Growth is a priority for most recruitment businesses, but growth doesn’t always have to mean finding a completely new market, becoming a generalist agency or dramatically changing your business model.
In fact, some of the strongest opportunities for growth could already be sitting within your existing recruitment business.
Your sector expertise, client relationships, candidate networks and reputation have taken time to build. Rather than moving away from them, tactical diversification is about looking at how you can use those existing strengths to create additional revenue streams.
Whether that means expanding internationally, introducing temp or contract recruitment, adding a permanent desk or simply doing more with your existing clients, there are several ways to diversify without losing the niche that makes your agency successful.
What does diversification mean in recruitment?
Diversification can sound like a major strategic shift, but it doesn’t have to be.
For a recruitment agency, diversification could mean expanding what you recruit, where you recruit or how you recruit.
The important distinction is that diversification doesn’t necessarily mean becoming a generalist.
A specialist agency can remain firmly within its niche while expanding the ways it generates revenue.
For example, an agency specialising in engineering recruitment could introduce contract recruitment alongside permanent placements. A healthcare recruiter could take its expertise into another geographical market. Or an established temp agency could identify opportunities to support the permanent hiring requirements of its existing clients.
The niche remains at the heart of the business – you’re simply finding more ways to grow from it.
1. Expand internationally
If you’ve built a strong reputation within a particular recruitment sector in the UK, could that expertise translate into another geographical market?
International expansion can provide access to new clients, candidates and revenue opportunities without requiring an agency to abandon its specialism.
Instead of asking, “What other sectors could we recruit into?”, the question becomes:
“Where else is there demand for what we’re already good at?”
That might mean following an existing client into another country, identifying overseas markets experiencing skills shortages within your sector or supporting candidates and businesses across multiple territories.
However, international recruitment comes with additional considerations. Local employment regulations, payroll, tax, currency, contracts and compliance requirements can all vary significantly between markets.
The opportunity can be considerable, but research and preparation are essential before making the move.
2. Add temp or contract recruitment to a permanent agency
For established permanent recruitment agencies, adding a temporary or contract desk can create a valuable additional revenue stream.
Rather than relying solely on individual placement fees, temp and contract recruitment can introduce more regular, recurring income into the business.
And you may already have one of the most important ingredients: the client relationships.
If your existing clients are hiring permanent employees through you, what other workforce requirements do they have?
They may use contractors to deliver projects, temporary workers to manage peaks in demand or interim professionals while permanent vacancies are being filled.
Those requirements could currently be going to another recruitment agency.
Introducing temp or contract recruitment allows you to potentially capture more of that client spend while remaining within the sector you already understand.
The operational requirements are different, though. Payroll, timesheets, invoicing, credit control and the need to pay workers before receiving payment from clients can all place additional demands on an agency.
Having the right processes, technology, funding and back-office support in place can therefore be an important part of making the transition successfully.
3. Introduce permanent recruitment alongside a temp business
Diversification can work in the opposite direction too.
Temp and contract agencies often build extremely strong relationships with their clients because they’re supporting their workforce requirements on an ongoing basis.
Those same businesses are likely to have permanent hiring requirements.
If you’re already a trusted recruitment partner, introducing a permanent recruitment offering could allow you to support more of their hiring needs.
Unlike temp recruitment, permanent placements don’t carry the same weekly payroll requirement, but cash flow still needs to be considered.
Permanent recruitment fees are commonly paid after the candidate starts and are then subject to the client’s payment terms. As placement volumes grow, agencies can therefore find themselves waiting for significant amounts of revenue to be paid.
Funding permanent placement invoices can help bridge that gap and allow agencies to reinvest sooner rather than waiting for clients to pay.
4. Grow your existing client relationships
Sometimes diversification isn’t about launching anything new.
It can simply mean looking more closely at the opportunities within your existing client base.
If a client already trusts your agency, where else could you support them?
They may have:
- additional offices or locations;
- other departments with recruitment requirements;
- temporary and permanent hiring needs;
- complementary roles outside the positions you currently fill;
- international recruitment requirements; or
- periods of increased demand where additional workforce support is needed.
Understanding more about each client’s wider recruitment strategy can uncover opportunities that might otherwise be missed.
Instead of constantly asking “How do we win more clients?”, it can be equally valuable to ask:
“How can we provide more value to the clients we already have?”
5. Expand within your existing niche
Being a niche recruiter doesn’t mean recruiting one specific job title forever.
Many sectors contain closely related roles, disciplines and specialisms.
A recruitment business with a strong reputation in one area may therefore be able to expand into complementary roles while retaining the market knowledge and credibility that differentiate it.
For example, if clients consistently ask whether you can recruit roles adjacent to your core specialism, that could indicate a natural opportunity for expansion.
Client conversations, candidate demand and market data can all help identify where those opportunities exist.
This is very different from trying to enter an unrelated sector from scratch.
You’re expanding around your niche rather than moving away from it.
Before diversifying, make sure your foundations can support growth
Finding an opportunity is only one part of diversification.
You also need to consider whether your business has the operational and financial capacity to deliver it.
Before launching a new desk, entering another market or taking on larger volumes, consider questions such as:
Do we have the expertise?
Understand the market you’re entering and whether additional knowledge or resource will be required.
Do we have the capacity?
Growth can quickly create additional administration, payroll, invoicing and credit control requirements.
What will it do to cash flow?
More placements don’t automatically mean more cash in the bank. This is particularly important when growing a temp or contract desk where workers may need paying long before clients settle invoices.
Can our technology scale with us?
Processes that work for a smaller recruitment business may become inefficient as placement and worker volumes increase.
What additional risks are we taking on?
Credit exposure, bad debt, compliance and client concentration should all be considered as the business grows.
Planning for these areas early can make diversification much easier to manage.
Growth doesn’t have to mean starting again
Recruitment agencies often spend years building specialist knowledge, networks and reputations.
Those things are valuable.
Diversification shouldn’t necessarily mean leaving them behind.
The next stage of your agency’s growth could come from taking what you already do well and finding new ways to apply it – whether that’s in another geography, through a different recruitment model, across complementary roles or within your existing client relationships.
Sometimes the biggest growth opportunity isn’t finding an entirely new niche.
It’s getting more from the niche you’ve already built.
Could funding and back-office support help you diversify?
Growth can create opportunity, but it can also put additional pressure on cash flow and internal resource.
At Simplicity, we support recruitment agencies with funding and back-office services across both temporary/contract and permanent recruitment, helping agencies put the infrastructure in place to grow.
From funding invoices and paying workers to payroll, invoicing, credit control, bad debt protection and technology, our support can help take care of the operational side of recruitment – giving you more time to focus on clients, candidates and growing your agency.
If you’re considering launching a temp desk, expanding your permanent recruitment offering or simply taking on more business, talk to Simplicity about how we can support your next stage of growth.
Frequently Asked Questions About Recruitment Agency Growth
How can a recruitment agency grow without losing its niche?
A recruitment agency can grow without becoming a generalist by building on its existing sector expertise, client relationships and candidate network. This could include adding temp or contract recruitment to a permanent agency, introducing permanent recruitment to a temp business, expanding internationally, recruiting complementary roles or providing additional services to existing clients.
What are the best ways to diversify a recruitment business?
Recruitment agencies can diversify by expanding what they recruit, where they recruit or how they recruit. Common routes include international expansion, adding a temp or contract desk, introducing permanent recruitment, expanding into complementary roles within an existing niche and identifying additional recruitment requirements within the existing client base.
The right approach will depend on your market, resources, client demand and growth objectives.
Can a permanent recruitment agency start a temp or contract desk?
Yes. A permanent recruitment agency can add temporary or contract recruitment while continuing to specialise in the same sector.
Existing clients can be a good place to identify opportunities, particularly if they already use temporary workers or contractors through other recruitment suppliers. However, agencies should consider the additional requirements around worker payroll, timesheets, invoicing, credit control, compliance and cash flow before launching a temp desk.
Can a temp recruitment agency add permanent recruitment?
Yes. Temp and contract recruitment agencies can introduce permanent recruitment to provide additional support to existing clients and create another source of revenue.
Because temp recruiters often have established client relationships and a strong understanding of their workforce requirements, permanent recruitment can be a natural extension of the service they already provide.
How can recruitment agencies generate more revenue from existing clients?
Recruitment agencies can look beyond the vacancies they currently fill and understand their clients’ wider workforce requirements. This could include other departments, locations, permanent vacancies, temporary or contract requirements, complementary roles or international hiring.
Regular conversations about a client’s wider recruitment plans can help uncover opportunities to provide additional support.
Can a niche recruitment agency expand internationally?
Yes. International expansion can allow a niche recruitment agency to take its existing sector expertise into new geographical markets rather than moving into an unfamiliar recruitment sector.
Before expanding internationally, agencies should research local demand as well as employment legislation, payroll, tax, contracts, compliance and other country-specific requirements.
What should a recruitment agency consider before diversifying?
Before diversifying, a recruitment agency should consider whether it has the expertise, people, technology, processes and financial capacity to support additional business.
Cash flow is particularly important when expanding into temp or contract recruitment because workers may need to be paid before clients settle their invoices. Agencies should also consider credit risk, compliance requirements and the additional administrative workload created by growth.
How can recruitment finance support agency growth?
Recruitment finance can help agencies access the cash tied up in unpaid invoices rather than waiting for client payment terms to pass.
For temp and contract recruiters, this can help provide the working capital needed to pay workers while waiting for clients to settle invoices. Funding can also support permanent recruitment agencies by advancing money against placement invoices, helping businesses reinvest in growth sooner.
What back-office support does a growing recruitment agency need?
As a recruitment agency grows, administrative requirements can increase quickly. Depending on the recruitment model, this can include payroll, invoicing, credit control, collections, compliance, timesheet processing and financial reporting.
Outsourcing some of these functions can give recruitment teams more time to focus on business development, clients, candidates and placements.
Does recruitment agency growth always mean winning more clients?
No. Winning new clients is only one route to growth. Recruitment agencies can also grow by doing more with existing clients, increasing placement volumes, introducing additional recruitment services, expanding into new locations or geographical markets and recruiting complementary roles within their existing niche.
Sometimes the next growth opportunity is already within the relationships and expertise an agency has built.
