When starting your recruitment business we believe there were two main motivations behind you doing so: to have an agency built in your own vision and to grow that agency to become a key player in your sector.
But what happens when growth gets in the way of running your business, and is growth always a good thing?
Growth is most definitely good for business providing it is the ‘right’ growth – too much growth or more specifically, growth that happens too quickly, can pose a very real threat to the future of your business.
Running a business is like maintaining a car. The faster you drive the more fuel you consume and the more expensive it becomes to maintain your vehicle. When you grow your business quickly you need constant access to the funds that will enable you to service the increased demand and seize the opportunities that come your way.
It is easy to be excited when you’re making placement after placement and seeing your profits continue to rise. It is also easy to mistake this for thinking that your business has reached the next level – it hasn’t.
We have extensive experience of supporting new recruitment entrepreneurs to start and grow their agencies, and with experience comes knowledge and more important, insight into how to grow in the right way.
Save time and make money
The most successful recruitment entrepreneurs that we work with do two very important things: they focus their time and energies on what they do best by outsourcing key functions, and they don’t leave their cash flow to chance.
It is well documented that the recruitment industry is at its most competitive for over a decade, with the number of new agencies setting up at an all-time high. To catch up with, keep pace with and eventually overtake your competition means focusing your time and energy on sourcing the best talent for your clients and not on those areas of the business that don’t return a profit.
Successful recruitment entrepreneurs don’t spend their time raising, sending and chasing invoices, organising payroll or doing their own credit control; they outsource these tasks. In doing so, they gain time that can be focused on business development.
When it comes to financing their growth, successful recruitment business owners are particularly savvy.
If you borrow heavily to fuel your fast growth, it is easy to run into debt issues if that growth slows and starts to level out – one bad month or a missed payment could create all manner of problems for you.
Then there is the issue of credit limits.
One of the major frustrations that leaders of fast-growing recruitment agencies report is the caps on the amount of finance they can access. Many non-specialist finance providers impose Concentration Limits on your clients, which effectively penalises you for…well, for being great at what you do.
In other words, by placing a credit limit cap on the rate by which you can grow your agency is pre-determined for you. We have seen situations when recruiters have been forced to turn work away because the agreements they had with their previous finance provider restricted them from going above a certain credit limit.
Not only does this penalise you from doing a job well done, it slows down your rate of growth and puts pressure on your cash flow.
Growth is essential for any business, but growth that is sustainable and managed in the right way is even better. It is about striking the balance between your ambition and what you really need to do to grow it.