How to start a recruitment agency
Starting a recruitment company

How to start a recruitment agency

So you’re thinking of starting a recruitment agency? Well, it's certainly a growing industry. Globally the recruitment industry was worth $521bn in 2021 and is increasing year on year.  

The last few years have seen a radical shift in the way people work and given that the business of recruitment is about putting those people into jobs, then it's been the time of massive upheaval for the staffing industry as well. The COVID-19 pandemic led to a change in expectations with regard to working from home. 

Candidates now often expect many roles to offer hybrid working and as a result, employers may have to follow suit or else struggle to fill vacancies. These changes have brought about challenges, but also new opportunities for recruiters and employers alike, such as access to a wider candidate pool.  This also means that recruitment businesses themselves could be managed from home.

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The industry had not long recovered from the COVID-19 downturn when we were plunged into the current economic uncertainty. There have been various impacts from the double hit of the pandemic and spiralling interest rates, such as the Great Resignation, large-scale redundancies - particularly in tech, a tightening of the belt from many employers, a shortage of talent, and a trend for filling roles with temp or contract candidates.

As a result, today's recruiters need to be adaptable and willing to evolve. The industry is rapidly changing with an Increased focus on the customer journey, new technology, and shifting demand. 

Potential recruitment agency bosses may have come from a long career in the industry or maybe they’re entrepreneurs who have spotted a gap in the market.  Anyone entering the industry needs to be aware it's a demanding profession, the hours are not 9-5 and whilst the pressure is high the rewards are too.

Here is our guide to starting a recruitment agency

Have a plan and set business objectives

You must have a solid plan in place before getting started. Do your research, speak to other agency heads, make sure you understand the market and what you’re getting into.

Create a business plan and set yourself short and long-term goals. An example of a short-term business objective could be to increase the number of contractors on your book by 20% within 6 months. A longer-term goal might be to offer your services to a wider range of industries within the first 2 years. Set KPIs to ensure you remain on track as you work towards these targets.


There are various types of recruitment agencies; from executive recruitment/headhunters, who specialise in highly experienced placements to mass recruitment companies, who fill a large number of varied roles for, often for very big companies in a short space of time. However, most agencies specialise in a particular field, for example, IT recruitment or healthcare,

It is possible to look at a niche from several perspectives. For example, you could specialise in: 

  • roles, such as operations or tech
  • Industries, such as engineering or aged care
  • Job type, such as permanent or temporary / contract

There is a good chance if you're looking at starting a recruitment agency that you already come from a particular niche or industry. Consider your network, knowledge, and experience. 

Becoming specialists in a particular field and understanding your target market can be hugely beneficial. You should look to build your reputation and aim to become a trusted partner to businesses in your vertical. Relationships can be strengthened through networking events, training, and social activities.


Once you've selected your niche, take some time to get a thorough understanding of the other players in that space.  Review the reputation, accomplishments, and business history of your potential rivals. Conduct a SWOT analysis to see what opportunities exist for you. 

What can you offer that your competitors cannot? What can make you stand out from the crowd? More established agencies have bigger scale and existing clients, but perhaps they are stuck with an outdated business model.  This is your opportunity to be nimble and innovate and understand what makes your fledgling agency different. 

Business model

The next question is how are you going to make money. You need to decide on a business model that appeals to your candidates and aligns with your business objectives. 

Broadly speaking an agency can follow a traditional model where they are hired to recruit one or more roles by a client. The agency sources and vets these candidates before handing them over.  

Alternatively, they can take an embedded model where they sit within the client organisation and adopt their ways of working. They will participate more deeply in the hiring process. 

Some common recruitment agency business models include:

  1. Contingency: By far the most common. Candidates are placed for a success fee only,  meaning the agency gets paid when the candidate is hired. Fees are often around 15-25% of the first-year salary. 
  2. Preferred suppliers list: Works the same as the contingency model, but used by large companies who have a pool of agencies they work with. Often involves more established agencies, who have to submit a tender to become a preferred supplier. 
  3. Retained or executive search: These agencies specialise in headhunting experienced candidates. They receive an initial payment with a further payment once the candidate is successfully hired. 
  4. Recruitment process outsourcing: This is the embedded model. The agency - or a number of consultants - takes the role of an in-house recruiter. They adopt the culture and practices of that organisation and get more involved in the end-to-end recruitment journey. 
  5. Self-service: This is a model where the client pays for the delivery of recruitment services at each stage of the process, such as search, screening, interview and finally hiring. 


To start a recruitment agency you need to be comfortable with the laws and regulations the industry is bound by. In Australia, all staffing agencies must be registered by the Fair Work Ombudsman. They must comply with the Fair Work Act and Anti-Discrimination laws.

It is also recommended that they are members of industry bodies RCSA (The Recruitment, Consulting & Staffing Association) and APSco (The Association of Professional Staffing Companies ) and adhere to their codes of conduct 

You’ll need to register your business name with ASIC and obtain an ABN (Australian Business Number). To avoid making costly mistakes, research the legislation, get comfortable with it, take a course if necessary, and apply for what you need well ahead of time. 


The next step is to think about technology.  Choosing the correct tech stack is a key early decision; it is essential to get it right.  The choices you make here will determine your ability to carry out your day-to-day work and grow the business. 

You must pick the right recruitment software for who you are now and who you want to be in the future. Think about how certain systems might integrate with others you want to use further down the track.

To get started, you’ll need the following:

Front office software

  • CRM (client relationship manager) - needed to manage your talent pool, as well as clients and other industry connections. 
  • ATS (applicant tracking system) - used to manage the entire application process from initial posting right through to hiring. They help screen applications and filter spam, identify qualified candidates, and track each stage of the process.

Back office

  • Payroll software - essential if you manage contractors, who need to be paid on time every time. It also allows for them to submit their timesheets. If you need assistance with managing your payroll, APositive can help.
  • Accounting software - essential for running any business. It helps manage accounts payable and receivable as well as your own employee payroll.


Building your brand is vital. You’ll need to be able to stand out in a crowded marketplace. Firstly, you’ll need a website. You can find an agency or web designer to create this for you or have a go yourself with a website builder, such as SquareSpace or Wix. 

At a minimum, your website will need to include:

  • The services you provide and the industry/niche you service
  • Your current vacancies
  • An easy submission form
  • Your contact details
  • Your company values, mission, and history

It would also be ideal to include details on the founders and consultants, so the candidate knows who they are dealing with. 

You should also think about regularly producing original content. This can help educate your audience on industry trends, and keep them engaged whilst also helping your website SEO and bringing in more users.

Social media is important for recruitment agencies, particularly LinkedIn given it is where recruiters and candidates spend so much time. Also, think about the job boards you want to advertise on. There will be a budget required for these, so it’s important to develop a marketing plan. You may also want to consider Google Ads to bring in more traffic.


Recruitment is a cash flow intensive business, particularly in the contract and temp industry. Those agencies need to meet payroll obligations on a weekly or fortnightly basis and recouping those funds from clients can take a month or more.

You’ll need enough capital for a few months, particularly if you’re working with a success-only model. You’ll need to be able to cover the basics to get started, such as office space and equipment, digital tools, salaries, insurance, and marketing.

It isn’t a good idea to rely on credit cards and overdrafts to get you through. There are types of business finance designed specifically for the recruitment industry. Payroll funding is a common solution to cash flow issues. Late payments to your contractors can make or break a business. With APositive, you can borrow against unpaid invoices and ensure that you meet payroll every time. 

Hire recruiters

A recruitment company is nothing without consultants. You’ll need to build a team of talented people, who have category experience. Continually Invest in their development and ensure you train junior recruiters. You’ll need to work out how many full-time employees you need to launch and have a plan for growing that number as you scale.

Find customers

Finally, you need customers. A recruitment agency is essentially a middleman so there are customers on both sides; employers and candidates.

Your strategy to find and win clients will involve defining your target companies and coming up with a compelling pitch and price. Networking is really important to find potential customers. Deliver excellent customer service and build up your reputation and client base through word of mouth. 

With candidates, it’s about finding the right people on the right platform. It’s estimated that 75% of professionals are passive candidates and the easier you make your customer journey the more likely candidates are to work with you.

Hiring experienced and skilled consultants will make all the difference to business development. 

Disclaimer: always refer to professional advice. The information presented here is purely indicative and not intended as advice. Always consult a legal or finance professional.

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