Article published on: 16/01/23

To help give your new temp recruitment agency the best chance of early success and avoid some of the more common pitfalls, read on for our tips on financial mistakes to avoid as a new recruitment agency. 


Not having enough funding to support your growth  

Whether its self-funded, a bank loan, or invoice financing, securing enough funding is crucial for temp recruitment agencies - especially when payroll commitments often dictate they pay recruitment staff before clients have paid their invoices. 

There’s no ‘right’ way of funding your recruitment agency, you just need to find one that is the right solution for you, and remember, this funder/funding arrangement you go with when you first start out won’t necessarily be the right one a few years down the line either. The more you grow, the more workers you’ll be supplying, and naturally you’ll need a bigger funding limit.  

As an agency, your provider should have your best interests at heart and provide you with the necessary processes and confidence that you will have funds in place exactly when you need them.  A  specialist recruitment invoice finance provider should have extensive knowledge of the industry  and provide you with 100% of gross profit each week.  

Not having the right amount of funding in place can damage your cash flow and constrict your growth overtime. Moving money from one area in your business to another to help make payment dates can be a difficult cycle to break out of if it happens month after month.  


Having unnecessary overheads 

Start-up costs for running a recruitment business can be quite low, as you can limit this to a room, a computer with internet access and a mobile phone. Therefore, once you have placed a few candidates, you can quickly break even, so the fewer overheads you have in the early days, the better. 

Overheads mostly references ongoing costs that you would still have if you were no longer trading, such as recruitment software packages, salaries, utilities, and rent. Often start ups can be under the misconception that you need to have a fancy city-based office or a certain number of employees to get ahead in the industry but investing too much in a property or growing your workforce too early can drain important resources.  


Not outsourcing certain services 

You don’t necessarily need to do everything in-house. Often outsourcing some of your functions, i.e. payroll or credit control, can be cheaper than hiring directly in house, or having to provide the time and money to send current staff on training courses – as this can also spread staff too thin in busy periods.   

Preparing your company year-end accounts, your personal tax return, corporate tax returns, tracking your incoming and outgoing cash, and so on is a lot to remember for anyone, especially when you are trying to successfully grow your new recruitment start-up. Outsourcing to a professional accountant will cut your costs and save time in the long run. They will keep on top of any paperwork and filing to HMRC, helping you avoid any penalties and fines, all while taking the burden of understanding Tax and VAT from you and your team. 


Pricing your services too low 

It can be tempting when first starting up to offer a very low agency fee to help get the first few clients onboard, however trying to be the cheapest provider or pricing your services just to undercut your competitors isn’t necessarily the best marketing move. After all, you are selling your value as an agency and starting too low can make prospective clients question your quality and whether you have the skills to fill their placements, you can offer cheaper pricing but don’t massively undersell your services.   

As well as this, don’t overcomplicate your pricing. People like to know exactly how much they are going to be paying for something, make sure to be clear to prospective clients what pricing structures you offer, i.e. percentage of the candidates salary, a flat- fixed fee, and what exactly your service will include to avoid confusion down the line.  


We can support you from the off at Flo, with resources, recruitment funding and all the services needed.

Contact us on 01827 438065 or to find out more