SCALING NEW HEIGHTSHIGHLIGHTING INDUSTRY ACHIEVEMENTS

www.theglobalrecruiter.comIssue 155

GRADUATE RECRUITMENT TRENDSUK INDUSTRY AWARD REVIEW FINANCE FOR START-UPS

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which is full of information on getting started in business as well as all of the different funding schemes that may be available to you.

David Simons Managing Director, Recruit Ventures

Having funding in place to smooth out the cash ow and enhance your edging reputation is essential. For recruitment professionals who want to go it alone, a franchise is often a tempting option. The brand is already there and support is available. However all too often the result is that they aren’t any more autonomous than when they were working for someone else. The only real difference is that they’ve parted with a hefty start-up fee, which some recruiters may struggle to nd.Individual funding is also an option, however problems arise when you have to pay temps before the client pays you. It’s a cash ow trap that’s snared many a new recruitment business, and it goes like this. Temps (understandably) want to be paid weekly, and most client companies want 30 day terms with you, all while with the cost of setting up a new agency.The nal option is a oint venture operation. With the sole aim of helping recruitment professionals set up on their own by providing the brand, backing and back up to let them concentrate on building their business, it’s their company, with the advance capital for

Miles Spencer Lloyd CEO, Outsauce

Getting any business off the ground can be expensive, but it’s actually cash ow that’s more

important when it comes to business planning, especially in the recruitment industry. There are a number of simple ways for start-ups to save on up front costs. For example, when it comes to IT and telecommunications equipment you may be better off going down the leasing route, and of ce hardware can be secured via a serviced of ce agreement. This then becomes part of your monthly running costs meaning your cash won’t be tied up in depreciating assets. When it comes to cash ow however, recruitment businesses in the temporary sector have the added pressure of making sure their candidates are paid on time, which begins with raising accurate invoices, chasing them and keeping control of debtor days. Many start-ups believe that in order to pay the wages of their temporary staff they need substantial capital. The reality is that you can actually improve cash ow from day one with back of ce services and invoice nancing that can release up to 100 per cent of the invoice value instantly. However, I would suggest to anyone starting a business that before exploring nancing options they look at whether they are eligible for funding through a start-up scheme. A great place to look is www.gov.uk/browse/business

Stewart Roberts Commercial Director, TBOS Limited

When starting a new recruitment business it is always best to have some start-up capital to fall back on as it can take time for that rst placement to hit the bank account. Banks will be loath to lend money against a new start-up business and arranging an overdraft can prove dif cult so borrowing from a family member may be a better option. You can see about getting an investor although there are very few around and could mean you have to give up a share of your business before you have got off the ground.If you are recruiting contractors or temps then setting up an invoice nance arrangement allows you to leverage off the value of your invoices instead of using your own funds to pay your contractors. As invoice nance companies will lend between 80-90 per cent of the value you can also draw down some pro ts even before the invoices have been paid. Some invoice nance companies will also

provide funding against permanent placements but often at a lower percentage (60-65 per cent) and the high service charges can make this an expensive option. There are many options available to new start up agencies and we have noticed an increase in new company formations over the past 12 months.

This year, The Global Recruiter is tapping into a variety of expert pools to explore issues and challenges within the recruitment industry. You are invited to pose a question concerning any area of recruitment and we will get the responses you need. Just email your question to simon@theglobalrecruiter.com.

Q:

FINANCE TO FLY

The Global Recruiter’s experts advise on funding

for start-ups

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retain your equity, running your own show but be aware that interest rates are set to rise. The most common options are:1. Overdrafts, bank loans and the Enterprise Financial Guarantee scheme 2. Factoring or invoice discounting 3. Self funding, savings or a cut in your outgoings and earnings Equity: For proven individuals with a clear business plan the equity sources include: 1. Colleagues, friends and family 2. Angel investors, crowd funding 3. Venture Capital At the start while you may consider equity as not really valuable, as you grow it’s a large cost of future wealth as well as being accountable to external investors. It is essential to be well advised for any nancial decisions and while each option has its place my preferred route is to choose to retain as much of your equity for the future when the inherent start-up risks are diminished and equity is more valuable as the business grows.

your business by putting a funding cap on you. Exceeding this cap will affect your cash ow and you may not be able to negotiate an

increase in any funding made available to you. We all know if you can’t pay your workers you will not be in business! When you start your new business, having a fully functional and compliant back of ce is essential. Being a start-up, you will want to concentrate on developing new customers and lling the roles. Our advice is to use a 1 per cent funding solution, with a dedicated back of ce function and proven industry track record, giving you the time to thrive.

Graeme Read CEO, 3R Partnership

With a strong market many are taking the leap to set up their own businesses and start-ups need to stay the course and that requires an essential ingredient – cash. The funding options are varied and each with its own bene ts that could suit you and funding typically takes two main forms either debt or equity.

ebt: A key bene t of debt funding is that you

the start-up becoming part of a formal shareholders agreement.

David ThornhillManaging Director, Simplicity

What is very interesting about nance is most nancing solutions

do not fully understand the key challenges a temp/contract and permanent recruitment business faces.Your new recruitment business needs money. If you are a temp/contract recruiter, you need access to money to ensure payment of your workers every week (more required for VAT, if they are paid through an umbrella or an Limited company contractor). You will also need the margin you have made that week, so that you can live but more importantly grow your business. Many of the recruitment start-ups we support achieve £1 million turnover in their rst year.This level of growth is only possible with access to 1 per cent recruitment nance. If you do your research, you’ll see that the majority of funders will restrict the growth of

Global Recruiter, email: simon@theglobalrecruiter.com.