How to finance your recruitment start-up

date published Published: 9th March 2018

It is an extremely courageous step to take from working within a recruitment business to set up your own. Building a successful start-up business relies on those first vital few months in which you establish yourself within the industry, build your client portfolio and search for further prospective clients and candidates.

 

For those that have no experience in running their own business can find these first few months challenging as you balance your day to day recruitment responsibilities alongside administration and cash flow duties. Just some of the challenges that a start-up business may face include:

 

Remaining compliant

 

Businesses throughout the UK contend with compliance on a day to day basis, including HMRC, employment law, GDPR, and many more. Although the sheer volume of legislation and regulations can be intimidating, business owners must ensure that compliance procedures are implemented into their business from day one.

 

Maintaining cash flow

 

Cash flow is the lifeblood of any business, it keeps the business running and provides working capital for growth, therefore ensuring that it is monitored and maintained at all times is essential. For a start-up, finding the initial cash flow to jump start your business can be tricky, as well as finding additional cash flow to uphold your recruitment capabilities (i.e. new staff members, overhead costs, etc). This can also tie into administration duties, as lax credit control and invoicing procedures can lead to your cash flow being tied up in overdue or invoices that haven’t yet been issued.

 

Understanding these challenges and having the knowledge of how to overcome them is key to the longevity of any recruitment start-up. Finance options for the recruitment sector, in particular, can have an enormous impact on the success and growth of a business.

 

Funding opportunities for recruitment start-ups

 

Many start-ups begin under the misconception that the only finance options available to them are bank loans and overdrafts, however, there are a number of financial services that can provide the right amount of cash flow support for a business to start and run effectively.

 

Principal

 

Not only does a Principal model provide financing to a start-up recruitment business, but these businesses are subsequently supported with administration requirements. Principal is the ideal solution to those wanting the flexibility that running your own business can offer but without the legal and administrative responsibilities of establishing a business on your own. Read more about Zodeq’s Principal Model.

 

Invoice financing & discounting

 

Particularly for recruitment companies, invoice finance and discounting can be attractive options as they allow recruiters to release cash from invoices before a client has actually paid. This is ideal for recruiters paying temporary workers on a weekly basis but only invoicing clients monthly as their cash flow must remain consistently positive. Both options will release a percentage of an invoice as soon as it is raised with the remaining balance paid once the invoice has been paid in full.

 

The difference between the two options is that with invoice finance, the finance company (i.e. Zodeq) will chase for payment and therefore clients will know you receive this type of financing, whereas invoice discounting is confidential and therefore you chase for payment from clients. Read more about invoice financing and discounting here.

 

Still unsure of which finance option is ideal for your recruitment start-up? Speak to our expert team for our recommendations on 01244 617 087 or email [email protected]