How to Start a Recruitment Agency – The Profitable Strategies

If you are looking to search on how to start a recruitment agency or information related to starting a recruiting business, I have compiled a great deal of useful information that you can use on how to start a recruitment agency successfully.

Good day, my name is Dougles Chan and I have been helping business owners, individuals in advising recruitment business setup, running a profitable recruitment agencies for over 10 years and I am also a third party advisor for many recruitment business owners, startup or established award winning agencies in their business process, marketing and branding. I have been doing business over 30 years and still doing multiple businesses till today.

Building a successful recruitment agency business going to be tough, I repeat that, it is TOUGH!

Gone were the days where as a business owner, you are able to make over $30,000 – $50,000 per month from your personal billing.

Here we go, so you are interested to setup your own manpower, recruitment and staffing agency and you would like to know how to do so, with these simple steps, you will be able to start and run your own manpower business, recruitment agency or staffing agency less than a few weeks.

I will be using “recruitment business” or “recruitment company” to talk about the same topic so you should not get too confused.

It is basically the same.

Well, here are some basic steps for you to have a good start in building a successful recruitment agency business.

1. Understanding the Market

You MUST know the culture, the industry, the pricing and the sentiment of the recruitment business. Read plenty of trade related magazines, online or offline.

Visit trade shows and exhibitions, it is necessary, this way, your FACE will be exposed to that industry top guns and HR directors, your visibility will be far much higher compared to other not so hardworking recruitment agency owners that stays in their posh office in raffles place, playing with their high end computer under the bright LED light with super cool Mitsubishi aircon room in the office.

Research who are the main competitors of your clients, the different types of the sector within the industry you want to focus on and not forgetting the “Lingo” the people use.

Failure to make preparation will show to your clients and candidates that you are an absolute novice in the industry. Clients usually do not like to talk to people who seems to not know their industry.

2. Creating an memorable identity

Deciding a name for your recruitment business – Choose a name that is good to represent the business and industry you are focusing on, it should be professional and yet CLEAN, when I mean clean it should be short and less fanciful, remember the recruitment industry is a professional industry, you will need to put in some efforts to have a good name.

Once you have decided the name of the recruitment business, you will need to get a professional designer to get a logo done for you, tell them your concept, your preferred color and how this logo will represent you and your company.

Just a reminder that it is important not to design your own unless you are a graphic designer by professions, you may find to be good but in the eyes of the public, usually it will look quite bad.

When deciding your logo, theme, tagline or the “clothes” you are wearing to be projected out to the public, which is the client, candidates and potential recruitment consultants that may join you later.

You need to create a consistent brand and image, get a professional graphic designer and a good website designer to help you on this.

Do not be a “cheapo” on this, if you pay peanuts you will get monkeys, and also I do not recommend to DIY and create your own, unless you are a designer by profession.

3. Register the Recruitment Agency Business Entity

Register a business or company with your local authority, please ensure that you have register a legal entity so that you will not get into trouble, in certain countries, if you were to carry out a business without a legal business entity, it will be consider illegal, you may get fined or jailed because of this.

Hence, please check with your local business authority before you start any recruitment agency business activities.

Any additional licenses needed – Register with your other relevant government authority involving in manpower and recruitment agency, do check with your local authority whether you will need any special license to carry out your own recruitment agency as it is a professional business where requires you to have a certain level of “requirements.”

For example, in Singapore, you will need to get approval from the Ministry of Manpower before you operate a recruitment agency, they used the term “employment agency”, (EA). Registered businesses, companies or individual are not supposed to operate a recruitment agency without the license. Penalties can be up to a fined of S$80,000 or jailed up to 2 years.

4. The Office

Deciding whether to rent an office or work from home.

If you have sufficient capital, it will be good to have a small office as you will look more professional and it will be easier to use them to interview candidates.

A basic rule of thumb, you must have sufficient capital for your operating expense for the next 6 to 12 months months without any sales!

If you do not have the required “safe” ratio, I will strongly advise you to work from home.

You can still use “virtual office” services to make your address looks better and work from home if your finance is just “starting out”, it is not shameful to start small, many successful recruitment agency started off working from home too.

5. Focus on your CORE

What industry are you good in, what specialized product or industry knowledge you do have for that particular industry, I would strongly urged you to focus major of the activities on these areas so that you will save plenty of time than learning an industry you do not know at all.

6. Making your presence felt in the digital world 

More recruiting will be done online whether you like it or not, be it Facebook, Linkedin, Twitter and other social media platform which you think is essential. Invest heavily on SEO also whether you are doing yourself or hire an SEO expert, in long run, you will yield better returns and leads from clients and candidates will POUR to your websites. Facebook marketing, Linkedin marketing and even Instagram will be a good platform to start if you are just a starter….

You can check out an article I have written specially for recruitment SEO.

7. Getting Clients

Getting clients for your recruitment agency – Use the following techniques to get new clients, the list is not exhaustive though:

  • Using telemarketing to call potential clients
  • Use emailing marketing to reach out to potential clients.
  • Door-to-door knocking, though this is a very old way of doing, it works in certain time.
  • Using social media such as Linkedin, Facebook or Twitter to reach out to potential clients.
  • Business networking
  • Attend training course, seminars etc, get to know more people.
  • Ask from candidates whether they know anyone who is hiring, this is one of a better way if you have a good relationship with the candidates.
  • Talk to your previous clients and suppliers from other industries.

8. Generating Quality Candidates

Getting candidates for your recruitment agency – This will be the key factor in deciding in the quality of your “product” to your client, hence you need to get the best quality at the right salary to your clients.

For a start you can also use social media such as Linkedin, Facebook or twitter to reach out to potential candidates.

You can also advertise on newspapers, magazine or online portals if you have sufficient budgets.

Of course you can use free online advertisement portals but do bear in mind that usually such websites have poor number of traffic, hence your effort might not bear good fruits.

Remember this formula – GREAT CANDIDATES are HARD to find, if you get a GREAT candidate that loves you so much that he or she recommends their own circle of friends to you (Usually they are of similar quality.), you will have consistent good quality candidates and even the clients will be very happy to do business with you.

9. Keeping a good database 

Along the way, you will acquired may clients and candidates, keep and consolidate the database as accurate as possible, 80% of your sales will usually comes from there, use a free CRM system available in the market (Search under free recruitment software in Google), managed them properly, get a part-timer or freelance person to help you when needed.

10. Focus on 80% sales 

As a business owner, remember that when you started off, you will be very much ALONE, it is fine, I have gone through that before and it is a process that you need to go through. Focus at least 80% of your time on generate new clients, servicing existing clients and sales, sales and more sales. Your recruitment consultants can help you but remember that eventually, you will still be the person that going to bring in THE figures to your company.

11. Check Your Profits

Basically in any business, there are only two factors that determine whether the business is profitable. They are:

  1. Total sales generated
  2. Total cost of operating

For recruitment agencies, the main bulk of the sales revenue comes from the placement of candidates; as such, the key clients are the companies who are paying the service fee for the placements. Some recruitment agencies also charge candidates a service fee, but in most of the cases it will be the companies who are paying the fees.

We will focus on the two sectors, generating sales and reducing costs.

How to Generate More Sales

  • Increase your service fees by 10-20% of your current price after you have establish your brand.

Some people may argue that they should reduce their price instead. However, when you are providing a great service, most clients will be very willing to pay an increase of 10-20% (although some may not like it), and when you increase your fees, you will automatically filter out those who are not very serious. In addition, you will be indirectly pushing your brand and status higher compared to the other players.

  • Find an industry you where you have plenty of connections.

They key is this: focus on your best industry or function. If you have plenty of contacts in a specific industry or function, put all your effort into that area. Not only will you be perceived as a specialised consultant in that area, you will have less competition, and you will be able to close more sales. 

  • Build Credibility.

To have more clients, you will need to be perceived as very credible, be it your company logo, design, layout, the content you put inside the webpage, your business card, your business agreement content, the company letter head, the email signature or every other thing that the clients see that will have a direct or indirect relation to perceiving your credibility. This is especially important and critical because without good perceived credibility, you will never able to win a client over to your side. Some questions to ponder: would you do business with anyone who does not have a good website design? Or uses a free email such as Hotmail for their business correspondence? The answer is quite obvious. Credibility counts a lot.

  • Delegate work that you are not good at.

If you are very good in operations, then you better stick to what you are doing and let other people do the other functions, such as sales, business development, customer service, or accounting. The very fact that you will take a longer time to do the work you are not familiar with or good at makes your productivity very low. Hence, with low productivity, you will not be able to generate more sales and clients.

  • Shorten the credit terms for clients

Given a choice, ask for cash payment upon service rendered. Reasonable clients will be able to agree with it. Of course, there are many customers who will ask for the longest credit period possible, and you will have to weigh whether to accept the terms or not. In my manuscript FSRI, I have written about how having a good cash flow is very important, because having sales does not mean the money is in your bank account. You may have to wait for a while before the cheque is sent over. Without cash, you will not be able to pay the bills, the rent, or the salaries….and that will be the last thing you want to happen.

How to Reduce Your Operating Cost

  • Go for the Basic Necessities

You do not need a very high-end computer such as APPLE or a super laptop that has powerful memory or RAM. As long as you have the basic equipment to use, that will be good enough. Once you have more cash on hand, then invest in better equipment. The higher end your items are, the more you will need to commit every month. For example, you do not need a laser color printer if a mono color printer can do the job. You also don’t need to rent the best office if you are able to use a basic office that is cheaper, and  if you are able to share an office, then do so. It will make your monthly running cost lower.  

  • Paying Excessive Salary

A good staff generally requires better salaries. You will still be able to get a good staff if you are careful and search hard enough, and better still, their expected salary will not be as high as those high flyers whose results are usually not very interesting. Pay a basic salary and reward highly based on performance; this will ensure that you will not commit too much in the cost of salary.

  • Looking for the Real Expert

If you need someone to do BRANDING and MARKETING or any specialised job for the company, generally people have the belief that it will cost a lot to hire such people. The trick is that you should not engage a company; instead you should look for a freelancer who has the expertise and is still able to do a much better job at a fraction of the market price. You just have to look out for them in the market.

To achieve the above, you will also need a lot of discipline to carry them out. It will not be easy, and it may not be pretty at times, however, for the sake of the business profits, sometimes certain sacrifices are needed.

12. Watch your Cashflow 

If your cashflow is not good, cut all expenses when needed, avoid any unnecessary expenditures and put your money only on processes and activities that are able to help you to increase sales.

Remember to control the cost – In every business, especially for a recruitment agency, you will need to ensure your cost is to the minimum, ensure that every dollar you spend is worth it.

But if the ROI is not good enough, usually the investment will not be worth it.

For example, you don’t have to spend $3,000 to get a high-end laptop for your business, even a $1,000 or $500 worth of laptop is good enough.

You don’t have to spend thousands of dollar per year for  a CRM recruitment software, an excel sheet will likely be good enough for a start if your volume is not high.

You don’t need to subscribe to a 1 year job board advertisement package where you are pay slightly more monthly and keep your cash-flow healthy.

13. Creating a Good Brand

It takes a while before you are POPULAR in the market and make very good money, make sure you address to all complains and potential tricky issues. Always remember that at this junction, it is the digital world, one wrong move and your company or your reputation will be gone in a heartbeat!

14. Building your communications skills 

Whether the company is going to be successful will very much depends on how you communicate with others and YOURSELFS.

It is a MUST you must be able to communicate well with other people and able to listen to what other peoples need are, on top of that you much always communicate with yourself that this is going to work and you have to tell yourself that you will continued to work hard and smart for your very own recruitment business.

I stressed to all my students when I was teaching them that communication skills is number one.

Without that, you will not be able to get new clients and candidates.

The communicate is not just to the other party but also your “internal communication.”

What I have done is that I rehearse them with VIDEOS and spot their weakness and work on their strong point, from there, going through at least 20-30 rounds, they will be able to see a great difference compared to the first time they had done the presentation.

This will actually helps them in their presentation skills, confidences and able to generate more clients and job order easier.

15. Building a great relationship 

Your clients, your candidates and your recruitment consultants will be your greatest assets, make sure you have a fantastic relationship with them or you will be financial ruin if you never take good care of it. Anyway, your business is in human, so be great on human relationship!

16. Focus on your People

Many times, I came across many employers who will stretch their working hours to the maximum and within the employment law so much so that every dollar they are paying to the employee, they believed they must get the maximum ROI on the employees.

This type of employers I would classified them as typical SMALL RECRUITMENT AGENCY mindset, many will also want the employees to work on Saturday itself.

However, let us look at the whole thing in a bigger prospective, why would the employers want to do that? Stretching the hours longer and giving the same salary, the reason is simple, they would want them to work more and potentially have more “Sales” so that the company can make more money, right?

Wrong….in this way, the employees will not feel happy, feel that they are being short-changed and felt that the boss is another typical SMALL RECRUITMENT AGENCY boss….many employees given a choice will not want to put themselves to be working with another typical SMALL RECRUITMENT AGENCY boss, they will rather work with an MNC (Multi-National Companies) so that they will have slightly shorter working hours, more perks and benefits….

That is why the SMALL RECRUITMENT AGENCY usually will never be able to compete side by side with the MNC because the top elites will only work with the MNC, and those who are willing to work in the SMALL RECRUITMENT AGENCY , the quality, sad to say are usually not on par with the employees of the MNC!

Let’s face a cruel fact, will your employee be working every single hour, no.. they will not. Based on the 80/20 rule, they have only about 1-2 hours of productive time per day, hence, even if you were to stretch the hours a little bit longer, the productive hours will still be about the same…isn’t it?

So why not shorten the working hours, make their productive hours the same as 1-2 hours and make them happier, increase productivity and will this be able to retain more people compared if you were to stretch the working hours and squeeze them dry. Sadly many SMALL RECRUITMENT AGENCY bosses will not think this way…

They will always think – I am the one paying for the salary, hence I must get every dollar back by making them work longer hours….this is just what is happening in the mind of the SMALL RECRUITMENT AGENCY bosses!

Here’s what SMALL RECRUITMENT AGENCY Bosses should do to turn the table around and compete side by side with the MNC:

Here are some sub-points you will need to do:

  • You must be willing to pay. Forget about budgeting, because when you are willing to pay, you will get good people and good people produce good results. And really good people are the one that brings in 80% of the sales of the company.
  • Make your working hours shorter. This will increase efficiency, morale and people will appreciate them.
  • Appreciating. Always appreciate your staff, no matter how small the things are. Even a pat on the shoulder is also good.Become their Friends, I know you are the boss, you can be one, act like one but when you are with your staff, become their friends….
  • Flexible Working Hours. Implement flexible working place and hour, whether the staff can work at home when needed. There is a saying, if you want to be BIG, think BIG, do BIG things, don’t focus on the smaller things because focus on small things will yield smaller results.

17. Making the Efforts

Putting at least 4-6 solid hours per day – Assuming you are working from Monday – Friday, you will need to put at least 4-6 hours per day on your recruitment business, whether to search for clients, or to search for candidates, interviewing, filtering, having coffee with candidates or clients, you will just need to put in the hours to ensure that things are working and you will feel the momentum.

Do not expect minimum effort and hope for a good return, usually it does not work that way.

Well, here you go, some basic steps for you to kickstart and build a successful recruitment agency business.

Remember that the above tips are just covering the surface of the recruitment agency business and it is even less than 1% of what you need to know, however, it is a good start and as we go along, maybe you would like to share some successful stories to us.

If you need any assistance in business a new recruitment business or need to make your existing recruitment agency leap to a greater level, drop me a mail @ or contact me at (+65) 9388 0851

Good luck and God blessed you on starting a profitable recruitment agency business.