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How to Run a Recruitment Agency in the USA

From finding the best candidates, to satisfying your clients - discover how to grow your recruitment agency.

Recruitment agencies (or staffing agencies) find themselves in a unique position where they have to cater to two ends of the business: the candidate end and the client end.

Often tasked with the responsibility of effectively filling job openings with the most suitable prospects, recruitment agencies also have to deal with a highly competitive ecosystem. As statistics show, there are over 20,000 recruitment agencies in the US alone. Also, 143 companies dominate the market, with a combined market share of 58.6%.

These numbers don't mean it's impossible to succeed as a recruitment agency, it only means you have to put in the work and make yourself stand out. So, if you're ready to accept the challenge, follow some of the pointers in this guide.

How to Improve Your Recruitment Business

The recruitment agency is a data-driven enterprise. This means most recruitment companies use KPIs (key performance indicators) to measure their consultants/employees' activities against objectives. This is sometimes rigid and could stifle the progress of your consultants.

A good way for you to improve on this is to employ the use of customized KPIs to help optimize the activities and turnover rate of every one of your consultants. In deciding what personalized performance indicators you should assign each of your consultants, you need to consider factors such as:

  • Experience level of the consultant.
  • If they handle high-value/ low volume roles or low margin/ high volume roles.
  • If they're just navigating a new market or they already work with existing clients and candidates.
  • And if their employment contract is for a temporary or a more permanent role.
  • Clients' requirements in terms of the number of CVs and interviews per job opening.

Another way of optimizing the activities of your consultants to improve productivity is by incorporating the efficacy of AI(artificial intelligence) into your data analytics.

According to Spice Works, the screening process for hiring takes an average time of 23 hours to reach a verdict. Also, the best talents are only available for 10 days before they are snatched up by a competitor. These facts show that there's a need to efficiently speed up the recruitment process.

You can reduce repetitive tasks and boost your revenue by employing the use of recruitment automation such as CRM (customer relations management), ATS (applicants tracking system), chatbots, interviewing tools, and candidate assessment tools.

These tools would help you:

  • Maintain a consistent standard in quality and reduce the margin of error in your recruitment process.
  • Removes unconscious bias against gender, religion, ethnicity, and educational background.
  • Improve candidate experience.

Laws and Regulations to Keep in Mind

According to the US Equal Employment Opportunity Commission, a recruitment agency must not discriminate against its employees or honor discriminatory preferences from their clients.

For example, it's illegal to receive job orders for candidates based on sex, race, religion, disability, age, and national origin. Also, a recruitment agency must not discriminate against its employees in terms of portions and wages.

Market Analysis

Your recruitment agency can greatly benefit from performing in-depth market research about the industry. This will help you understand the type of candidates available and the type of candidates your client companies are interested in.

Effective market research will help you:

  • To identify the hot markets in the recruitment industry.
  • To understand the behavioral patterns of candidates when they are seeking employment.
  • To understand the motivation and values of your consultants, to keep them happy and engaged.

Market analysis also involves the examination of other recruitment agencies. Evaluate recruitment agencies that are currently hiring for similar roles that your clients are offering. This should help discern the desirability of your company to candidates when compared to the competition. Anticipate the incentive program of your competition and be prepared to offer something as stimulating.

What is the Growth Potential?

To get a better understanding of the growth potential of the recruitment industry, you should analyze its performance in the last few years, the projection for the current year, and future projections.

According to IBISWorld, the growth rate of the recruitment agencies industry in the last five years (2017-2022) was 2.3%. The market size of the industry is expected to increase by 5% in 2022.

Future projections show that the recruitment agencies industry is expected to reach a market value of 568.29 by 2028, with a CAGR of 1.95% from 2021 to 2028.

Three Interesting Facts About the Industry

  • As of 2022, the recruitment industry is ranked 360th in the US in terms of market size.
  • According to IBISWorld, the market size of the recruitment industry in the US rose faster than the economy in general.
  • The number of businesses and the rate of unemployment are two primary factors that affect the growth of the recruitment agencies industry.

Marketing Ideas for Your Recruitment Agency

Because of the unique nature of the recruitment agency, you are required as the business owner to tailor your marketing strategies to target both your prospective clients and candidates.

As far as social media goes, LinkedIn is a very powerful tool for recruiters. It provides access to talents with in-demand skills that your clients would be grateful to have on its employee's list.

Conversely, it would also be used to search for companies that may be in demand of the particular set of skills your candidates offer.

With LinkedIn, you could search for people who just got a new job, so you can contact their previous employers with the hope of filling the now vacant position with your candidate with the required skill set.

You could also use job hashtags (with the specific job description you are looking for) on Twitter to locate companies that are looking to hire new talents.

Financing Your Recruitment Business

A convenient way for recruiters to finance their business is through invoice financing. Invoice financing allows you to access funds tied up in invoices to enable you to finance your contract business. Invoice financing comes with options such as invoice factoring and invoice discounting. 

Another financing option is to apply for SBA loans. Guaranteed by the Small Business Administration, they are loans with favorable rates that have been made available for small businesses to take advantage of. Because of its strict criteria for approving loans, this option is best suited for businesses with good credit.

If you'd like to understand more about financing options, you can read our guide on small business loans

Considering Your Exit Strategy

The value of a recruitment agency is usually tied with the owner. Core values such as the major client relationships, position in the market, revenue generator, and KPIs tend to go down once the owner departs from the business. All that will be left for the new buyers to work with will be the client database, some consultants, and client contracts.

Most buyers know this and they factor that into the price and structure they'll offer to acquire the business. Therefore to drive up the value of your business you have to devise a plan to wean the business off your influence before making your final exit.

It's always advisable for the owner of a recruitment agency to set aside time to examine itself from the perspective of a prospective buyer. Evaluate the risk and growth potential involved and let that guide you when you're formulating your exit strategy.



Megan Kelly

About the author

Megan is Head of Content Marketing at BusinessesForSale.com. She is a B2B Content Strategist and Copywriter. She has produced multiple articles that rank on the first page of Google SERPS, and loves creating people-first content.

@Be_theBoss