You’ve set up your own recruitment business and have been running it successfully. You’ve got a steady stream of revenue and may even have a couple recruiters or resourcers working under you. But now you’re ready to take it to the next level. Your goal is to create real equity value and personal wealth; to build something more than a lifestyle business that can eventually realise an exit event – you want to know how to scale a recruitment business.
Over 70% of recruitment agencies never grow beyond a headcount of 10 people. It’s certainly a difficult task to break through this ceiling, however when done right it is more than possible and can be incredibly rewarding. We’ve supported our portfolio partners to scale to headcounts of over 30 people, spanning multiple locations and specialisms.
In this guide, Recruitment Entrepreneur examines the key fundamentals of how to expand a recruitment business. We touched on this in our blog, 8 Steps to Scaling a Recruitment Business, but let’s dig a little deeper…
A common, often fatal, error regarding recruitment agency growth is trying to grow too quickly or too soon. Your business needs to have demonstrated stable success for at least a couple years. Strong talent retention and predictable revenue that’s not overly dependent on only a few consultants or clients are good indicators of this.
It’s also important to remember scaling a recruitment business is as much about your ambition and mindset as it is about business finances. Do you have the leadership skills required to attract, retain and develop the right talent for your business? Do you have a clear vision of the values, USPs and culture of your business and how you will uphold these as you grow? Are you prepared to be responsible for a large workforce and all that entails? If the answer to these questions is yes, and you have the financial numbers to back up your ambition, then its time to consider how to scale a recruitment business into something you can be proud of.
As Marc Benioff, CEO of Salesforce said, “Acquiring the right talent is the most important key to growth. Hiring was – and still is – the most important thing we do.”
Scaling your workforce is one of the fastest ways to increase revenue. More recruiters at desks means more outbound calls per day which can mean more closed deals. However, the crucial word in Marc Benioff’s quote is the word “right”.
Hiring the wrong people can be a costly mistake that can seriously stump your recruitment agency growth. It’s crucial that you only hire people who will genuinely add value to your business and help it scale, rather than simply focusing on attaining a certain headcount number. Otherwise, you risk ending up with low productivity per head, burning through cash, and with a diluted company culture.
Remember, who you hire is how your business is perceived by clients and candidates.
As your team grows, delegation becomes increasingly important. Your responsibilities and day-to-day duties will inevitably evolve and become more top line as your business grows. You need to have trust in your staff; micro-managing or trying to do it all will only result in your dropping the ball in other more important areas.
Another pitfall is focusing solely on hiring recruiters to directly drive revenue. As your recruitment business grows, operational efficiency will become increasingly important. Often, small businesses are sales-led and do not put enough focus around good corporate governance and systems.
Hiring an operational head will help keep things running smoothly and ensure your processes are robust, from terms of businesses are always being signed to compliance being tight. If you decide to outsource all back-office functions, make sure you thoroughly research different providers and choose the right one for your business.
Once you’ve hired more people, the next step is ensuring you retain them. The staff turnover rate in the recruitment industry is a staggering 43%, compared to the national average of 15%. With so many competitors in the market, it’s important to nurture and invest in your employees. Offering a market-leading commission structure is important but money isn’t everything.
Learning and development is a huge part of talent retention as it demonstrates that you’re actively investing in your team. The key to how to expand a recruitment business is to build your employees’ skillsets through training programmes in areas such as leadership, client negotiation, social media, or anything else that could bolster both their recruitment career development and your business performance.
One of the most important factors of scaling a recruitment business is ensuring you have the cash flow to support the growth. Overstretching your growth can lead to additional pressures and worst-case scenario you’ll have to downsize and start again. Cashflow management is important for:
If you don’t have the resources for successfully scaling a recruitment business on your own, applying for investment may be the best path for you. There’s lots of different types of investment models available for recruitment agencies – take the time to research them and find the best fit for your business goals.
At Recruitment Entrepreneur, we offer much more than just cash funding. Our portfolio partners benefit from all our back-office support (covering marketing, legal, operations and IT), as well as mentoring from our senior management team who have more than 100 years’ experience within the recruitment industry. Check out our current portfolio and the businesses we’ve helped build.
You can’t scale a business if the right people don’t know who you are. Your marketing strategy should take into account the industry you recruit within and the platforms your target audience uses. Understand your market, track what works and what doesn’t, and use that to inform your strategy.
Starting out in recruitment, we would advise finding a niche you’re confident in. When seeking the answer to how to scale a recruitment business, however, you need to consider expanding your horizons.
Diversifying into new markets means that if one part of your recruitment business suffers from market changes, you can rely on other income streams. This makes your recruitment business much more stable and valuable in the eyes of investors, and as the founder, it will give you security during the inevitable market challenges ahead.
However, diversifying doesn’t necessarily mean branching out into new markets. If you’ve built your brand on providing a niche, “inch wide, mile deep” service, don’t feel you need to broaden this in order to scale. There are other avenues of diversification, such as:
Investing in the right technology is a great way to save time and resources, which becomes ever more important when you’re scaling a recruitment business. There are automation tools available for every arm of a recruitment business, such as marketing, invoicing, accounting, and business development. However, these tools can be expensive so make sure they’re the right fit for your business.
Recruitment Entrepreneur invests heavily in technology for our portfolio partners. We are constantly reviewing the software and tools available in the marketplace and pride ourselves on only partnering with the best suppliers. Being part of the RE group means you don’t have to research and source all the automation tools on your own, but rather can see the success demonstrated by 25+ other recruitment businesses and opt in if it suits your needs. Our portfolio partners also benefit from group purchasing prices to help keep costs down.
Here’s a list of some of our tech partners and an overview of how they support our portfolio of recruitment businesses:
Recruiter Insider: Collects client and candidate feedback throughout the hiring process.
SourceWhale: Delivers personalised automated outreach and follow-ups with AI learning.
SourceBreaker: Automates workflows and frees your team to engage, powered with the intel they need.
LinkedIn Recruiter: A talent search tool that helps find and engage candidates for your sourcing needs.
LinkedIn Talent Insights: Direct access to real-time data on talent pools and companies around the world.
Paiger: Sources articles to share and broadcast to your team and sends out automatic job posts synced with your website.
Leadoo: A range of chatbots to convert website visitors and engage your audience.
Odro: Transform your business with the UK’s leading video platform for agency recruiters.
Recruitment businesses can be too proud or stubborn to outsource but if you’re working with industry professionals who know what they’re doing then it can be a very strategic and beneficial partnership. External delegation creates new arms of your team and helps take the pressure of your workload as you scale so you can focus on what you do best – recruiting, building a team, and growing your business.
Recruitment Entrepreneur prides itself on not being an outsourced partner, but a partner full-stop. Scaling a recruitment business certainly isn’t a simple or easy task. There are many different areas to consider and plates to spin in order to do it successfully. That’s where we come in – our funding, mentoring, strategy, and back-office support offer a one-stop solution for scaling. Our exclusive focus on the recruitment sector means that we’ve encountered and overcome all the obstacles you’ll face in your growth phase and are well-placed to advise.
If your ambition is to build a market-leading, scalable business, then apply for scale-up investment from Recruitment Entrepreneur.