Proprietorship 
  2. Partnership
  3. Corporation 
  4. Limited Liability Company (LLC)

The registration method and tax implications may depend upon the type of business ownership you choose. 

2. Come with a Business Name.

To register your business, you will have to find a unique name. You can use business name generators to find name inspiration or conduct research on the Internet to find a suitable name. Use the US Patent and Trademark Office's (USPTO) search tool to ensure your selected name does not conflict with an existing trademark. Ensure that the domain name with your desired business name is available and that no other accounts exist on social media platforms with a similar name.

3. Get EIN Through IRS.

You will have to get an EIN (Employer Identification Number), which you can apply for online through the IRS website. 

4. Apply for Necessary Business Licenses. 

To start your recruitment agency, you will have to apply for an employment services company license. Some statutes mention that the license applicant should have at least 1 year of experience with an employment agency to get the business license. Besides, you will have to furnish to the Department of Labor an affidavit stating that the license applicant has never been a party to any fraud, has no jail or prison record, belongs to no subversive societies, and is of good moral character, is of business integrity, and is financially responsible. 

The affidavit should be accompanied by proof of the applicant’s business reputation for integrity and financial documents as the department may require to process the business license. If given the license, the agencies should maintain accurate records, post a bond, establish contract forms and fee schedules, and limit the area within the state where the licensed agency can conduct business. 

Step 5. Develop Marketing Plans.

Before opening your recruitment agency, make sure your business can be found and has a well-thought-out marketing plan. Otherwise, it won't be easy to attract companies and individuals.

For this reason, you should create an online presence that is consistent with your business's mission, values, and culture. This entails designing a logo and marketing materials that capture the essence of your agency's character.

To create an online presence, construct a website, establish social media accounts, and produce pertinent content. Choose between paid and organic marketing and develop a dependable and effective plan.

Your advertising, content, and graphic strategies should be in line with your resources and abilities. For example, you can create images using various graphic design tools. Along with identifying your target market, you need to choose how to connect with and pique their interest. To get your first clientele, you may host webinars or use LinkedIn.

Step 6. Set Up Business Goals.

Do you aspire to be large? – That's a wonderful spirit, but impartiality is essential.

Positive experiences and a high volume of candidates are essential for a staffing agency to be successful, but so are certain business objectives. Establish a thorough yet adaptable business plan for your organization.

Set both short- and long-term objectives to inspire and guide your recruiters. For instance, you may set a goal to add 10% more steady clients in the next two months. In the upcoming six months, you would like to increase the area you serve.

In addition, in order to accomplish more, you should develop pertinent KPIs that enable you to monitor advancement and identify obstacles. After all, a successful firm depends on numbers and figures.

Step 7. Invest in Tech Tools.

These days, technology and recruitment agencies are closely related. As a result, you should spend money on the appropriate tools because you'll save a ton of time and money that way.

One of the most widely used and trustworthy pieces of digital software that recruiters utilize is the Applicant Tracking System (ATS). With an application tracking system, you can effortlessly track candidates' statuses, identify the top applicants, and automatically gather their LinkedIn profiles.

If you choose this option to expand your recruitment firm, you'll see how much easier and faster it is to manage your talented applicants and schedule work. Moreover, you can utilize a Customer Relationship Management (CRM) platform to stay in touch with customers.  

Step 8. Hire People and Build Your Team. 

To assemble your ideal team, you must hire recruiters, and this is no simple feat. You must possess the abilities and expertise to identify and assess the most suitable applicants for the position. Seek a candidate who can effectively manage the hiring-to-onboarding process, create a strong network, understand your sector, and embody your organization's principles. They must be able to establish a connection with possible applicants, use market intelligence to enhance recruitment tactics and guarantee a favorable experience for both the organization and the prospects.

Wrapping up

To sum up, starting a recruitment agency involves careful business planning, in-depth market knowledge, and a dedication to offering top-notch services.

Agencies can effectively serve a wide range of client needs by concentrating on specialist markets such as executive recruitment, temporary employment, mass recruitment, vertical/niche recruitment, and social recruitment. Based on their hiring criteria and financial constraints, businesses can select the best alternative from several recruiting services, each of which has special benefits.

If you are starting a new business, you must invest your considerate efforts in building a successful marketing strategy. Email marketing is one of the best methods to reach your target audience, and with Neo, you can take the first step to success. Subscribe to the Neo platform and revolutionize the way you do email marketing. 

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Frequently Asked Questions

1. Does my recruitment business require a license from the US government? 

Yes! A business entity offering employment services should register with the Department of Labor and receive an employment services license. All the US states require this license except nine states, such as Delaware, Georgia, Idaho, Maryland, Mississippi, Missouri, Ohio, Pennsylvania, and South Dakota. 

2. What are the three types of employment services license categories?

The three types of employment services licenses are: 

  1. Employment Agency,
  2. Staffing Agency, and
  3. Talent Agency.

3. What are the registration fees for an employment services license?

The initial employment service license fees range from $0 to $3,054 and depend upon the state where you register your business. Some states, like Kentucky, New York, Virginia, and West Virginia, charge nothing for specific licenses, while licenses in Michigan may cost up to $3,054. The average license fee is $500, and the most common filing fee for registration is also $500. 

Regarding renewal costs, the fees may differ from state to state. The time to renew a license also differs; it is mandatory to renew a license every six months in Kentucky, while there is no need to renew the license in Minnesota and Washington.

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