22
 min read

How to start a recruitment agency (complete guide 2023)

There are fewer things more exciting than launching your own recruitment business. But where to start? This guide helps you with practical steps you can start with today.

September 29, 2020
Yuma Heymans
October 18, 2022
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The recruiting industry has been one of the industries with the most developments in recent years. When covid hit, hiring was hit hardest. When we recovered, hiring jumped up. Current economic turbulence makes things even more exciting.

But one thing is for sure. Companies need talent. Without the right people, no business.

An exciting industry for sure. And especially if you’re starting your own recruiting business.

This guide will walk you through all the necessary steps for you to set up your recruiting agency.

  1. Get registered
  2. Choose your niche
  3. Build your brand
  4. Decide on a business model
  5. Find customers
  6. Go recruit!

1. Get registered

In most countries you need to be a registered business to legally do business with customers.

Every country has its own legal structures, options for starting a business and rules so you have to figure out what those are within your country.

Not the most exciting part of setting up a business, but for you to receive money from customers and to operate legally you need to have your business registered.

Take into account that when you want to do business internationally (cross-border) you might need a different legal set up than when you do business only locally.

Also financially there are a lot of things to consider, like tax.

Best is to involve an accountant or financial advisor with the experience needed for your specific set up. If you don’t have that money to spend yet, start with a simple structure. You usually can change your legal entity later, although it might require some work.

Here are the basic steps to go through to get registered:

Step 1. Research possible legal structures

Find out which entity you can set up within the country where you want to register your agency. Is it going to be your home country? Then you might already be familiar with some of the rules and options for registering your business entity. 

Google the regulations in your region, which governmental organizations processes business registration and seek advice from people who you know who set up a business before in your region.

Step 2. Get registered

File your request to register your business. Depending on the country’s efficiency of setting businesses this can take anywhere between a couple days to a couple of months.

This doesn’t mean you cannot already start on building your business. There is a lot of work you can already do without being registered (building a website, setting up your recruitment process, starting networking etc.).

Step 3. Keep your documents safe!

Keep all the legal documentation that you build up somewhere in a safe and organized place. Bad administration can cost a lot of money and cause problems in the future. Take your time to develop a disciplined way of working and keep your administrative hygiene in order. Use software that can manage your finances like Freshbooks and file storage like Google Drive.

2. Choose your niche

A niche is a particular part of the industry that you focus on. An example of a niche of a recruitment business could be ‘Permanent tech talent for startups’.

It’s important to pick a niche because when you focus on a particular part of the market it’s a lot easier to build up knowledge and network quickly instead of going after all kinds of different recruitment projects.

You don’t have to know exactly what you want to focus on initially because developing your specialism and brand around a niche is an iterative process and takes time. Also, you can always expand your services across market segments later.

It does help however to quickly gain experience and a name in a segment where customers don’t have that focus on a particular candidate market. This will be part of your added value as a recruitment agency.

You can look at niches from a couple different angles:

  • Roles
  • Industries
  • Process
  • Job type
Choose your niche for your recruitment agency

Roles

Are you going to focus on finding tech talent only or is it financial professionals you’re going to help customers find? The candidate market you focus on can bring a lot of value to the customer since you will have built up knowledge of how to source these candidates and also a network of candidates within that niche.

Industries

Are you going to focus on the corporate market or on startups? A startup company will have fundamentally different requirements to talent than corporations. So you might want to establish your recruitment agency as one that can help with the specific needs of certain growth stages of a company. Also the industry angle can be a relevant one to choose your niche in, is it going to be healthcare organizations, financial institutions, governments or software companies you’re going to help?

Process

Are you going to focus on the sourcing part of recruitment or are you going to be a full-cycle recruitment agency? Based on the companies you like to help you probably also have a certain focus in terms of process. Bigger companies might need your help specifically for the sourcing part of recruitment (finding talent and reaching out) and smaller companies might be looking for more of a full-cycle approach since they don’t have the resources and experience to do recruitment themselves.

Job type

Are you going to focus on permanent or contract jobs? Recruiting for contract roles fulfills a different need than permanent roles and requires a different expertise and is more reliant on the network that you will build up yourself. Whereas recruitment for permanent positions is much more focussed on long term commitment and the right fit with company culture.

3. Build your brand

You’re not the only recruitment agency. Competition in the recruitment industry is very real and you have to differentiate yourself from others to win deals. The good news is that most recruitment agencies don’t invest a lot in building a brand. 

The biggest part of agencies, especially the smaller ones, have unfinished and very basic websites, monstrous logos and zero content.

This is an opportunity for you to stand out with a beautiful brand that clearly communicates your focus (niche) and possibly also educates potential customers on where to find good recruitment services (that’s you!).

Website

A great website lets you stand out and get the attention from a customer. It also is the gateway for information about your recruitment services for potential customers. Your website should make clear what services you offer, which niche your serving and what your approach is.

Your website can also be the place where you create and share content like videos and blogs. If you do this right potential customers are even able to find you in search engines like Google so you can create a steady stream of organic traffic and eventually leads for your business.

Here’s some inspiration from great recruitment agency websites:

Your options for building a website:

  1. Hire a website developer: through for example Fiverr, UpWork, or someone in your own network
  2. Build it yourself: with website builders like Webflow or Squarespace.

Content

Content can be a true growth engine for your recruitment business. Many potential customers start their search for recruitment agency services online. If you have good content, you might be one of the agencies ending on top of their search results and probably the one they click on.

Next to appearing in search results, content also helps you to establish your recruitment brand in other ways. You can share content on social media, in events and in newsletters. 

The more interesting content you create, the more engaged potential customers will find you and contact you to learn more. 

Content can be anything like blogs, how to guides, videos, email newsletters and even full courses on recruiting.

Why give your knowledge away for free? Because in the end you’ll gain customers by creating content because website visitors end up in leads and leads will end up in paying customers.

Here are some examples of strong blog pages of recruitment agencies:

To find out what the most interesting topics are to create your own content about, you can use a SEO tool like Mangools to do your keyword research.

Social

When you have interesting ideas and content to share with the world, share it! Get active on social media like LinkedIn, Instagram, Twitter, wherever your potential customers and potential candidates are active.

Create a company account on social media so people can find your brand and start following your agency for updates.

But also engage with posts and updates from your potential customers so they will see that care about their companies and their professional goals.

4. Decide on a business model

The business model is about how you deliver value to your customers.

Do you charge a success fee or an hourly rate? Do you operate embedded in the customer’s organization or external? Do you work with an exclusive contract or non-exclusive contract? 

The business model indicates how you charge customers (pricing model) and how you deliver your services (delivery model).

Pricing model

The pricing model determines how you charge customers for your services. There are several types of pricing models and each of them has its own benefits and flaws. You should decide on which pricing model fits your type of customers and the roles that you typically recruit for.

Contingency

The contingency model is a success fee model and the most common pricing model used by recruitment agencies. Some companies can prefer contingency recruitment because they can avoid the risk of paying for services that don’t lead to hires.

A contingency fee is calculated as a percentage of the annual salary of a hired candidate. The average success fee ranges between 15% and 25% of the candidate’s total first-year salary. But the height of the success fee depends very much on the recruitment difficulty of the role.

Hourly

The hourly model is the most straightforward model. The recruitment agency charges an hourly rate for the recruiter who is delivering the services. Hourly rates on average range between $50 - $150 per hour, depending on the recruiter’s experience and added value.

Flat

The flat model is based on a fixed fee calculated based on the services requested by the customer. The customer pays the fixed fee to the agency regardless of if the agency is successful in bringing in hires.

A flat fee is typically calculated based on the total time spent by the recruitment agency and possible add-ons like software use. An example would be a fee calculated based on 20 days of work including the use of additional software licenses or services.

Retainer

The retainer model is a bit of a combination of a contingency contract and a flat fee contract. The customer pays a standard fee to secure the services of the recruitment agency and sometimes a certain minimal commitment and in addition pays for any successful hire just like they would in a contingency based contract.

When a flat fee is part of the contract the contingency fee is typically lower to compensate for the higher upfront cost.

Delivery model

Together with your pricing model you decide on which delivery model you are proposing to customers. The recruitment delivery model is how you deliver your services to the customers. 

Traditional

The traditional recruitment delivery model is based on the agency working externally of the hiring company and handing over candidates. The recruitment agency will not have a seat in the hiring company’s office and will not have too many dependencies on the internal organization of the hiring company like a company email account, access to a lot of internal systems or being part of internal meetings.

Embedded

The embedded recruitment delivery model is a model in which recruiters of the recruitment business take a seat in the office of the hiring company. That means literally having a seat at in the office of the hiring company but also adopting the hiring company’s way of working, being part of meetings, using their systems and reporting to internal stakeholders. Embedded recruiters are typically full-time involved for a defined period of time, like a 3 or 6 month period.

Recruitment Process Outsourcing (RPO)

Recruitment Process Outsourcing (RPO) is a recruitment delivery model in which the entire recruitment process is outsourced to an external party. Typically RPO providers are bigger recruitment businesses who provide full-cycle recruitment solutions instead of point solutions. For your starting recruitment agency this might be too complex of a model but it is an interesting model to grow towards.

5. Find customers

Once you know which niche you’re going to operate in you also know which companies to acquire as your customers.

Within your target accounts (companies) there are potential buyers (individuals) that you need to convince to buy your services.

You need to do three things to get to your first customers:

  1. Define your target companies
  2. Define your buyer persona
  3. Target potential customers
  4. Convert to deals

Step 1. Define your target companies

When you know the niche that you’re going to focus on, you can look at companies who you can serve with your offering. 

You should be able to answer the following questions:

  • Which industry are your future customers in?
  • What is the typical company size of those companies?

Based on the answer of these questions you can do a first company search in a prospecting tool like LinkedIn or Apollo.io.

The amount of results gives you a good estimation of the amount of companies you can sell to.

Step 2. Define your buyer persona

Now you have a list of companies you can look for the right individuals within those companies to buy your services. A buyer persona is a description of the person within your target company who’s going to buy your product or service. In other words, who will sign the contract that allows you to recruit for that business.

You write down what your buyer’s role is, what their goals and responsibilities are and their challenges.

This way you’ll better understand their reasons for buying your services and you can better target potential buyers.

A great way to get started with your buyer persona is the free Buyer Persona tool from HubSpot.

Step 3. Target potential customers

Now you know exactly who your potential customers are, you can start targeting potential buyers from different sources.

These are the best potential sources of new customers for your new recruitment agency:

  • Network
  • Outbound
  • Organic (inbound)

Network

Your first customer might be right in front of you. Your own network is probably full of companies hiring or looking to hire in the next few months.

Share that you started your recruitment business on social media and directly to your personal connections. If you’re lucky, this might already result in some people reaching out to you to get to know more about the services that you’re offering.

Outbound

Every starting business has to work hard to get their first customers in. You probably do not have a huge and tight network of potential buyers coming to you, so you have to come to them. 

This means proactively reaching out to your potential customers. You can use your company targeting and your buyer persona to start targeting them.

Here’s a very quick intro to outbound sales:

  1. Start a search in a prospecting tool: the first step is to create a search for your potential buyers. Since almost every hiring company team’s employee has a profile online you can find them. Look at your niche and think about what your potential buyers call themselves (for example “Talent Acquisition leader”, “Recruitment manager”, “Talent lead”). Also think about the keywords that potential buyers have on their profiles (‘tech’, ‘financial’, ‘startup’). You can use tools like LinkedIn or profile databases like Apollo.io to build your search and find your next lead.
  2. Create a list of prospects: select the relevant profiles of potential buyers that you think are likely to be interested in your services. Put them into a list, this will be your target list to reach out to.
  3. Set up an outreach message: you are going to have to reach out to a lot of people to get some traction on your outbound prospecting. That’s why it’s good to set up a message template that you write once and use to reach out to many prospects.
  4. Reach out: use your target list to send out your outreach message template to. You can also use prospecting tools like Hunter or  to reach out to your targetlist based on your template message automatically.

Organic (inbound)

Organic growth means growth coming from unpaid sources of lead generation. This usually is content on your website. If you write blogs and generate relevant content for your potential buyers, there’s a good chance they might end up on your website or other channels that you own like social media.

Follow the guidelines in the previous ‘Build your brand’ section to generate inbound traffic.

You can create a contact form on your website so your website visitors can get in touch with you.

Follow up any leads that are coming in through for example your website by contacting them (personally) and asking for their most pressing needs or suggesting next steps.

Step 4. Convert to deals

To convert a hiring company’s team to your paying customer you need to follow up with leads and articulate your value proposition.

This an example of how you can convert a lead to your first deal:

  1. A prospect that you sent a cold outreach message replied to you with a question about your services
  2. You give a brief explanation of what you provide and ask what their biggest needs are
  3. Based on the needs that the prospect shared with you, you think it’s a good idea to plan a meeting to learn more about the prospective customer and they about you services
  4. In the meeting you ask relevant questions about their hiring needs and you indicate how you can help
  5. After the meeting you follow up with a summary of what you discussed
  6. You don’t get a reply on your mail so you follow up with another email
  7. Now they respond and the prospective customer wants to do a follow up conversation with the head of talent acquisition
  8. You have the second meeting and your value proposition is recognized so you can send an offer to the potential customer
  9. You send an offer outlining your services, pricing model and delivery model.
  10. Your offer gets approved and you can start your first recruitment engagement!

6. Go recruit!

Based on the offer you won, you can now start recruiting for the job requisition.

The biggest advantage from a customer perspective of having a recruitment agency helping them out is that you as the expert know where you can find the right people, have a way to reach them and you facilitate connecting interested candidates to the right people within their organization.

Now you have your own recruitment agency you have to decide yourself in which tooling and process to use.

Select your primary tooling

To recruit the right professionals you need to make use of the right tooling. Obviously you can find a lot of talent on LinkedIn but there are many other sources you can find profiles on.

Also there are a lot of other tools that you can use to differentiate yourself from other recruitment agencies. You can recruit faster, reach more talent and have a better outreach strategy to reach more relevant candidates.

Tools that can help you hire the right people for your clients:

LinkedIn

Many recruitment agencies use LinkedIn. Although expensive it can still be an effective tool. LinkedIn Recruiter starts from about $850 per month per user.

Here you can find LinkedIn Recruiter options and pricing.

HeroHunt.ai

There are alternatives in the market that provide a more affordable and powerful way of finding all LinkedIn profiles and profiles from other platforms like GitHub and Stack Overflow. HeroHunt.ai finds all LinkedIn profiles, just like LinkedIn itself but also provides a more automated and a quicker way of reaching out to candidates.

Here you can try HeroHunt.ai.

Chrome extensions

Chrome extensions are simple tools that help do your recruiting work faster by generating insights or automating repetitive tasks.

Here’s a list of the best chrome extensions for your recruitment agency.

Other recruiting software

There are a lot of helpful recruiting software tools that can help you work more efficiently and recruit faster. 

Here’s an extensive list of software tools that you can use for your recruitment agency.

Set up your process

Every hiring need and customer is different but you will have some recurring phases and steps you will always execute for (almost) every project.

To be as efficient as possible, you need to bring structure in your way of working.

Therefore it’s important to have a clear process in place so you can execute your recruiting function without having to reinvent it every single time.

You need a repeatable process where you have clear steps defined that you, and on the longer term your employees, can execute in an efficient way where you can continuously improve the process.

These are the most important phases and steps you’ll have to set up:

  1. Search
  2. Screen
  3. Engage
  4. Handover

Search

Obviously you will do a lot of the search work for customers. To work efficiently you need to set up a smart repeatable process for figuring out which candidates you want to reach out to. Candidate prospects can hang out in several places (LinkedIn, GitHub, Medium, Stack Overflow or Kaggle?) so you need to know how to search those platforms. 

Are you going to source multiple platforms? Do you create a shortlist and then reach out or reach out the moment you find a relevant profile? Which information do you collect from the profiles and where do you save it? 

These are all relevant questions to answer to set up your search process.

Valuable resources for targeting:

Screen

Screening is the process of reviewing candidate’s profiles and deciding if they are worth your time reaching out to. 

These are some of the questions you need to answer when setting up your screening process:

  • What are you screening for? Are you looking at knowledge and skills (by looking at previous job titles and skills), company fit (personal match with company), job switching pattern (moving frequency of the candidate), Interests and personality (passions, hobbies, personal life) and other screening points. 
  • What tooling are you using for screening? You can use a variety of intelligent tools to pre-screen profiles and for example validate skill sets.
  • What is the feedback loop for screened and evaluated profiles? Determine who gives feedback on what and when regarding the evaluation of profiles and how you process feedback received by the hiring company on candidates.

Valuable resources for screening:

Engage

Engaging is the process of reaching out to candidates, following up with them and making them excited about your company and job.

You want to have a process for reaching out to candidates that matches with the tools that you use for reaching out.

The following should be part of your process:

  • Finding the right contact details: how do you find contact details and which tools do you use? Do you focus on finding phone numbers first or do you rely on emails for outreach?
  • Setting up personalized messages: which templates do you use for outreach and how do you personalize your messages with the right personal details of candidates so they feel appreciated?
  • (partly) automate outreach: which tools do you use to (partly) automate the process of reaching out? Do you send message sequences with multiple automated follow ups or do you send single personalized messages?

Valuable resources for engaging:

Handover

Finally, you need to have a process for the handover of qualified and interested candidates to your customer.

In this part of the process it’s important to discuss with the customer how they would prefer to receive and review interested candidates.

A handover process could look something like this:

  1. After sourcing including screening, you share any interested candidates with your customer for them to review including their personal details
  2. If your customer likes the profiles they plan an interview with the candidate
  3. After the first interview the customer shares feedback with you about the candidate
  4. You process the feedback and optionally adjust the job description and your sourcing approach.
  5. You keep track of all the candidates sourced, interviewed and converted in the customer’s Applicant Tracking System (ATS) if available and otherwise in your shared administration

Now you can bring everything together and just start. You don’t have to do everything right from the start. Just start and you’ll learn. 

From one entrepreneur to another; if you want, you can do it. Good luck!

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