How To Start A Recruitment Agency In 2024?

Startups are one of the crucial pillars of the economy in the United States, Asia, and Europe. In 2022, startups alone created 3.7 million jobs in the USA, and the numbers are poised to grow further in the coming years. In India, the number of jobs created by young startups stood at 1.2 million, as of October 2023. A report claims, startups will directly or indirectly create 50 million jobs in India by 2030. The story is the same in many European countries. As per McKinsey, 1.44 million jobs can be created in Germany if the country aggressively supports more startups. In short, the demand for talent would rise as the entrepreneurial ecosystem matures across the globe. However, the talent shortage is a real problem. 9 in 10 startups fail. And 14% of startups fail because they don’t have the right team. 75% of startups struggle to find the right talent to steer their organizations forward. By 2030, talent shortage can lead to a loss of $8.3 Trillion in the form of unrealized revenue. And that opens up a big opportunity for recruiters and entrepreneurs. If you’re aspiring to start your own staffing & recruitment agency, there couldn’t be a better time. Already, in 2023, the revenue generated by staffing agencies totalled USD 593 billion. Read this blog, wherein we dive deep into how to start a recruitment agency in 2024.

Note: In this insight, for brevity and relevance, we don’t dive deeper into the nitty-gritty of registering a recruitment business in a specific country/state, rather we give you a high-level overview of what goes into launching your own recruiting business, and how you can improve the odds of success for your staffing & recruitment agency.

1. Start With Researching Your Niche

First and foremost, research and gain clarity about which industry domain you would be serving, and accordingly know the ins and outs of the niche. For example, legal aspects, recruitment services demand, your understanding of the niche, the business feasibility etcetera.

2. Understand The Legal & Compliance Aspects of Starting Your Own Recruitment Agency

Sometimes, recruitment agencies in specific regions need to comply with the laws and business regulations applicable to organizations operating in their jurisdiction. On a high level, in almost any state/country, there will be a set of laws or processes that every organization needs to follow. An example of this could be registering the business with the local & national authorities. Additionally, some states or countries have extra regulations and license requirements for certain types of employment companies.

For example,

If you want to start a staffing & recruitment agency in the UK and provide workers for agriculture, horticulture, shellfish gathering, food processing, or forestry-related jobs, then you would need to obtain a license from the Gangmasters and Labour Abuse Authority (GLAA). Similarly, to serve the nursing sector’s talent requirements in England, you would need to obtain a license from the Care Quality Commission (CQC).
Let’s say you are starting an executive search agency in the United States, you would need to comply with the Fair Labor Standards Act (FLSA), Equal Employment Opportunity (EEO), Occupational Safety and Health Act (OSHA), Family and Medical Leave Act (FMLA), etcetera.

In general, every state or country has its own legal & operational requirements for fair & equitable treatment of labor, fair wages, and protection against exploitation. Depending on the model of your recruitment business, it could be necessary to comply with the compulsory regulations to avoid any future penalties. Please do find an attorney or law firm to help you with the legal aspects of starting your recruitment agency.

3. Choose A Staffing & Recruitment Business Model

There are a lot of staffing & recruitment business models out there. Different companies have different types of recruitment requirements, and to cater to them, companies come up with unique business models that best suit both the client who is hiring and the recruitment agency that is helping them hire. In your quest to start a recruitment firm, it will be helpful if you are acquainted with different models that you can pursue with your staffing agency.

Here are some of the popular recruiting agency models:

Executive Search Agencies

These recruitment firms help companies find executives or senior leaders for crucial company positions.
As per Wikipedia, executive search firms charge a company up to 35% of the base salary that they pay the candidate.
It’s worth mentioning here that this type of recruitment agency does not charge the candidate, but rather only the organization/clients. In fact, charging job seekers is not allowed in certain countries; the best example is the UK.
The recruiters active in these companies mostly rely on relationship building and influence to recruit top talent.

There are two types of executive search agencies.

Retained Executive Search Firms

Retained executive search firms work on an up-front fee, which they charge from the company they are hiring for to perform talent search activities.
Ideally, retained executive search firms work exclusively with a client i.e., they often have to sign non-competency contracts wherein they can’t work with the competitor firms.

Contingent Staffing Agencies

As apparent from the nomenclature, contingency staffing agencies work on a conditional basis, wherein they charge the client only upon closing the job vacancy.
Usually, this type of recruitment business is best suited for finding talent for high-in-the-hierarchy leadership positions, but lately, certain contingency recruitment services companies are also catering to the hiring needs for entry-level job roles of their clients.
Unlike retained executive staffing firms, contingent employment agencies can work with multiple firms, and vice versa.

Permanent Hiring Recruitment Companies

This is a traditional type of recruitment agency, which maintains a recruitment database to cater to the hiring needs of the client.
Mostly, these agencies are aimed at closing entry-level job positions. They work with all sorts of companies— startups, SMEs, and enterprises.
The pricing model for permanent recruiting, aka full-time employment companies is often commission-based, fixed service charges, or a percentage of the salary of the candidate. Overall, if you launch a permanent hiring agency, your earnings would be somewhere between 15% to 30% of the annual package your candidates get.
They are free to work with any number of companies as the nature of hiring is focused on full-time employees.
They rely on proactive recruitment strategies to find quality candidates. Pro recruiters also make use of niche job boards to find candidates with skills specialization in a specific domain.

Temporary/Contract Hiring Employment Firms

Temporary workers are akin to full-time hires but for limited periods of time. Companies hire temporary, aka contract workers when they need talent with specific skill sets but only for a short time- maybe a quarter, or a year. During this period, these hired contract workers have to do specific tasks in which they specialize. If you want to get into temporary hiring or contract recruitment, you would need a highly active network of contract workers to build a substantial recruitment agency. This type of business is in high demand in the retail, manufacturing, and healthcare industries. The pricing here can be of two types-

Employer-paid fees pricing model is where the employer pays the recruitment agency for the contract workers they hire. The pricing is directly proportional to the number of hires.
Applicant-paid fees are wherein the employer pledges a certain amount of money, the major part of which goes to the talent, and a small chunk goes to the recruitment firm. For instance, let’s assume that a candidate gets hired for $80/hour. In an applicant-paid fees model, the candidate gets $67, and the recruitment agency bags the remaining $13 towards assisting the candidate in finding an employer.

Staff Augmentation or Team Leasing Staffing Agencies

Staff augmentation is close to contract hiring, but fundamentally they are different.

Like in the case of contract hiring, companies opt for staff augmentation services when they need to supplement the existing workforce.
But unlike temporary contract hiring, in case of the staff augmentation, the workers remain employees of the staffing agency whilst they work for the client where they are deployed.
In this model of staffing, the employees get the salary decided by the staffing agency, whereas the staffing agency can quote whatever they want to the employer.

There is a different variant of the staff augmentation recruitment firms- team leasing staffing agencies. Sometimes, employers don’t just need a specific skill set, but entire teams with capabilities and expertise to pursue a project. In such cases, recruitment agencies avail them of entire teams. It’s more like, instead of relying on outsourcing a project to services companies, hire their team and pursue the project in-house.

Recruitment Process Outsourcing (RPO)

The RPO model of recruitment is quite popular among startups and enterprises, where the entire recruiting process and activities are outsourced to an agency.
From sourcing to screening, assessing skills, evaluating cultural alignment, salary negotiation, rolling out job offers, and employee onboarding; everything is shouldered by the recruitment firm.
RPO pricing models are often hybrid in nature. If you are launching a recruitment process outsourcing business, you can quote clients a fixed service charge, and an additional fee per recruitment.
Recruitment process outsourcing agencies make use of AI recruiting tools throughout the hiring lifecycle to streamline recruiting operations.

4. Setup Your Business

Legally register your business as an entity, and obtain the necessary licenses.
Design a recruitment website using a DIY platform like WordPress, or alternatively, reach out to an IT services company to help you design, develop, and launch your website.
Set up your digital assets like social media, blogs, newsletters, etcetera.
Based on your recruitment agency business model, prepare pitch slides for promoting your recruitment offerings to potential clients.

5. Put Together A Great Recruiting Stack To Streamline Your Staffing Operations

Next, you’ll need a fail-proof staffing agency software stack to smoothly carry out your hiring activities like job description creation, job postings, applicant tracking and management, etcetera. Here is a high-level gist of the types of recruitment software you would need-

A candidate sourcing tool. Our recommendation is Skima AI (of course!)
AI tools to create job descriptions, a career-site builder, and/or a job post-creation tool to create and publish jobs.
An applicant tracking system (ATS) to track the progress of candidates, and to automate candidate engagement.
A resume screening tool with smart talent-to-job matching recommendations that is highly effective at vetting the candidates against the job description and precisely evaluating their compatibility with the role.
A candidate engagement or communication tool to follow up with applicants in a timely manner.
An interview scheduling tool to speed up the hiring process.
Skill-assessment and evaluation platform to test candidate’s skills & expertise.
An onboarding platform to amplify a candidate's experience of starting as an employee.

6. Start Hunting For Clients To Grow Your Recruitment Business

For most staffing firms, finding clients is a top priority in 2024 right now with a global slowdown in hiring. Modernize your sales and recruitment strategies to find both awesome candidates and clients.

Make use of content marketing (especially, SEO).
Tap into the potential of a professional network, of course, LinkedIn.
Invest in relationship building with existing clients, and ask for a referral.
Ensure that your sales pitch is mindblowing, and talks about the core stuff.
Use paid advertising and/or creative recruitment strategies.

7. Build A Recruitment Database To Close Job Requisitions In A Timely Fashion

A recruitment database is quintessential for every recruiter. As soon as you start your recruitment agency, make sure that you have subscribed to a sourcing tool that can function as your recruitment database. Also, if possible, make use of recruitment database software, which has built-in features to store candidates’ information, search for talent with filters, and even automate outreach & initial communications. Recruitment database software helps you better respond to job requisitions.

8. ScaleUp Your Staffing & Recruitment Agency With Data & Analytics & Iterative Business Plan Improvisation

Though except for legal business registration, almost every other step involved in starting a recruitment firm is iterative in nature i.e., you can visit it over and over to make it better. And data is quite handy to help you make your business more robust. Hiring analytics tools help you reveal your strengths and weaknesses. You need to multiply your strengths and minimize your weaknesses for a frictionless journey to scaling your recruiting business.

End Note

You must do your research and choose a niche that suits your business acumen the best, a niche that drives you! Equally important is to enter into a recruiting domain that is not quite saturated, and there is space for more players.

In 2024, starting a recruiting business is relatively easier than sustaining it. But it is possible with the right plan, the right people, and the right recruitment products. During the early days of your recruitment business, the investment you make must help you earn multifold ROI. Skima AI is one such AI recruiting tool; equipped with all the features of modern recruitment software— from sourcing database to AI resume screening, candidate engagement tools, communication tools, and extensive integrations to support workflow automation like skill assessments and candidate onboarding. Try Skima AI now.

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