The importance of a strong management team, robust talent attraction, and diverse income in scaling a recruitment business (Part 1 of a 3-part series)

There is a significant difference between being a successful recruiter and running a recruitment agency. Your ability to do these things is what can set you up for a successful exit from the business when the time is right. But you need to do things the right way to ensure you make a successful transition. You need the right business model, support, and strategic partnerships.

What does it take to run a recruitment agency?

Running a successful recruitment agency necessitates a diverse skill set that requires you to be strategic, operationally sound, and financially responsible. These are the key constituents of the value of existing businesses.

In the first of our 3-part series, we look at the importance of:

• a strong management team,
• attracting talent to scale a successful recruitment agency,
•  diverse income.

These are three of nine core elements Recruitment Entrepreneur helps recruitment agencies build to ensure a successful exit.

Throughout this series, you’ll receive insights from the experience of Recruitment Entrepreneur, the number one global investor in recruitment businesses and a company who has invested in 45 recruitment businesses worldwide and counting.

What you need for a successful recruitment agency (the strategic elements)

Having a sound business strategy for how you will generate income, attract top-level talent, and manage operations are a must for any recruitment agency. Here’s what we help recruitment businesses build:

1. Ability to attract and retain talent, leading to size & scale

A recruiter must be able to prove a strong track record of talent attraction, with good retention. Absalom believes this is one of the most challenging components of a business.

“…the biggest advice I would say is can you attract people to join you? That's the hardest part. It's not about can you do the sales, that's a consultant's job. It's when you start recruiting business: have I got the market?, can I attract people to work for me? and where can we have fun doing it?,” he says.

As recruiters are aware, you can ill afford to make hiring mistakes, especially at the start-up phase.

“…if I have to hire somebody and then tell them how to do the job, I've got it wrong already,” says Abid Hamid the Group CEO of Recruitment Entrepreneur, in an interview about how to start up and scale a recruitment business.

Finding the right people is essential, but if you don’t have the right management structure in place to help them thrive, you could have retention issues. What a buyer looks at when considering an acquisition is:

• How many recruitment consultants have been hired within the last 3 years,
• What they have billed and,

2. Management team structure and future dependency

All businesses require a strong management team in place with a focus on quality, experience and a track record. This team should ideally demonstrate no dependency on the founder. They should be able to handle the day-to-day operations. Founders require a clear vision, and they need to clearly communicate this to the management team.

Abid Hamid explains:

“…they (founders) should have clarity in terms of the vision of the business. Just very simply involve your people in the objectives that you as a manager or you as a leader are trying to achieve. Explain it to them, show them how to get there, show them what's required and then there's no confusion, is there?”

Ensuring future success and being able to successfully scale the business requires investment in learning and development (L&D) at all levels of a company. But the truth is most recruitment businesses spend very little in this area. Hamid identifies this as an issue that needs to be addressed and believes you cannot stand still on L&D.

“…when we set up the Recruitment Entrepreneur platform, one of the things we did was we got Cass Business School (now Bayes, of London) involved and said we'd like a program designed for entrepreneurs within recruitment. So a bespoke program for us,” says Hamid.

 “Learning & Development is the way you go. Be ready for the balance, not just simply by having people sitting there, but by having smarter people. Who? If they haven't been researching their sector and learning their sector more intently in the last three to five months, then that's also wrong because you're supposed to be a specialist,” he adds.

3. Recruitment services offered and sources of income

Working within the right niche and having a diverse and balanced income stream of both contract and permanent revenue are key success factors for a successful recruitment business.

“I think the hardest thing about starting a recruitment business is actually choosing a sector that you know you're going to be passionate about that has legs and will be sustainable and it's not just something to make a quick buck,” says James Absalom, CEO & Founder of Walter James in a recent interview.

He adds, “I think every sector from hiring in the most bizarre sector in the world will have competitors. You know it's one of the most competitive jobs you can do. And I think you've just got to do the real strategic thinking around why am I choosing this market, you know, SWAT analysis basically, what is in it for me? Why is it a sector that I want to get involved in?”

Figuring out the viability of a niche within recruiting will help you quickly understand how competitive it is and the potential for long-term and consistent revenue.

The above are three of nine core strategic elements. Part 2 of this 3-part series will look at more key components of what you need to grow a recruitment agency to the point of ensuring yourself a financially successful exit. This time they will be of an Operational Nature: Corporate governance, Staff tenure & commitment and Reliability of Budget forecasting. 

Recruitment Entrepreneur is a private equity firm with 30+ recruitment companies in its portfolio, covering numerous recruitment sectors, at various stages of growth. Founded by international businessman, James Caan CBE, it provides talented individuals with funding, best-in-class operational infrastructure, coaching and management advice. Its success lies in its ability to provide the knowledge and hands-on know-how to help start-ups and scale-ups grow, scale, and materially increase profit - ensuring that its portfolio partners can achieve a high equity value on exit.