10 Tips for Starting Your Own Technology Staffing Company

I’ve worked as a recruiter for J. Jill, SAP, and then started the boutique recruiting firm Boston Tech Talent, and offer you up these suggestions if you’re thinking about going out on your own.

I don’t recommend starting a staffing company with anything less than five years of experience. I know several aspiring entrepreneurs who have come out of large staffing companies with 1-3 years of experience who have tried doing it on their own and failed. With five years under your belt, you will have built a big enough network (LinkedIn, clients, conferences, networking events) and will have worked on a variety of skill sets that will give you the foundation to be able to go out on your own and convince potential clients that you have the experience to fill their roles.
Find a side hustle. Most of us don’t have enough liquid assets to float ourselves through a year of two of building a business. The rule of thumb is that most companies aren’t profitable until year three. If you’re a recruiter, find a part-time recruiting job that only takes up 20-30 hours a week, and spend the rest of the time building your business.
Diversify your client portfolio. Most of the staffing companies that went down during the 2008-2009 economic crash relied on five or fewer clients and didn’t survive because they were satisfied with a few clients that comprised most of their business. Go after both contract and full-time placement business to diversify your business income.
Use a third-party payroll company to fund your consultants/contractors. Most of us don’t have the liquid assets to be forking over tens of thousands of dollars to consultants while waiting for clients to pay invoices and don’t have the accounting prowess to process W2s and establish ACHs (direct deposits). I highly recommend using Madison Resources Funding and to reach out to Matt Behnke for more information if you’re interested there.
Be prepared to work a full desk. I have been fortunate enough to work as an account executive, agency recruiter, and corporate recruiter during my career and know to sell technology staffing and recruit the right talent on the back end. If you’re only comfortable recruiting or doing strictly sales, find a business partner who you trust who is willing to go 50-50 percent on profits and can compliment to your strengths. If you are in sales, find recruiters that are willing to work for commission only in their spare time to keep your overhead low.
Don’t expect to be closing sales until 6-12 months into your business. Even if you have a book of business, it’s still an arduous process to get back into companies and most of us in the staffing world have non-competes that will prevent us from working with current clients for at least a year. Be aware that a lot of non-competes are unenforceable depending on the language and what state you work in. Consult a lawyer or law firm that specializes in non-compete law (Pollard is a good place to start.)
Use an ATS and CRM. From the very start, you are building a company that will hopefully last a long time and you will be able to sell or retire from. Pay a menial amount out of your pocket now to keep track of every candidate and client you are working with. Not only can you keep metrics that will help you track your activity, but you will be keeping track of candidates who will become managers, directors, VPs, and CIO/CTOs who you can call again in 10-15 years for business.
Don’t focus all of your time on big companies. That’s almost useless to go after Fortune 100-500 companies for business. Big companies expect you to have big recruiting teams to handle their req loads. I have called several big clients I have worked with in the past only to have them ask me to call the back in a few years because I have fewer than 5-6 recruiters working for me. Instead, go after small companies that don’t use VMSs (Vendor Management Systems … i.e. ProUnlimited, Kelly Services, Volt, Davis Companies, etc.).
Minimize your expenses. As mentioned earlier, the first 6-12 months of owning your own business can be scary. Move back in with your parents if you have to. Instead of taking your clients out to Ruth’s Chris for dinner, try something less expensive that still has a nice flair to it but maybe has a reduced-price lunch menu. Instead of paying for ZoomInfo, use Jigsaw (data.com), or a Chrome plug-in (i.e. Prophet) that gives you enough data to get by. You don’t need an office right away and can easily put together a makeshift office in your home. If you need to get out of the house, go to Starbucks for a few hours. Don’t recommend making big ticket purchases or decisions in close proximity with going out on your own (i.e. buying houses, having babies, starting a master’s program).
Before you decided to go out on your own, do as much research as possible. Reach out to other staffing company owners and entrepreneurs to get tips on operations, finance, and feasibility. Put together a list of your top 25 client targets and have conversations with your contacts to see if it’s even realistic to count on them as a source of business. Dig deep into your network and try to uncover untapped potential clients (college alumni, business networks, friends and family). Put together a business plan and map out your startup costs for the first year. Starting a business is an educated decision. and the most prepared entrepreneurs are often the most successful ones.