If enough to get the business off the ground, then you’ll be likely to set up as A Sole Trader or A Limited Company. The tradeoff of not borrowing setup capital is extra responsibility in the form of reporting on your business activities, and that you will be personally responsible for any financial debts incurred by your business.
Bessie Hassan, Money Expert at finder.com.au Australia’s most visited comparison website, shares this piece of advice about managing loan repayments and reducing interest costs:
“Throw extra cash towards your loan repayments. Once you’ve taken out a loan or line of credit, you’ll need to make room in your cash flow to service your ongoing repayments. A good strategy to get ahead on your repayments and to fast-track your way out of debt is to round up your repayments.
If your monthly loan repayment is £812, round this up to £850 or even £900. If you put an extra £38 or £88 towards your loan, you’ll service your loan sooner and reduce your interest costs.”
For more information about how to set yourself up for financial success when starting a recruitment business, read Bessie’s full article here.
Commission or Flat Rate?
In the UK, recruitment agencies typically charge clients in one of two ways - either through commission - by taking a percentage of a candidate’s annual salary - or through a flat rate placement fee.
A commission-based structure works by charging a fee that’s dependant upon the candidate’s salary. As that salary increases, so too does the rate of commission (or percentage of income the recruitment agency takes). This rate is typically around the 10 - 20% mark, but can be higher for a role that commands a higher salary.
Commission is not a cheap option for candidates or clients, so a lot of new startup recruitment agencies opt to charge one-off flat rates while the business is still growing.
When you start out, don’t be afraid to experiment with your terms and do deals that make sense, rather than being rigid on the rules. Communicate with your clients and work out an arrangement that is financially viable for your new business. Talk to clients about fixed fee arrangements, retainers, exclusivity and so on. You’ll be surprised at the deals you can do if you are providing a higher level of personal service than your competitors.