12/12/22, 8:43 AM Blueprint – How to Start a Recruiting Agency in 2021, Part Two - Crelate

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Blueprint – How to Start a Recruiting Written by

Agency in 2021, Part Two

Posted on March 9, 2021 By Aaron E

Aaron E

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Tuesday, March 9, 2021

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This post is the second in a three-part series:
Recruiting & Staffing Events
Part one – Developing a plan for starting your recruiting agency (1)

Part three – A list of everything you’ll need, or nearly everything you’ll need, to consider for Recruiting Tips (86)
your agency
Relationship Management
… Software (18)

This post is the second in a series. In my first post, I discussed the importance of developing Social Media Recruiting
a plan for starting your recruiting agency and some of the common reasons for agency Strategies (2)
failure. I also focused on the importance of understanding your market opportunity, and
developing your sales and marketing plans. Staffing Agency
Management (19)
Here, we’ll focus on developing, testing and improving your agency’s operations and financial
plan.

3. Operation and Delivery Plan for Your Agency

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what you are going to outsource.

If your plan requires 80 hours of work per week, eating nothing but Top Ramen Noodles, with Email *
zero chance of sick time or vacation, you’re planning to fail. (Speaking of sick time, what are
you going to do about health care during this time period? And what are you going to do
about your other living expenses?)

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[Podcast] Key Accounts

Drive 33% of Sales Revenue:
Developing your KA Strategy

What is MPC’ing? How

merchandizing your talent
can increase sales in your
staffing firm

Don’t let this get overwhelming. Consider the following:

Who’s going to actually deliver your services? How is this going to be done, and how is this
going to be measured and rewarded?
What tools and technology will you need to run your business? Think about everything
from internet and phones to CRM, Applicant Tracking and sourcing tools.
Where is your business going to be located? Do you need any equipment?
What templates and processes do you need to develop to reliably run your company and
deliver your services? Do you need training for your vendors and employees?
How will you measure the returns on your investment across every part of your business?

A note on measurement: You must have milestones, and you must hold yourself
accountable. The exact milestone doesn’t matter; what matters is holding yourself
accountable and the choices you make after each checkpoint.

Key Performance Indicators and Success Metrics for Your Agency

I’d recommend developing simple and easy key performance indicators (KPIs), especially as
you’re setting forth. For a recruiting agency, you’ll likely want to base your KPIs around
questions like:

How many placements do you want to make per year?

How much do you want to make per placement?
How many sales calls do you need to make to get a serious conversation?
How many serious conversations do you need to get an order?
How many orders do you need to get to get a placement?
To get the placement, how many candidates do you need to reach out to get a serious
conversation?
How many serious candidate conversations do you need to get to an interview?
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How many interviews do you need to get a placement?
Helping staffing and recruiting leaders
grow their firms with key insights from
Now, work backwards, and hit the phones! Track it all, and improve the ratios of each
industry veterans. Want to learn more?
through A/B testing and tweaking. But above all, hold yourself accountable to the raw
numbers required to produce the results you’ve planned. Listen now

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Validate your numbers and assumptions from the top down and the bottom up. For Log In (443) 569-8262 Book
example: Let’s say you want to generate 10 Placements a year and you convert 25 percent of
your orders to placements. An example plan may say you need to make about 38 sales calls
a day to generate 17 serious conversations, which, in turn, generate three to four orders a
month. Let’s say it takes me about five minutes per call… actually, let’s explain this using a
spreadsheet:

If you budget time to make the call and take the notes, this plan shows you need to budget
90 hours a month to generate demand. Does that work for you?

Even though you only win one out of every four orders, you still need to work them all. So
how much time do you need to budget per order for both those you win and those you lose.

Be realistic about what’s achievable given there are only so many minutes in a day, and don’t
forget about the rest of your life!

4. Financial Planning for a Recruiting Agency

Your financial plan should come after the above three
sections, because the previous answers will inform the numbers you’re plugging into
your forecasts.

At a minimum, you should develop a forecast for every month of the next three
years with three fundamental accounting tools:

Profit and loss statement

Statement of cash flow
Balance Sheet

Don’t forget to include all the expenses of running your own business: rent, utilities, taxes,
insurance, equipment, software, marketing, sales, operations, legal, etc., etc., etc. And
for all your projections, be sure to document your assumptions.

Pro-Tip #1 – Forecasting a Realistic and Sustainable Pipeline

If you feel like your new business flow couldn’t possibly be that consistent or
predictable, I’d recommend checking out Tom Erb’s book Winning the
Staffing Sales Game. It’s a fantastic resource for just about anyone who needs to develop a
steady income stream through sales but is even more valuable if you’re trying to grow a
talent business. If it’s your first time as a full-desk recruiter, this is a must-read.

Pro-Tip #2 – IMPORTANT: Why a Three–Year Plan? Risk vs. Reward

First, if you’re quitting your day job and investing your savings – or the savings of others –
into a plan that only accounts for your first year, please save the money and stay in your
current job.

Second, you should always compare your plan to the alternative: “What if I just worked for
someone else?” Do the math. Take your base salary, plus commission, plus the benefits of
working for another firm, and be reasonable with your assumptions and the perceived upside. The Full Desk Experience
Add that up over three years, and now do the same with your expectations for Helping staffing and recruiting leaders
your own company. If your own venture projects to yield the same amount of grow their firms with key insights from
profit after three years but suffers from three-times the risk, it’s probably not a good idea to industry veterans. Want to learn more?
move forward.
Listen now

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The risk–adjusted reward of any startup should be at least twice as good as the amount of Log In (443) 569-8262 Book
money you could make working for someone else.

Pragmatism: An Example and Planning for The Initial Months

Example: let’s say you know you can make $100,000 per year working for an established
company, adjusted for any period of unemployment at the outset if applicable. That’s up
to $300,000 over three years. If the plan for your own business shows you making
the same amount over three years, when you consider the sheer amount of risk and hard
work that go into starting your own company, you definitely should not quit your day job. In
order for it to be a smart decision, your own plan needs to show a plausible path to
at least $600,000 over the same three-year period.

Importantly, you need to plan for the likely scenario that you will not generate meaningful
revenue for at least seven months. Read that again.

And, unless you get lucky, it will likely take you six to eight months to make your first
placement. Then assume NET 30 terms on the fee, and make sure your projected Balance
Sheet can handle that kind of drawdown.

This might be sobering advice when the job market for recruiters is extremely tight. But,
again, entrepreneurship is not easy. If you are determined to push forward with creating a
new agency but the numbers don’t support it, revisit your plan and figure out where you
can realistically improve your top-line revenue before you take the next step.

5. Executive Summary for a Recruiting Business

You’ll be faced with numerous conversations in the coming months that require
a concise pitch and overview of the business as a whole.

Summarize the four big sections above into a simple document or PowerPoint
that consolidates your plan into something you could present to an investor. This will give you
the 50,000-foot overview with no fluff, and it’s the last step before the leap of faith that
is entrepreneurship.

Your Executive Summary will also help you craft your “elevator pitch.” Personally, I like
to distill it down to something I can explain to my parents and my kids’ friends’ parents in a
single sentence or two. A good pitch, to a layperson, should ideally yield this response: “Oh,
that makes sense… I have a friend who might need that.”

More importantly, creating an Executive Summary helps you stay focused. And you will need
to.

The Full Desk Experience

Helping staffing and recruiting leaders
grow their firms with key insights from
industry veterans. Want to learn more?

Listen now

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Log In (443) 569-8262 Book

The road ahead will have no shortage of siren songs offering the temptation of a quick buck or
side gigs that’ll play on your instinct that “I need to be making money now.” If your plan is
good, these temptations will be distractions, and they’ll only make success harder to achieve.

All of the above might sound like a lot of additional work, but shouldn’t take more than a week
or two.

Validation and Testing – Tap Your Support Network for Feedback

To keep yourself moving forward, don’t be shy about getting help where and when you need
it. As the plan comes together and you see a path to success, pitch it to a friend or
relative regardless of your funding situation. See if they would invest in your business. The
more constructive and informed feedback your potential “investors” can provide, the better.

Once you’ve completed your plan and successfully “pitched” your business, you’ve convinced
yourself – and, hopefully, others – that your plan is achievable and worth pursuing.

Recap: Hallmarks of a Good Staffing or Recruiting Agency Plan

To recap some of the most important above points, which you won’t necessarily find in the
usual “paint by numbers” article, a good business plan for a new staffing and recruiting
agency should:

Reduce the risks and address failure points one and two, listed above.
Assume you won’t make your first placement for six to eight months as you plan
finances.
Ensure that your plan allows for you to thrive, not just survive while you’re executing the
plan. (No Top Ramen.)
Shows a path to sustainable, reproducible success that is worth of the risk of going it
alone.
Set clear, measurable and achievable performance metrics and expectations.
Stand up to an external pressure test; i.e., be convincing enough to get someone else to
invest in it, even if you don’t need/want their money.

You’ve Planned the Work – Now Work the Plan

As you wrap the significant planning work of starting your new business, the
mission shifts to execution and accountability.

Your path won’t be straight, and it’s likely that many of your assumptions will turn out to be
incorrect. But that’s not really important now. What’s important is that you have a plan
to follow and to measure yourself against. To stay accountable to doing the hard
work required to get this agency off the ground.

From experience, measurement and accountability is critical. Not just on the day-to-day, but
on the overall progress towards building a business.

Run It Like a Business from Day One The Full Desk Experience
The KPIs from your Operations Plan are your daily/weekly performance measures. But as you Helping staffing and recruiting leaders
look to grow and sustain the company you’re about to create, you need to measure grow their firms with key insights from
industry veterans. Want to learn more?
the business as a whole.
Listen now

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12/12/22, 8:43 AM Blueprint – How to Start a Recruiting Agency in 2021, Part Two - Crelate

This means closing the books every month. Is your cash on hand in line with what you Log In (443) 569-8262 Book
planned? Is your spending in line? How is revenue looking? Consider reporting it to an advisor
or outside investor, or at least to yourself no less than once a quarter.

You’re building a business, not pursuing a hobby. So, run it like a business!

As an entrepreneur, I couldn’t be more excited for you to embark on this journey.

What’s Next?
In the third part of this three-part series, I’ll supply a list of useful and reliable tools perfect
for recruiters starting their own agency.

If you want to be sure you don’t miss it, sign up for Crelate’s email newsletter.

For now, here are a few resources, tips and considerations that apply to the above
suggestions around developing, testing and improving your agency’s operations and
financial plans. (This list is by no means complete, and the resources are only suggestions!):

Business – Guiding Documents to Start a

Recruiting Agency
Business Plan
Growth Plan (one, three and five-year plans)
Guiding Principles/Mission

Operations – Core Functions and Tools to Start a

Recruiting Agency
Finance to-dos for Your Recruiting Agency

Get a CPA/Accounting firm (You should be selling and recruiting, not doing your taxes)
Fully separate your finances from the business (crucial)
QuickBooks and a Chart of Accounts
Company bank account
Company credit card
Method for getting paid (Credit cards | Check | Wire) – (If you’re using QuickBooks for
accounting, you can also use their payment system.)
Quarterly estimated tax payments
Self-employment tax/Tax filing plans (LLC, LLC as S-Corp, Etc.)
Dealing with 1099MISC and 1099-K
Capitalization policy-safe harbor de minimis threshold

IT Considerations for Your Recruiting Agency

Time tracking
Professional email account
Phone system
Domain name
Web hosting
Recruiting CRM/ATS (I’m kind of partial to Crelate…)
WiFi / Internet upgrade (Don’t mess around with bad internet)
eSignature Tool (HelloSign or other)
VoIP Provider (RingCentral or other) The Full Desk Experience
A fast and powerful laptop with a monitor and headset Helping staffing and recruiting leaders
grow their firms with key insights from
Comfortable office chair and desk (Don’t skimp here, or money saved on your chair and industry veterans. Want to learn more?
desk will be spent at your chiropractor)
Listen now

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Legal Minutia for Your Recruiting Agency Log In (443) 569-8262 Book

Business start date

Type of entity
Insurance (General liability, etc.)
Operating agreement/Articles of incorporation (Special Topic: Will you plan for partners?)
Loan/Investor documents
File with your Secretary of State
File with your State Department of Revenue
Apply for an IRS EIN
Deal with local business taxes (City, State, Local, Personal Property Tax, Sales Tax)
Deal with out of state income / Nexus rules
Record retention plan
Master service agreement
Statement of work template
Accounting and HR Policies

Stay tuned to the Crelate blog for part three of this series!

Related posts:

Market slowdown? Now’s Your Video: Tech Trends & Keys to Remote Onboarding for Staffing
Chance to Get Ahead Successfully Digitally Transform Agencies – Best Practices
Your Staffing Firm - Webinar
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