Small Business Ideas: Recruiting Agency

If you’re reading this, you’re probably considering starting your own small business and thinking about what kind of small business you’d want to create. Chances are you don’t have a lot of cash laying around, so anything that requires a big upfront investment is off the table.

If you have experience in the B2B (business-to-business) world, ideally with a background or some relevant experience and training in the world of sales, starting a recruiting agency might be the ideal fit for you, for a number of reasons.

How recruiting agencies work

Recruiting agencies partner with clients (employers) to help them find talent for their job vacancies. Generally an employer will procure an outside recruiter for a hard-to-fill position or one that is very specialized, that the employer does not have the resources internally to focus on. The recruiter will work with the employer to understand their specific requirements and put together a marketing plan to identify prospective candidates that they can bring back to the employer to interview for the open position. When the employer finds a candidate they want to hire, they will make an offer, and the recruiter will be paid a percentage of the candidate’s first year salary.

For example, if the candidate is offered a job at $75,000/year, and the recruiting agency negotiated a 20% fee, the recruiting agency will be paid $15,000 for that placement, usually within 30 days of the candidate’s first day of employment. That’s a lot of $$ for just making an introduction!

But there’s a lot that goes into making that introduction – the recruiter might talk with 20-30 different candidates and find 10 that are a good fit, and of those, maybe only 3-5 will be interviewed. So like any sales-related function, it’s a numbers game.

Recruiting agencies are not career counselors

Recruiting agencies are not paid to help people find jobs. They don’t take money from candidates/job seekers, and only provide resume advice as it pertains to the particular role they are hoping to place the candidate in.

Another way of putting it: recruiting agencies ARE NOT career counselors. That function does exist, and may be a good fit for you if you would prefer to help coach people in their careers, and don’t mind asking them to pay you for it.

Recruiting agencies and career counselors are two very different and distinct functions, and it is important to know and understand the differences.

What you need to get started

If you want to start your own recruiting agency, you really don’t need much other than a few months worth of income to live off of as you get started (it will take you a few months to start to see any return on your initial investment of time). You’ll also need a good recruiting training program to help you understand how the business works, and a methodology and playbook you can operate from.

You’ll want to have a quite place to work from with a good internet connection, a readily-accessibly phone line, and a commitment to put in the work and know that success will not come over night. Most importantly, you need to be willing to do some selling – if the thought of reaching out to prospective customers cold makes your stomach churn, then starting a recruiting business probably isn’t the best fit for you.

How much money can I make?

Great question! The good news about recruiting is the size of the market: in 2018 alone, over $28B was spent on direct hire placement (recruiting for a fee). That doesn’t include any of the revenue generated by staffing (placing a candidate in a “contract” position), which is a great way to extend your service offerings down the line (more on that later).

If you can make 1 placement every 2 months, at an average fee of $15,000, you can expect to generate $90,000 in income per year. That’s a very conservative figure, many Top Billers generate $300,000-$1M per year in direct hire placement revenue!

You’ll pay taxes on that revenue just as you would in any other business, but the good news is that the only expense you’ll have against it is your time, and of course the cost of the tools you are using to do the job (database, website, email, applicant tracking system, LinkedIn account, etc.)

How do I get started?

Getting started is easy! You can watch our free pre-recorded webinar, “Close Your First Direct Hire Placement Deal In 90 Days”, where we teach you the entire process to get your first placement made from start to finish. You can also book time with us for one-on-one coaching, or read more entries in our blog.

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