How working for yourself can actually be less risky than changing jobs.

Since setting up Davidson Gray to invest in and support recruitment business start-ups, I must have had hundreds of conversations with recruiters considering working for themselves. The biggest reason by far most recruiters settle for a new job rather than setting up, is the desire for security.

However is moving jobs really more secure?

Statistically, 4 out of 5 new recruitment business start-ups don’t last beyond 2 years, however taking the right new job can be tricky to get right too.

Reasons a new job may not work out

Here are some of the common reasons a new job may not work out that could be outside your control.

  • You don’t fit in/ like the culture/ it’s not the job you were sold – You could do more due diligence before you take the job, although it’s not really something you change nor influence much once you’re there.
  • You don’t hit your figures fast enough – This is in your control to a degree, however the opinion of your boss on whether to stick by you if they’re not what they expect is less so.
  • The company/ branch shuts down – Your figures could be flying, but if the business numbers as whole aren’t…
  • The company decides to move out of your market – Same as the above
  • You moved because you’d fallen out of love with the job you were in, but it turns out you’ve moved to the same job, nothing’s really changed – Not much you can do here, try another job, set up on your own, or change industries completely.
  • You’re not given any support, just a desk, phone and PC, and left to it – One of the biggest factors why most people like to be employed is the support aspect. But, too often recruitment companies don’t think through new markets, they think recruiters are some sort of business magicians – give them a desk and they expect the money to roll in!

Reasons a new business might not work out

These are some of the most common reasons a start-up can fail. However most are avoidable.

  • You spend your VAT, Corporation Tax and Personal Tax money, and get a shock when the bills land or you hit a barren spell – As recruiters we are bred to bill and spend, all our tax is handled at source. However as new business owners you need to budget for forthcoming bills. If you appoint a good accountant ask them to keep you up to date on all the tax bills before they’re due, so at least you can see them coming.
  • Run before you can walk – You bill, cash comes in (we don’t think about Tax or VAT) and we get drunk on success, take on staff and hey we’ll be rich! Use the above answer. Plus, work out the cost of a new hire for a 6 month period, only then take on a new employee if you have that amount in the bank, that way you’ll have enough cash until the new recruit starts billing or you decide they’re not working out.
  • Laziness – Again cash comes in and life’s easy. You start to ignore normal working hours, get too hooked on daytime TV or the golf course, and before you know it you’re earning the same or less. If you are earning the same or less and you run into the inevitable run of bad luck, with no cash buffer in the bank, you can be in real trouble. Working from an office can help certainly with this, but before you set out on your own you need to have a good look at yourself and be honest, can you motivate yourself to work on your own?
  • Loneliness – Work from a shared office.
  • You were far too reliant on your previous employer for vacancies and that candidate rich database – This is just bad planning. I explain in my blog “where to start with a recruitment business plan”. When writing a realistic sales forecast you need to analyse where your current billings come from. Looking back where your billings come from will tell you how much you can replicate if you didn’t have the support you have with your current employer.
  • Fail to get your business ready, and try and build it on the job – With all the businesses I set up I stress how critical it is to give me time to get the infrastructure set up for you before you go live e.g. website, database, emails etc. Trying to put all this in place as you go will only distract you from the most important part of a new business, billing and generating cash.

The purpose of this blog is to demonstrate how working for yourself can be a “safe” option to consider when you make your next move. I wanted to make the point you have more control of your own success with a new business, in a new job that’s not always the case. Many new jobs clearly work out, and if they don’t speak to a good Recruitment to Recruitment firm you trust, (Spencer Hunt being the best I know) and you’ll have interviews set up within the week.

However simply heeding my advice on how to avoid the start-up business risks will mean becoming your own boss can be a lot less risky than you first thought.

Here are some of the additional reasons why a new businesses success is in your control:

  • You won’t have to work to any KPI’s you feel add no value to your desk. You work your way, you know your market, you know what style makes you money, so doing it your way can make the job of billing a lot easier.
  • The first 12 months of any new job or new business is the critical time for success (or not). When you’re working for yourself you only need to bill a third of the level you do when you’re employed to earn the same, and you won’t be worrying about being sacked!
  • If there is a job board, a new technology or you feel LinkedIn Recruiter would make a positive difference to your billings you can opt for them. Unlike being employed where that can be a battle with your boss you won’t win.
  • No office politics, fighting over candidates or clients, no rules on taking jobs from different markets and no one taking all the senior or easy to place jobs.

I could go on but I don’t want to appear that I’m trying to sell working for yourself.  This blog is simply to balance the argument when it comes to decision time on your next career move. Setting up your own business does have a stigma of being risky, and if a recruiter jumps into it with no thought or planning this bad reputation is rightly earned, however I hope I’ve shown it’s far from clear-cut.

There are two big reasons recruiters can fail with their start-up in year one. There are those recruiters who aren’t made for working on their own, or those who set up with too little recruitment experience.

Working for yourself takes a certain mind-set, real drive and the ability to self-manage (which is why you need a certain level of experience). The prospective new businesses owner needs to really imagine working on their own, it can be lonely. However if you work in a shared office, set up with a partner or a working investor (in the way I work with my partner businesses) it’ll make it considerably easier.

When you are successful you should be taking on staff in the medium term so it can be just as simple as staying focused on your goal and toughing out the early days on your own. I do need to add recruiting your first staff is often the hardest, convincing good recruiters to join a one-man band or new business is not easy, so don’t assume getting staff will be easy or fast.

There is also the option to start in an employed role with an existing business who give you a proven route to part owning your own business with them. Try Jonathan Taylor of Taylor Higson, I mentor and coach the business owners Jonathan develops so I can speak first hand his strategy for helping his staff become business owners really works.

I know no one better for giving you all the support and encouragement you could want for to build your own business while being employed.

When speaking to recruiters who are considering setting up on their own I always try and give a balanced argument and enough advice for the prospective business owner to make the decision on their own. Hard to do (I am a recruiter after all) so selling a “job” is in my blood, but setting up on your own needs self-analysis and can’t be a knee jerk decision. So, think carefully before you decide to build your own business.

Read my blogs on how to write a business plan, this can often help in the decision-making process. The biggest mistakes you can make is also a good one.  If you are considering setting up on your own, read my blogs they will help.

I took a year to set up my first business, and have set up numerous since and love building new companies, but it’s not for everyone. I was also fortunate I managed to learn on the job. However I look back now and if I had someone with my experience to turn to I would have made twice as much money, twice as fast, with half the stress; so I do recommend looking for a mentor or coach to help you.

Written by Rhys Jones Managing Director – Davidson Gray.

Rhys sold out of his previous recruitment businesses in 2012 to focus solely on helping recruiters set up and build recruitment businesses. Follow Rhys on LinkedIn or contact him direct for help with your start-up recruitment business or for coaching to grow an existing one.

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