How to Start a Recruiting Business

How to Start a Recruiting Business

Helping people find jobs and helping companies find staff — it sounds simple, but recruitment is a high-demand, high-pressure industry. If you’ve got an eye for talent, a knack for networking, and the drive to work with both businesses and jobseekers, starting a recruiting business could be a smart move. But before you dive in, it’s worth knowing what’s involved — because while the barriers to entry are low, the competition is fierce.

What Does It Mean to Start a Recruiting Business?

A recruiting business, or recruitment agency, acts as the middleman between employers and candidates. Your job is to match people to roles — whether that’s permanent positions, contract jobs, or temporary work. You’re paid by the employer, not the candidate, and usually earn a percentage of the salary for each successful placement.

Some agencies specialise in a particular sector — like finance, healthcare, IT, or construction — while others go broader. You can run it solo, work remotely, or eventually grow a full agency with consultants, an office, and your own client book.

How Does the Setup Work?

To get started, you’ll need to register your business. That could mean setting up as a sole trader or forming a limited company — both are viable, though many recruitment businesses opt for limited status due to credibility and liability protection.

You’ll also need to register with HMRC, set up a business bank account, and get proper insurance — including professional indemnity and possibly public liability. If you’re dealing with temporary staff, you may also need employers’ liability insurance, even if the workers are technically not your direct employees.

There’s no specific licence needed to start a recruitment business in the UK unless you’re placing workers in certain regulated industries — like healthcare or teaching — where DBS checks, safeguarding, and regulatory compliance come into play. If you’re supplying temps, you’ll need to follow agency worker regulations, and if you're handling payroll, tax, or IR35 matters, things get more complex fast.

Finding Clients and Candidates

This is where things get real. Clients don’t just fall into your lap — you have to pitch for their business, build relationships, and prove you can deliver. That might mean cold-calling, networking, attending industry events, or using LinkedIn like your life depends on it.

You’ll need to balance both sides — attracting companies with open roles and building a talent pool of candidates who are qualified, available, and actually want the job. It’s a matchmaking game with real people’s careers and real businesses’ needs on the line. Done well, it can be incredibly rewarding — but it takes hustle.

Technology plays a big part too. You’ll likely need access to a good Applicant Tracking System (ATS) or CRM, and you’ll be using job boards, LinkedIn, and email marketing regularly. Expect to spend as much time marketing as you do matching.

How Do You Get Paid?

Recruiters are typically paid one of two ways: a placement fee or a contractor margin. A placement fee is paid when a candidate is successfully hired — usually 10–25% of their first-year salary, depending on the industry and role.

If you supply temporary workers or contractors, you charge the client an hourly or daily rate, pay the worker a portion of that, and keep the rest as your margin. This model can generate steady income but comes with added admin and compliance.

Getting paid on time is its own challenge. Clients often pay 30+ days after invoice — sometimes longer. If you’re supplying temps, you may need to cover wages before your client pays you, which means cash flow matters. You might need financing options like invoice factoring or a business overdraft to manage the gap.

Possible Advantages

Starting a recruitment business can be done with relatively low upfront costs. You don’t need stock, premises, or expensive kit — just a phone, a laptop, and a serious work ethic. It’s also a business where success is directly tied to your effort and relationships. You’re in control.

If you specialise in a niche or underserved industry, the margins can be strong. And because hiring is always a need — even in slower economies — there’s consistent demand for good recruiters.

Possible Disadvantages

The recruitment market is crowded, and clients don’t always want to take a chance on new agencies. It takes time to build a reputation, and you’re only as good as your last placement. It’s also high-pressure. You’re juggling clients’ expectations, candidates’ hopes, and tight deadlines — all while knowing your income depends on successful outcomes.

Compliance is another challenge, especially if you deal with contracts, tax rules, or sectors like healthcare and education. Getting it wrong can land you in hot water fast.

And let’s be real — there’s a lot of rejection. From clients who ghost you to candidates who back out last minute, it’s not for the faint-hearted.

Do You Need Experience in Recruitment?

Technically, no — but it helps. Having experience as a recruiter means you understand the sales process, the admin behind placements, how to deal with client objections, and how to assess candidates. If you're brand new to the industry, you'll have a steeper learning curve, especially around compliance, client expectations, and time management.

That said, if you come from a background in a specific industry (like healthcare, finance, or construction), you might have enough insider knowledge to specialise in recruiting for that niche — even if you're new to recruitment itself.

Should You Niche Down?

In most cases, yes. Trying to be a jack-of-all-trades makes it harder to compete, especially against larger firms. Picking a niche — like tech startups, legal firms, care workers, or logistics — lets you develop deeper industry knowledge, become known in specific circles, and justify your fees.

Specialising also helps with marketing. You can tailor your messaging, build a more focused database, and get found more easily by the people who actually need your service.

What Tools Do You Need to Start?

At a minimum, you’ll need:

• A professional email address and website

• A LinkedIn profile that reflects your business brand

• A CRM or applicant tracking system (ATS) to manage contacts

• Access to job boards or advertising platforms (these cost, but they’re crucial early on)

• Contracts — for both clients and candidates — drafted or reviewed by a solicitor

You’ll also need to register with the Information Commissioner’s Office (ICO) for GDPR compliance, since you’ll be handling candidate data.

How Long Until You Start Making Money?

That depends on your model. If you’re placing permanent staff, it could take a couple of months — you’ll need to win a client, find candidates, interview, place, and then wait for the client to pay. If you’re supplying temps or contractors, you could start earning sooner, but you'll need cash flow to pay workers up front.

Most new recruitment agencies take 3 to 6 months to generate consistent income. Some faster, some slower — depending on your network, niche, and hustle.

Is Franchising an Option?

Yes — there are recruitment franchise models in the UK that offer branding, back-office support, systems, and training in exchange for a cut of your profits. It’s a faster route to market, especially if you’re new, but you’ll lose a degree of independence. If you're confident in your ability to go solo, setting up independently gives you more freedom and profit potential.

In Summary

Starting a recruiting business in the UK is a low-barrier, high-opportunity venture — but it’s not easy. You’ll need to be organised, relentless, and great with people. Get your legal and financial ducks in a row, choose a niche that plays to your strengths, and focus on building strong relationships from day one. It’s a tough game — but for the right person, it can be a highly rewarding business to build.