We take a look some of the challenges faced by those in the recruitment industry when it comes to growing a business...
You’ve worked hard to get your business off the ground, it’s trading well, but what challenges will you face as you enter the next, much harder, phase of growing your company with an eye on a lucrative future exit?
Here we look at four challenges recruitment businesses are currently facing as they attempt to grow, and the mitigations they can put in place to help buck the trend…
1) Attracting and retaining talent
It might go without saying, given recruitment is an entirely people dependent business, that attracting and retaining talent may be the single greatest challenge to growth. A successful recruiter is a special breed of individual who combines both the business acumen and people skills necessary to succeed in this industry. Finding this person is one thing, keeping them motivated to stay in the business long-term is another.
Top billers are constantly poached by larger organisations, or they decide to start up themselves. An obvious way to attract and motivate these staff is through generous bonus and equity schemes. However, maintaining an inclusive and friendly culture, whilst ensuring all back office tasks are as streamlined as possible (to allow people to focus on what they do best) can be just as important.
Cashflows in recruitment businesses are notoriously hard to predict. Recruitment businesses often have to wait a long time to get paid for their services, leading to lumpy and cyclical cash cycles. This is of particular problem for perm businesses. As such, it can be hard to forecast cashflows and therefore plan properly for growth.
The most available mitigation is to ensure you have an Invoice Discounting (ID) facility set up. This is already a given for most recruitment companies, but some have yet to access the benefits. The security of paying a percentage of each invoice processed is definitely worth it when it comes to mitigating the risk of an invoice not being paid. Maintaining a good financial relationship with your clients is crucial, as this will smooth any potential future funding or security releases when you come to exit.
3) Brand reputation
Brand image is critical for recruitment businesses. The industry has received much negative press in the past due to the actions of rogue consultants. Both clients and candidates need to feel that they will get the best possible personalised service from their consultant (this is a professional services industry after all). Cultivating a forgiving culture, with an emphasis on customer service and training for new staff, will filter through the market and make your company more popular amongst both clients and candidates.
4) Adapting to new technologies
The emergence new technologies such as AI and video interviewing presents both a challenge and an opportunity for growth. The opportunities are the streamlining of your processes and open your consultants up to a wider pool of candidates and customers. However, shifting the culture of the team away from the traditional working methods can cause resistance and extra cost. Early adoption of new techniques and technologies is key, but so is making sure you set aside enough time for training people to take advantage of these opportunities.
Growing your business is tough, there is no getting away from that. Having an understanding of these challenges, and the way to combat them, will assist you to make the right decisions and alleviate some of the growing pains businesses can have.
If you'd like to discuss how we can help you fund, sell or buy a business, please contact me or book an informal chat via our website
Oliver Roper is an Assistant Manager - M&A at Shaw & Co
When a specialist recruitment business grew to £103m turnover, its owners asked us to sell the business to a new owner.
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