In last month’s article I talked about fragmentation in the recruitment industry, and the fact that there are 18,000 recruitment businesses registered in the UK today. And that doesn’t even include all those businesses that aren’t registered, mostly taking place on people’s sofas in their pants!
The barriers to starting a recruitment company are incredibly low. You don’t need a qualification, a license, you don’t need to take any tests, fill in any forms, fulfil any criteria. From most of the start-up stories we hear, you really don’t even need to be wearing trousers. It’s amazing really that a company that has the power to shape people careers, lives and make a big difference to the economy, can do so in their living room, with Jeremy Kyle on mute in the background.
And unfortunately for a lot of clients and candidates, this is what a lot of the recruitment market looks like. Many people out there who have either already taken the plunge to leave big companies and set up on their own, or have been thinking about it for a while, generally do so with one main thought in mind: “why am I billing all this money to make somebody else rich, I could be doing it for myself.”
…And here in lies the problem. Because it is so easy for people to set up on their own, many senior people in recruitment companies keep their business affairs to themselves – thinking that too much transparency about how they run their business will make it even easier for people to leave and set up in competition. I think this is a mistake. In making it appear that all there is to building a successful recruitment company is speaking to clients and candidates, recruiters are even more likely to go and try and do it for themselves. The problem is, the sheer amount of people following this line of thought and the lower the barriers to starting a company are, the higher the barriers become to scaling a recruitment company.
With 18,000 companies out there, not making anything, not inventing anything, not selling the latest product or creating the next big thing, and all with access to exactly the same product (people!) how the heck do you stand out – not only to clients and candidates, but also to people that might want to join your business? And this is why, of the 18,000 recruitment business out there, two thirds have less than 4 members of staff, and 75% (or 13,500) have a headcount of less than 10. Only the top 5% of recruitment companies will be able to grow a company to 100 heads or more and become a market leader in their sector and a company that begins to have real value.
Chart: Headcount of recruitment companies in the UK
Attracting and retaining talent into your business is one of the hardest things you will have to do as a business owner in any industry, and unfortunately, in recruitment, hiring good people is the only way to grow. The number of new recruitment companies being registered each year is growing, but the number leaving the market is growing even faster (roughly at a rate of about 3,000 companies a year). As the market continues to improve, more people will be hiring, and talent attraction in recruitment is only going to get harder.
If you are starting your own company really stop and think about whether you want to be small recruitment company number 18,001 – and if not, how are you going to stand out and do better? Make sure you have a strategy, a business plan, make sure you have thought about how you are going to fund growth, how you are going to attract talent, what your culture will be, what you can offer that is better than the market. And if you can’t articulate things, perhaps think again….
If you are thinking about setting up a recruitment business, there are many more things than clients and candidates to consider. Next month’s article will focus on some of the key things to think about before you take the plunge.
For more about starting a business in the meantime, visit www.recruitmententrepreneur.com