The Outsauce view

Recruiters toolkit

The myths, half-truths and pitfalls of setting up a recruitment agency. Ten practical strategies and insights for start-up and growing businesses.

Introduction
Its a challenging market out there, for sure. But if youre reading this it means you havent been put off. Youll know there are opportunities for the taking; you may even have some clients lined up already its likely youre an experienced recruitment professional or a seasoned operator in your field. Or an entrepreneur whos identified a gap in the market.
Maybe youre well on your way and are looking for tips to achieve growth. Perhaps youre looking to launch your own recruitment business and you would like some advice on how to get started. You have faith in your abilities; youre either ready to make the leap and go it alone or to scale up and really grow your business. The only thing holding you back is preparation and a touch of apprehension. The purpose of this toolkit is to provide practical guidance to help you achieve your goals, while clearing up some of the myths around starting up in the recruitment industry. Well cover all the main considerations and point you in the right direction for further assistance because running your own business doesnt mean you have to do it alone.

Recruiters' toolkit. Introduction

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Myth or truth?
Thinking
1. Setting up a recruitment agency is expensive ............. pg 04 2. Theres personal financial risk involved ........................ pg 07 3. Its difficult to get funding .............................................. pg 08 4. Its not a good time to be setting up ............................. pg 10 5. The first few years are the hardest ................................ pg 11

Starting

6.  The administration required to start up and run a recruitment business is complicated and time consuming .................................................................. pg 14 7.  There are too many pitfalls to remaining compliant ......................................................... pg 16

Growing

8. The market is volatile ........................................................ pg 19 9.  There are few opportunities to boost your profit margin as you grow ........................................................... pg 20

10.  Referral to an umbrella company will mean exposing contractors and clients to dubious practices ................ pg 22

Thinking
What I know now... that I wish I knew then...

Q.

What advice would you give yourself if you were setting up now?

Very simple. Do it right and take your time. What I mean by this is that quick success can sometimes make you become complacent and you forget why you were successful in the first place. CRS rapidly increased revenue and profits over a two year period and naturally wanted to continue its growth. If I could go back in time I would be much more cynical about how and when we decided to grow. Growth is fantastic, but sometimes you can lose sight of all of the important things which made you successful just to achieve a growth target. The realisation of this has provided me with much more focus in how I grow the business rather than growth for growths sake. Ambition is a powerful ally, greed can be an equally powerful enemy.
Gary Janes, Channel Recruitment

Consider what you want from your business and how you want it to balance with all aspects of your life. Keep your goals in mind at all times. Its easy to get greedy and work all hours, but for me, its about enjoying what I do, getting great satisfaction out of having a business to call my own, but still having plenty of time to spend with my children.
Ashley Percival-Smith, Norse Recruitment

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1.  Setting up a recruitment agency is expensive

The must haves
The upfront costs for setting up an agency are actually quite modest. When going it alone, you have the advantage of being as lean as possible. You wont need an office to start with just a room at home with the essentials: a laptop, a phone and your contacts. Or a coffee shop with free wi-fi. You will need funding though, which well discuss in section 3.

MYTH

Insurance
The benefit of only requiring a few assets means you wont need to worry about different types of insurance but you will need to investigate liability insurance. In most instances employers liability insurance is compulsory for businesses with employees. Bear this in mind if you are going to make temporary placements in particular. If you place temps via an umbrella company however, this liability is removed as they effectively become the umbrellas employees. Professional indemnity insurance meanwhile will help to protect from any claims made against your business for the services you provide. When starting out, the most important thing is to understand exactly what insurance you need and what is optional. You can then scour the market for the best policies for you.*

Insider tip

Outsauce partners with Caunce OHara, specialists in liability insurance for recruitment businesses.

Go to www.outsauce.net/ services/value-added-services/ for-recruiters

Contracts
Your requirements for contracts will vary depending on the exact nature of your business and the sectors for which you recruit. The 2003 Conduct Regulations require formal contract terms to be agreed with all clients and temporary candidates, including contractors. If youre already working in recruitment, think about the contracts you use now. Discuss with your solicitor and look for discounts on bulk purchases. Trade bodies, including the Association of Professional Staffing Companies (APSCo), TEAM (a network of UK independent recruitment experts), the Association of Labour Providers (ALP) and the Recruitment and Employment Confederation (REC) may also be able to assist you in this area.

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Are you planning on recruiting for temp or perm staff?

Temps and perm staff bring different financial and logistical implications for your business. With permanent placements, you can take your fee and move on to the next job so you dont need to worry about payroll so much as maintaining a healthy pipeline of new placements. Temps need to be paid every week and in most cases you will be paying them before you receive the money from your client. Deductions for tax and National Insurance (NI), as well as holiday pay obligations will also complicate matters. Employers NI is an additional cost to your agency. And of course, there will be timesheets to manage. You will need to balance the administration and compliance burden with time dedicated to business development.

In all cases: cash flow is critical.

How strong are your existing relationships with your clients and are they good payers? If youre just starting up, do you have any warm prospects that could be quickly converted to fee paying customers? Whether recruiting temps or perms, consider how much work you can expect to put through your business in the first few months and factor in delays around placements and payments. Securing a steady income is a priority for your fledging agency so be realistic about how, and where the money will come from in the early days. Fortunately, there are options available to agencies to overcome this hurdle, including invoice financing. A good financing provider will cover up to 100% of your temp payroll, could also cover your perm billing and invoice your clients on your behalf, meaning that you get your money before your client pays. (See page 09 for more on this). Your accountant can provide useful financial guidance to streamline your workload while an umbrella service, if your temps are registered with one, will remove NI contributions and holiday pay burdens.

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Marketing your recruitment agency

Your mindset will ultimately decide the success of your marketing efforts. Do you view marketing as a cost or strategic investment? If you consider it a strategic investment then you need to plan around two key numbers: 1. Average client lifetime value 2. Average client acquisition cost

Or to put it another way: How much is a client worth to you? How much are you prepared to pay to get one?
The same model can also be applied to candidates. If you establish an acquisition cost model that you are comfortable with, you can then start to test and evaluate the plethora of marketing channels available. Digital marketing is the most tangible investment because everything can be measured. But that doesnt mean you have to restrict your efforts to just the most measurable activity. Its important not to confuse cost efficiency with effectiveness. An email blast to a cold database may be very cost efficient, but how much more effective and impactful could a physical mailing be? The catalyst for growth for many recruitment businesses has been a strategic focus on becoming a voice of authority in a specific market sector. Build relationships with key journalists by becoming a useful and interesting source of information and opinion. Social media represents the greatest opportunity for a free marketing investment as it only requires your time. But make sure you are disciplined enough to focus on being productive rather than just busy on social media platforms. Like traditional networking there are always hidden opportunity costs to activities that just involve time. Only after a sustained effort can you make an accurate judgement call on the effort:reward ratios involved. Thanks to the cloud, smaller recruitment agencies can compete against large corporates through low rent marketing technology platforms for CRM, email etc. One early investment that will only reap intangible returns is your brand identity. But it is a key investment. Having the ability to build great client relationships means nothing, if prospective clients wont contact you if they cannot see beyond a cheap website, logo, copy style etc. As a service provider you are essentially selling the invisible. A professional brand identity will reduce the perceived risk of working with you and subconsciously give you a confidence boost.

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2.  Theres personal financial risk involved

Risk is an inevitable component of any business venture its the price of opportunity. How you manage risk is more important than the risk itself.
When starting a new agency, its likely youll be putting up some of the money yourself. Self-finance gives you control, but youll probably need to raise additional funds to cover your investments. You must ensure you have enough money set aside to pay yourself and cover your debts. Borrow wisely and understand the benefits and limitations of each method. For instance, credit cards provide easily accessible short-term cash but are expensive in the longterm. Paying interest on inflexible loans can eat away at your finances. While a mortgage or a second mortgage puts extra pressure on your household. Also, be wary of signing a personal guarantee A personal guarantee is a common way to secure a loan for start-up businesses without a credit record. A director, who is also a shareholder of the company, agrees to be liable for a certain amount plus interest, including any costs and expenses. Personal guarantees are quite easy to secure but are difficult to get out of and should not be entered into lightly. On the plus side, they allow new companies to borrow money relatively easily and are only enforced if payments stop. But should the company default on its debt, the lender may seek the money from the guarantor. If he/ she is unable to pay, the lender may seek a bankruptcy order. Explore all your options before committing to a personal guarantee and always get your liability in writing.

PARTLY TRUE

Benefits of applying for funding through a reputable financing company

For the day-to-day funding requirements of a recruitment agency, support from a financing company can make all the difference. A respected financing business will work with you to reduce your risk, managing important processes including: Applying for credit insurance to protect you against bad debt Credit control Chasing payment of your invoices to clients Making monthly returns required under the bad debt protection policy Paying PAYE/NIC direct to HMRC Supporting maintenance of a healthy cash flow. Helping you to get from timesheet submission to cash as quickly as possible.

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3.  Its difficult to get funding

Given the current economy, youd be forgiven for thinking money is hard to come by. However, there will always be opportunities for promising businesses. Firstly, youll need a business plan. Banks wont lend to you without one and its a good idea to have one anyway!
If you know your industry you should have a head start, but the key things to remember are:  Be prepared. There arent too many overheads for the new recruitment agency, but costs can accumulate. As long as you plan ahead they wont creep up on you.  Be pragmatic. The only thing worse than not being able to raise any money at all is not raising enough. The last thing you want is to embark on a new venture, with all your skills in place and opportunities in the pipeline, then run out of money halfway through your first year. If you have other shareholders its better to be pessimistic in your budget projections to give yourself some slack.  Assess what it will take to achieve your goals, then calculate what it will cost. Seek efficiencies but dont economise on your ability to do the job properly. Raising six months upfront costs is a good rule of thumb. (And remember you need to pay yourself a living wage.)

MYTH

Lets take a look at the self-financing options available to you, including an overview of the benefits and drawbacks for each: Savings (unsurprisingly)
Limit your risk using other sources as well

Borrowing on credit cards

 Quick cash and no questions, but not a cheap long-term option

Bank loan
 A personal guarantee is a big commitment but will enable you to get more funding for your start-up

Getting a mortgage (or a second mortgage)

 Always approach with caution, but a ready source of capital nevertheless

Overdrafts
 Not great for lump sums but useful to aid with cashflow

Borrowing privately
 A good option if you have supportive family/friends. Private investors will want to see a return, though selling a share in your business could seem like a good idea until that share becomes more valuable

An unsecured loan
 Relatively easy to obtain, but difficult to get a large sum. Definitely worth investigating to add into the mix

Commercial lenders such as insurance companies and building societies

 Potential for lower interest rates and less restrictive, but subject to fewer regulations than banks and you might have to provide some security

Equity split with a partner

 Half the funding but youll need twice the spoils to share the same victory as going it alone

Selling possessions or assets

 You could always buy them again when your business takes off

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Options for temp recruitment

Factoring and invoice discounting
In simple terms, factoring and other forms of invoice finance allow recruitment agencies to get paid earlier. In factoring, a recruitment agency can sell its invoices to a factoring company at a discount, before the end-customer has paid. This means that for a relatively modest fee, agencies can get a reliable cash flow and do not have to worry about chasing invoices. Invoice discounting is effectively borrowing against unpaid invoices. The end results are similar to factoring although invoice discounting is closer to pure lending as, unlike a factoring facility, you retain responsibility for chasing payment and managing the sales ledger. For many temp agencies, factoring/invoice discounting are essential tools. The key is to choose carefully:

Questions to ask your financing provider

 Can they adapt to your changing needs? Do they provide back office support in addition to funding?  As your business grows, how well placed are they to grow with you? Can their services scale from pay and bill right through to invoice discounting as you bring some of your financial support functions in house?  What is their experience in the recruitment sector? Do they understand the cashflow characteristics of employment businesses?  Can they scale up and down with you, according to the changes and seasonality of business flowing through your agency?  Do they understand the compliance issues within the recruitment industry that can impact on your finances?

Benefits of choosing a specialist vs. generalist

There are many financing providers out there with apparently similar products. The trick is to find one that really knows the industry and how to help your business handle the unique challenges of the recruitment sector. A specialist should understand your requirements and work in partnership with you, from start-up and beyond. They should have a genuine empathy and where possible, first-hand experience of your challenges. Specialists understand the unpredictable nature of the recruitment industry and will be more inclined to finance phoenix businesses they are aware of the pressures on recruitment industries so theres no reason not to be confident youll get funding again next time round. Generalists have their place, but they are not ideal for recruitment agencies. Many are unlikely to have the insight or inclination to handle all the nuances of collecting temporary and permanent placement invoices.

Did you know?

With Outsauce, funding can be combined with a full suite of financing services including credit control and sales ledger administration. With up to 100% funding for temporary invoices, all your temps are paid on time and in full. No need to worry about a shortfall. No need to dip into your overdraft. We also provide financing for perm invoices as part of a combined offering or on a stand-alone basis.

Want to know more? 0330 100 8686

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4.  Its not a good time to be setting up

The economy is poor. A bad debt can mean the difference between success and failure. But fortune favours the brave. In a depressed economy the leaner and nimbler operations often thrive.
Whether its a good time or not to set up depends on your attitude to risk and how you plan for any problems:  Spread your risk with several contracts  Plan ahead what would happen if you suddenly lost 50% of your turnover?  Consider carefully the sectors you are considering specialising in. Is there any opportunity to test the water in other sectors and spread your risk by diversifying?  Think carefully about when to take on staff which business functions could you outsource to avoid additional overheads? The recruitment industry has consistently demonstrated its resilience in tough times. The most recent Annual Trends Survey from the REC last year showed that recruitment had bounced by 25% to just under 25billion. And its on the rise. The medium term forecast for the industry is single digit growth over the next four years with the industry peaking at over 30 billion in 2014/15.

YOUR CALL

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5.  The first few years are the hardest

Running your own business is not a hands-off pursuit. Theres no getting around the fact that in order to succeed, you will have to be committed and that means late nights, weekend working and precious few holidays in the first years. Unless youve set up in partnership, sanity breaks may be hard to come by.
However, its not a life sentence. As you develop the business you will be able to increase your resources, expand your workforce and free up some time for R&R. A recommended piece of bedtime reading is The E-Myth Revisited by Michael Gerber. This is considered a bible for small business strategy and management. The core E-Myth principle is that successful business owners need to work on their business rather than in their business. Sage advice indeed. Outsourcing your payroll is one of the key strategies available to ensure your time is focused on the most productive areas of your business. It can also mean of course that your workers still get paid if you take time out. But in reality youll still have to ensure timesheets are submitted, answer queries and handle new business enquiries year-round. Its the nature of the beast.

TRUE

Did you know?

While most accountants can keep your books in shape and accurate, they cant tailor their advice to the unique nuances of the recruitment industry. With Outsauce, expertise is available to advise you on everything from your bottom line to your business plan.

Want to know more? 0330 100 8686

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Where can you get help?

What are the key steps in setting up an employment business? What should you organise yourself and where can you ask for help?
Registering your business Registering for tax Self-assessment National Insurance Holiday Pay/ Statutory Sick Pay Insurance Funding Contracts with clients and candidates Ensuring compliance Paying your workers DIY DIY DIY Consider outsourcing Consider outsourcing DIY Outsource to a specialist finance provider Outsource to your solicitor Consider outsourcing Outsource to a specialist finance provider www.companieshouse.co.uk www.hmrc.gov.uk www.hmrc.gov.uk www.outsauce.net www.outsauce.net www.caunceohara.co.uk www.outsauce.net www.lawsociety.org.uk www.bauerandcottrell.co.uk www.outsauce.net

While most of the items covered here can be handled by you, as part of our broad service we can look after them on your behalf. Contact Outsauce now to arrange a free, no obligation meeting with one of our advisers

0330 100 8686 ask@outsauce.net www.outsauce.net

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Starting
What I know now... that I wish I knew then...

Q.

What was the biggest challenge you faced when setting up?

Getting a new brand recognised and off the ground is tough. Many clients are set in their ways or have long standing relationships and nudging onto PSLs with an unknown business is difficult. This is where dogged determination comes into its own. You just have to keep at it and you will get your break. And once youve got one contract and can prove your service quality, more follow.
Ashley Percival-Smith, Norse Recruitment

You will have bad days running a new organisation but its important you convert those bad days into good weeks.
Simon Noakes, Bespoke Recruitment

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6.  The administration required to start up and run a recruitment business is complicated and time consuming
Its true; there is a lot of paperwork involved when setting up your business. However, it neednt be overly complicated, provided you get the right guidance and specialist assistance where required. You can even outsource a lot of the more technical aspects to your accountant or solicitor.
When setting up, there are many options available. For instance, you can become a sole trader, enter into a partnership or become a limited liability company. Which one you choose will depend on you its a good idea to take advice from a specialist to make sure you are choosing the most tax efficient and compliant solution for your business.

PARTLY TRUE

If you are planning on going down the self-employment route, you will need to inform HMRC. This will mean you are responsible for tax self-assessment, Class 2 National Insurance and PAYE if you have people working for you. Click here to find out more:

http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm
To become a limited company, you must register at Companies House. Its cheaper to do this online and the process can take just 48 hours. Visit the Companies House website for more information:

http://www.companieshouse.gov.uk/about/gbhtml/gp1.shtml
You will need to register for VAT if your sales total more than 77,000 for the last 12 months. This page has some useful information to find out when and how much you have to pay:

http://www.hmrc.gov.uk/vat/start/register/index.htm

Why battle the admin?

Want to know more? 0330 100 8686

Outsauce Accounting can provide assistance with all of the administration required in starting up.

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Legislation governing employment agencies

As well as the general legislation which applies to all businesses, both temp and perm agencies are subject to specific requirements under law, including:  Never charging workers fees in exchange for finding them a job (this doesnt apply to performers or other workers in the entertainment field, or workers who are themselves, set up as companies)  Getting adequate information on the job requirements and the work-seekers eligibility for the role  Obtaining written consent from a parent or guardian when taking on under 18s  Ensuring workers have all the necessary qualifications required by law (including a criminal record check if required)  Paying workers if they are employed by the agency, regardless of whether the agency has been paid by the hirer (again, there are exceptions in the entertainment and modelling sectors)  Providing workers with full details of all chargeable services, including right to cancel and notice periods  Ensuring migrant workers have the right to work in the country. You can outsource paying your workers (including NI contributions and holiday pay) but the rest is your responsibility. In 2013 this will also mean being on top of your AWR and pensions auto-enrolment responsibilities.*

Record keeping
To prove compliance, you have to record everything. Agencies must demonstrate they have followed the Employment Agencies Act 1973 and Conduct Regulations 2003 legislation. Youll need to keep details pertaining to applications, hirers and your dealings with other agencies. Agencies must be able to supply this information for up to one year after creation and within two business days of being requested. (Modelling and entertainment agencies have to keep records for a minimum of six years.)

Tips for negotiating a business lease:

 Request a rent-free period to help your cash flow  Enquire after quarterly rent payments rather than monthly  Get flexibility by requesting a break clause (right to end lease early)  Bear in mind Stamp Duty Land Tax this is a complex calculation so seek assistance  Get a schedule of condition so you dont have to foot the bill for any repairs  Dont pay the landlords legal costs  If you have a limited company, ask for the lease to be put in its name to limit your liabilities (Offer rent deposit, rather than directors guarantee)

keeping up with the rest of the paperwork

Of course, record keeping must be completed alongside day-to-day administration: payroll, sales ledger, purchase ledger etc. It can be time consuming and there is always the risk you will take your eye off placing people and building relationships or perhaps go the other way and make a crucial slip in the paperwork. You might consider outsourcing various aspects of back office administration to an outsourcing business so you can focus on developing your business.

*Read more about AWR and auto-enrolment in 2013 with our Guides available at www.outsauce.net/resources

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7.  There are too many pitfalls to remaining compliant

There are numerous legal requirements facing recruitment agencies. Achieving compliance is not necessarily difficult, but it demands a good working understanding of the law and can be time consuming.
Recruitment agencies are covered by both general legislation governing businesses as well as legislation pertaining specifically to recruitment. For businesses, these include employment and tax law, immigration law, EU regulations, VAT, PAYE and NI.

PARTLY TRUE

The government provides a quick check list for businesses with employees (this includes contractors at temp agencies). So, if you have employees, you must give them:
 a written statement of employment or contract  the statutory minimum level of paid holiday  a payslip showing all deductions, e.g. National Insurance Contributions (NICs)  the statutory minimum length of rest breaks  Statutory Sick Pay (SSP)  maternity, paternity and adoption pay and leave.

You must also:

 make sure employees dont work longer than the maximum allowed  pay employees at least the minimum wage  have employers liability insurance  provide a safe and secure working environment  register with HM Revenue and Customs to deal with payroll, tax and NICs  consider flexible working requests  avoid discrimination in the workplace  make reasonable adjustments to your business premises if your employee is disabled. Source: https://www.gov.uk/contract-types-and-employer-responsibilities/fulltime-and-parttime-contracts

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Obligations specific to recruitment agencies

If you operate a temp agency, some responsibilities fall to the client who is hiring your workers and the rest to you. The client pays you, including the sum for your employees NICs and SSP. It is your responsibility to pay your workers. Temp agencies are responsible for ensuring their workers receive their rights under working time regulations. The client remains responsible for their health and safety. In accordance with AWR, after 12 weeks continuous employment, agency workers get the same rights as permanent employees in most respects. These include: pay, working time, rest periods, night work, breaks, annual leave and maternity, paternity or adoption leave. The client must provide you with information on the relevant terms and conditions but it is your responsibility to ensure that your worker receives these rights.

Additional information
There is a great deal of information available on all of these topics: The new www.gov.uk website is a good place to start. For instance, if you are employing migrant workers, view this section on ensuring your employees are eligible to work in this country: https://www.gov.uk/check-an-employees-right-to-work-documents The Employment Agency Inspectorate (EAS) is a government body that works with agencies, employers and workers to ensure compliance with employment rights. For useful links to advice and legalisation, visit: http://www.bis.gov.uk/eas The above sources are useful, however, due to the complexities involved, it is always advisable to seek advice from a specialist to ensure you are fully compliant.

Contact Outsauce now to arrange a free, no obligation meeting with one of our advisers

0330 100 8686 ask@outsauce.net www.outsauce.net

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Growing
What I know now... that I wish I knew then...

Q.

Whats the best decision you ever made as your business began to grow?

Dont waste money on things you really dont need. Keep costs low, it sounds simple, but costs can run away from you if you dont keep an eye on things.
Giles Casson, Encon

Q.

What lessons have you learned along the way?

People. Make sure you surround yourself with reliable people who you would trust to run your business in your absence. If you ever feel that you couldnt leave these people to work on their own you have the wrong people in your business.
Gary Janes, Channel Recruitment

Persistence is key. Keeping motivated is difficult, particularly during the early stages when youre working alone and trying to get a new brand off the ground. A fear of failure holds a lot of people back from taking the plunge but you need to believe in what youre doing and keep at it.
Ashley Percival-Smith, Norse Recruitment

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8.  The market is volatile

The market is volatile but then there were no guarantees when you set out on your own. The fact that youre still here and looking to grow is a good indication you have what it takes to make it.
As an experienced recruiter you will already understand the unpredictability of income, the perils of winning and losing contracts and the impact of seasonal variation. Mitigate your risk by planning ahead if cash is tight, consider cutting fixed costs such as property or limit your staff overheads. Remember when expanding to check the credit worthiness of new clients while keeping an eye on the old. Talk through any potential issues with your lender up front. Equally, plan for an upturn what would you do if you won a major new piece of business?

TRUE

Upturn checklist:

Could you fund the increase in staff payment? Could your systems cope? Do you have the admin support you need in place? Can your financing facility scale up quickly in line with your sales?

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9.  There are few opportunities to boost your profit margin as you grow
Would you like to increase profit margins and improve your own personal wealth? Perhaps you want to enjoy the fruits of your labour and spend less time working on your business?
If youre placing candidates, referring them to a reputable and compliant employment service (commonly known as an umbrella business) could help you achieve your goals:

MYTH

Remove the admin burden

If too much of your time is being taken up dealing with the day-to-day management of contractors, referring them to an umbrella company will remove the hassle of admin. Because your contractors will be employed by the umbrella company, the company will be responsible for their PAYE and will be able to offer them the security and benefits of full employment, as well as ensuring they are working compliantly. All contractors need to do is fill in their timesheets and expenses. The umbrella company will take care of the rest. If your contractor is earning more than 15ph, then depending on their individual circumstances, there may be more suitable options to consider. Some contracting support businesses can provide a full range of payment options according to the best employment status for them; individual limited company (PSC) or sole trader. Some also offer full accountancy services to ensure they make the most of their hard work and stay on top of their own HMRC paperwork.

Everyone benefits
As your business grows, so too does the risk involved with PAYE and keeping on top of legislative compliance. By referring your candidates, you wont have to manage the tax, NI and holiday pay implications yourself (as well as the liabilities and professional indemnity insurance), while your contractors can maximise their take home pay by claiming legitimate expenses. Contractors can enjoy the freedom of self-employment, with the peace of mind and benefits of being employed, including sick pay and holiday pay. Specialists bring additional advantages. For instance, construction industry experts will be able to ensure CIS contractors comply with their specific obligations.

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Growing laterally considerations for acquiring competitor businesses

Acquiring a competitor business could be a good way to quickly expand. Its an appealing option as most of the groundwork should have been done for you but dont underestimate the costs or the amount of work required to ensure a smooth transition. When considering acquiring another business, look for proof of strong existing customer relationships, reliable income and a decent reputation. Why is the current owner selling? Make sure its for the right reasons. Value the assets and the debts. Talk to existing customers, but be sensitive to the current owner and do not reveal your intent without clear permission. You should be able to get a good picture of what the business does well and where it has shortcomings. Try to assess the quality of employees have you had any dealings with them professionally, while networking or during previous roles? Ideally they should have experience that you can draw on to enhance your own business. One drawback to buying a business is that you will typically need to invest a large amount up front. This will include budgeting for professional fees solicitors, accountants and surveyors will all need to be involved. If the business is underperforming, you will need to inject extra time and money to realise its potential. Fortunately, obtaining finance might be easier if the company has a proven track record.

Outsauce can help

We have specialist contacts within the mainstream lending, business angels,private equity and venture capitalist communities. Call us to find out more

0330 100 8686

Consider cash flow its a good idea to set aside a few months of working capital to assist with any extra costs (think: general administration, stationery, advertising etc). Rebranding the new company will add to the bill. Provided a whitewash certificate is provided by an accountant, the target companys invoices can be used to release the funds for acquisition (unless it already factors or discounts those debts.) Existing contracts may need to be honoured or renegotiated, including employment terms, and you should ensure there is no serious outstanding litigation against the company. Once you have made the decision to purchase a business and your offer has been accepted, you will be given a period of time to ensure due diligence. This is where the solicitors and accountants come in. There are three types of due diligence:  legal due diligence verifying whether all legal issues have been addressed, including ownership of assets and whether the business has the legal title to sell  financial due diligence making sure there are no hidden surprises in the company accounts  commercial due diligence assessing where the business sits in the market, alongside competitors and the regulatory environment. Due diligence is a critical process and you should use this time to make sure you know exactly what youre getting into. Use payroll records, staff files, employment contracts everything you need to make the most informed decision.

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10.  Referral to an umbrella company will mean exposing contractors and clients to dubious practices
A few companies have tarnished the reputation of the umbrella industry by giving unscrupulous tax advice. However, although umbrella companies have received some bad press, there are many which are fully HMRC compliant and operate on an ethical basis, providing extensive, above board benefits to agencies and contractors.
Its important that contractors are matched with the correct employment status a reputable contracting business will give impartial advice that ensures contractors choose the most financially beneficial, and compliant, status for them, and they will never push them to make a particular decision. If joining an umbrella is not the right solution, then they will make it known and provide guidance on alternative options. Of course you are concerned about your reputation, so only refer to a well-established umbrella company with a good reputation of their own. The best umbrella companies are fully HMRC compliant and operate to the most stringent standards. A successful, umbrella company with a strong history is also a much safer choice in financial terms. Unproven companies are a gamble and the consequences could be severe if they go bump.

MYTH

Questions to ask your umbrella:

What is your AWR Model? What support can my contractors expect if they have employment queries? Whats your financial track record? How do you monitor contractor compliance?

Why sweat on legislation?

Ensuring conformity with legislation can be a drain on your resources. Especially when you need to focus on placing candidates and creating and nurturing client relationships. Compliant and ethical contracting services can take away the pain so you can concentrate on developing your business. Not only will you save time, money and potential legislation headaches, youll also be providing added value to your contractors.

Want to know more? 0330 100 8686

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Conclusion
Hopefully, this toolkit has dispelled a few industry myths and clarified others; you should have a clearer picture of the many considerations for running a recruitment agency and a more objective view of the potential pitfalls.
Yes, there are many myths, but also many universal truths. We could have concocted reasons to put every negative aspect into the myth category but it wouldnt have been very convincing. It takes the right mixture of optimism and pragmatism to create and sustain success. Launching and growing your own business can be challenging, expensive and time consuming but a little time and effort invested early on can make the world of difference to your working hours and bottom line. Take a look at successful recruitment businesses and the rewards are clear to see. The importance of effective management cannot be understated; the more control you have over the day-to-day responsibilities, the more time you can devote to business development. Recognise your strengths and where they can be employed to most benefit. A reputable outsourcing specialist can assist with complex issues or take care of the administrative tasks you simply dont have time for. Working with a specialist in recruitment is one of the most efficient ways to mitigate risk and free you to concentrate on what you do best: placing candidates and building your business.

About Outsauce

Outsauce can provide financial and business support on tap to deal with every changing business demand. Built by recruiters for recruiters, Outsauce provides funding, freedom from back office administration and new margin opportunities from compliant contracting services. Contact Outsauce now to discover how we can help you grab new opportunity.

0330 100 8686 ask@outsauce.net www.outsauce.net

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www.outsauce.net
Contact Outsauce now to discover how we can help you grab new opportunity.

0330 100 8686 ask@outsauce.net