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Show me the money! Part 2

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Welcome to the second instalment of this two-part series where I take a look at the progression from recruiter right through to business seller, broken down into four key stages:

 

Part 1 - Becoming a recruiter – read more

Part 2 - Becoming a leader – read more

Part 3 - Becoming an owner

Part 4 - Becoming a seller

 

Part 3

Why become a recruitment owner?

 

What is your prime objective of setting up a recruitment business?

 

Is it:

  • a desire for freedom?
  • a lifestyle choice?
  • to exert more control?
  • a last resort?
  • a desire to build and sell?

First and foremost, the purpose of any business is to attract and retain a customer - without customers, you simply have nothing. Therefore, the budding entrepreneurs should only "do their own thing" if they are following their passion. It sounds obvious but most people quote "profit" or "making money" as their objective. These are actually outcomes and are rarely being realised. Let’s face it, if setting up a successful recruitment business was easy, everybody would be doing it.

 

"Show me the money!"

 

Being a great fee-earner isn’t enough. In order to create a business that someone wants to buy, you have to build something that is special and which has genuine prospects for continued successful growth.

 

Customer loyalty

 

No agency can claim to place more than 10% of the candidates they register - and to believe that those placed candidates will be loyal is foolhardy (although this is less a reflection on them and usually a response to the service received). The bigger opportunity and challenge is building loyalty amongst the 90% whom you don’t place. Sadly, most recruiters think and act short-term. So, if you aspire to lead and own your own business, you have to behave differently.

 

Customer loyalty is a hard-won battle, a battle which many companies tend not to fight as they find greater excitement in chasing "new business". However, study after study reveals that customers chose not to return for 1 of 3 reasons:

  • poor service
  • lack of contact
  • price

One of these reasons scores 70% whilst the other two score 15% each. Can you guess which one dominates?

 

There are many paths to owning your own recruitment company. The barriers to entry remain low and, as a result, the market in the UK is hugely fragmented with 90% of all registered agencies employing less than 50 people.

 

The entrepreneurial spirit in the recruitment industry is very strong. This is probably because, as an inexperienced recruitment consultant, you are usually encouraged to believe that you should run your desk like your own business.

 

Anything worth doing usually requires a clear and compelling vision that is easy to articulate. You also need to work out how you will differentiate yourself in an increasingly competitive market place. You will be judged more on what you do rather than on what you say. If you need to choose between "wonderful words" and "glorious deeds", remember that the do-ers win every time.

 

Part 4

Why become a seller?

 

The answer may seem obvious but making this a reality is not that easy. There are far fewer Trade Deals or MBO’s than people like to think. The reason is that larger corporates and PE Houses have now experienced more tales of woe than they’d care to admit. Acquiring or backing people businesses where the assets walk out the door every night is fraught with risk.

 

To answer the question, people decide to sell for any number of reasons:

  • to realise wealth
  • to reward key executives who have helped to create the value
  • to differentiate the organisation from lifestyle businesses
  • the company is in distress
  • the management team have run out of steam
  • the acquiring company allows the business to grow further and faster

Also, do not under-estimate the emotional turmoil of letting go. Most people who have a business worth selling fear that they’re selling too soon or too cheaply. As a result, many deals fail. As the saying goes: "it’s better to have 50% of something than 100% of nothing."

Gary Watson
Posted by Gary Watson
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