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This question is about recruiter.
How to start a recruiting business
To start a recruiting business, you need to define the recruitment focus of your business, perform market research, and determine your recruiter commission structure. For details on the steps you can take to start a recruiting business, use this guide:
Define the recruitment focus of your business. This applies to industry, segment, niche, and geographic focus.
The recruiting market is massive with many different kinds of opportunities. This is why it is important to know what type of recruiting your business is going to focus on. It is a good idea to have a hyper-focus on your business, so you can exploit a specific niche of the market.
You might want to base your recruiting business on your own personal background, or work experience, meaning the specific industry you have worked in or roles you have held.
This gives you the chance to start off with inside knowledge and can help your business get off the ground more smoothly.
Here are the areas you need to figure out:
Industry
Attempt to pick industries that have strong potential for growth in the coming years. Having recruitment services in a shrinking industry that already has many providers will lead to limited success.
Segment
Is your business looking to service executive-level, and professional job candidates? Are you focused on high-salary roles, more experience-based positions, entry-level jobs, or even blue-collar roles, and temporary positions?
Niche
As much as possible you should seek to serve a very specific group of professionals or workers. This can lead your business to be the "go-to" company in terms of a specific recruitment type.
Geography
Are you going to focus on a specific city, state, or region, or have a broader scope in terms of countries or even continents?
Certain industries will require you to have a somewhat local focus, while others demand a broad focus, even global.
For instance, many roles in tech have a global focus because most jobs in this industry can be performed remotely, and it's an industry that spans the whole globe.
Perform market research. This is an essential step in starting a recruiting business.
You first need to do market research on other recruitment businesses and related companies. This means finding out the consumer base in your local area or more broadly online, as well as any competitors that may exist in your niche of recruiting.
You need to find out the scale of their operations, which recruitment markets they serve, and how many recruiters they have on staff. You should also try to find out about the prices for their services.
Determine your recruiter commission structure. There are three different ways recruiters can obtain commission for their services.
This is an important decision because it involves how to advertise your business's services to specific companies.
There are three different types of commission structures that relate to recruiting:
Contingency
Contingency structures are used to pay recruiters after they have completed specific jobs. These usually involve metrics, such as the amount of time a new hire stays at a company.
An example of this would be when an external recruiter signs a contract stipulating that they will receive compensation equal to 40% of the base salary of each role that they fill if the employee they place in the role stays for at least 60 days or more at the company.
Percentages of base salaries can vary, and this is just one hypothetical scenario.
In this structure, the external recruiter is often pitted against the company's own internal recruiters in its human resource department. This can often benefit both internal and external recruiters by increasing their motivation and incentivizing them to bring on more new qualified hires.
Retainer
A retainer is a recruiter commission structure that sees an organization paying an external recruiter before they accomplish the company's recruitment objectives.
This can be beneficial if an organization does not want the external recruiter to compete against its own internal recruiters. It also allows the external recruiter to focus on finding the appropriate candidates and not worry about meeting any quotas.
In this type of structure, a commission is also usually based on the salaries of the roles that the external recruiter sells. They might receive 30% to 50% of the base salaries of any filled positions.
Container
The last type of commission payment structure for external recruiters is a mixture of both the contingency structure and the retainer structure.
This arrangement often sees organizations paying external recruiters half the commission, also referred to as an engagement fee, before the external recruiter has begun their recruitment services.
Then the organization will pay the second half of the external recruiters' commission once their job is complete. This practice is typically cheaper for organizations than the retainer structure, and it is more appealing to the recruiter than the contingency structure, because the external recruiter earns money before they complete their job.
This structure also follows the method of basing commissions on percentages of salaries for roles filled.
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