The recruitment industry contains a lot of small businesses.
Maybe 50% of the recruitment agencies in Australia and New Zealand are less than 5 staff. They play an important role in the industry yet little time is spent discussing these businesses and the challenges they face.
We are not sure that many new business owners start with a goal of creating a micro business. Some new businesses don’t grow; some might shrink back to a smaller size. A few business owners find they personally thrive in a micro business environment.
All would agree that there needs to be a strategy and desire to evolve and grow, because standing still is dangerous and will lead to the agency being overrun by change.
Leading a Micro Business
Being the owner of a micro-business can provide a level of freedom that is not attainable in other work environments.
But at the same time there is a constricting responsibility because there is no one to turn to - the responsibility and actions sit with the owner. Most principles of “The 4- Hour Work Week” by Tim Ferriss don’t fit in the people-oriented recruitment industry. A micro business owner will need to decide how much to invest in proceduralising business so that it can grow beyond the creation of a “job” for the owner.
Related: Exit Strategies For Micro Businesses
A micro business will logically have smaller organisations as clients and probably derive most of its revenue from sub-500 employee companies where personal service and longer-term relationships are valued.
Unless located in a suburban or regional area, deep specialisation is required to ensure relevance and a value-added conversation with target organisations. This specialisation is also required to get the attention of candidates.
Investment in technology and automation is a continual debate for smaller organisations. Technology costs cash and requires significant time invested to implement and gain benefit. So where to start? A pragmatic approach is needed to get the basics in place so that the business can be efficient, can compete, and remain legal.
Investment in technology is also required to make sure you are not penalised and restricted. A simple example might be access to job posting software so you can quickly and efficiently get your requirements published, or tools to quickly communicate with candidates.
Lack of technology can be an inhibitor. For example, a quality timesheet system will enhance your potential to provide temps and contracts, and interfaces to large Vendor Management Systems will at least give you a chance of supplying to the largest opportunities available.
More than anyone, micro businesses need to master social media presence and marketing. In a crowded world you need to be able to be found, present your credentials and specialisation, prove your legitimacy online, and communicate with your stakeholder groups – talent pools, client organisations, potential staff, peer organisations etc. There are no shortcuts or time-outs in this activity and in the recruitment industry this is a hurdle that must be cleared.
Most micro recruitment agencies are perm-dominant. Not all, but most. The RIB Report benchmarking clearly shows the impact on perm-dominant businesses when market sentiment turns.
But it is the pressure on daily operations that is most impacted when there is no relief provided by the annuity revenue of a temp & contract book.
One relief strategy for owners of micro recruitment agencies is to identify trusted partners that have complementary skills and services. Work can be shared and you can genuinely say "yes" to clients more often if there is a requirement outside of your specialisation or in a different geography. One example is NPA Worldwide, which formalises sharing of business between smaller companies around the world and is a trusted peer environment.
Exiting a Micro Business
Selling a micro recruitment agency is when a value is put on your strategies. Decisions made running your business are now evaluated by potential buyers and unemotionally valued.
The buyers of recruitment agencies are seeking sustainability of operations and are assessing the risk of future profits. Most micro businesses do not attain strong equity value and so strategies are required from the owners to maximise the circumstances.
The first strategy is to create a little wealth each and every year as there is less opportunity to create significant equity value at exit. Discipline during the operation of the business is required.
The second strategy is to plan and execute a smooth handover of the business, probably to a smaller, known, local company that can flexibly take on the business and reward the owner based on achieved future results.
Micro recruitment agencies are important to the industry. With a little planning and consistent execution, it can be a rewarding venture for the owners.
This article was written by Rod Hore and originally published in The Global Recruiter's Australia and New Zealand edition.