Recruiters toolkit

8/13/2019 Recruiters toolkit

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The Outsauce view

Recruiters’ toolkitThe myths, half-truths and pitfalls of settingup a recruitment agency.

Ten practical strategies and insights forstart-up and growing businesses.



Introduction

It’s a challenging market out there, for sure. But if

you’re reading this it means you haven’t been put o.You’ll know there are opportunities for the taking; youmay even have some clients lined up already — it’s likely

you’re an experienced recruitment professional or aseasoned operator in your eld. Or an entrepreneurwho’s identied a gap in the market.

Maybe you’re well on your way and are looking for tips toachieve growth. Perhaps you’re looking to launch your ownrecruitment business and you would like some advice on how

to get started.You have faith in your abilities; you’re either ready to makethe leap and go it alone or to scale up and really grow yourbusiness. The only thing holding you back is preparation anda touch of apprehension.

The purpose of this toolkit is to provide practical guidanceto help you achieve your goals, while clearing up some ofthe myths around starting up in the recruitment industry.We’ll cover all the main considerations and point you in theright direction for further assistance — because running yourown business doesn’t mean you have to do it alone.

Recruiters' toolkit. Introduction 01



Myth or truth?

Thinking1. Setting up a recruitment agency is expensive .............

2. There’s personal nancial risk involved ........................

3. It’s dicult to get funding ..............................................

4. It’s not a good time to be setting up .............................5. The rst few years are the hardest ................................

pg 04

pg 07

pg 08

pg 10pg 11

Growing8. The market is volatile........................................................

9. There are few opportunities to boost your protmargin as you grow ...........................................................

10. Referral to an umbrella company will mean exposingcontractors and clients to dubious practices ................

pg 19

pg 20

pg 22

Starting6. The administration required to start up and

run a recruitment business is complicated and

time consuming ..................................................................

7. There are too many pitfalls toremaining compliant .........................................................

pg 14

pg 16



Gary Janes, Channel Recruitment

Ashley Percival-Smith, Norse Recruitment

What I know now...that I wish I knew then...

What advice would you give yourself if you were setting up now?

Thinking

Very simple. Do it right and take your time. What I mean by this isthat quick success can sometimes make you become complacentand you forget why you were successful in the rst place. CRSrapidly increased revenue and prots over a two year period andnaturally wanted to continue its growth. If I could go back in timeI would be much more cynical about how and when we decided togrow. Growth is fantastic, but sometimes you can lose sight of allof the important things which made you successful just to achievea growth target. The realisation of this has provided me withmuch more focus in how I grow the business rather than growthfor growth’s sake. Ambition is a powerful ally, greed can be anequally powerful enemy.

Consider what you want from your business and how you want

it to balance with all aspects of your life. Keep your goals in mindat all times. It’s easy to get greedy and work all hours, but for me,it’s about enjoying what I do, getting great satisfaction out ofhaving a business to call my own, but still having plenty of timeto spend with my children.

Recruiters' toolkit. Thinking 03



Are you planning on recruiting for tempor perm sta?Temps and perm sta bring dierent nancial and logistical implications foryour business.

With permanent placements, you can take your fee and move on to the next job — so you don’t need to worry about payroll so much as maintaining a healthy pipeline

of new placements.

Temps need to be paid every week — and in most cases you will be paying them before

you receive the money from your client. Deductions for tax and National Insurance (NI),as well as holiday pay obligations will also complicate matters. Employers’ NI is anadditional cost to your agency.

And of course, there will be timesheets to manage.

You will need to balance the administration and compliance burden with time dedicatedto business development.

In all cases: cash ow is critical.

How strong are your existing relationships with your clients and are they good payers?

If you’re just starting up, do you have any warm prospects that could be quickly convertedto fee paying customers? Whether recruiting temps or perms, consider how much workyou can expect to put through your business in the rst few months — and factor in

delays around placements and payments. Securing a steady income is a priority for youredging agency so be realistic about how, and where the money will come from in theearly days.

Fortunately, there are options available to agencies to overcome this hurdle, including

invoice nancing. A good nancing provider will cover up to 100% of your temp payroll,could also cover your perm billing and invoice your clients on your behalf, meaning thatyou get your money before your client pays. (See page 09 for more on this).

Your accountant can provide useful nancial guidance to streamline your workload — while an umbrella service, if your temps are registered with one, will remove NIcontributions and holiday pay burdens.




Marketing your recruitment agencyYour mindset will ultimately decide the success of your marketing eorts. Do you viewmarketing as a cost or strategic investment? If you consider it a strategic investment then

you need to plan around two key numbers:

1. Average client lifetime value2. Average client acquisition cost

Or to put it another way: How much is a client worth to you?How much are you prepared to pay to get one?

The same model can also be applied to candidates. If you establish an acquisition cost

model that you are comfortable with, you can then start to test and evaluate the plethora

of marketing channels available.

Digital marketing is the most tangible investment because everything can be measured.

But that doesn’t mean you have to restrict your eorts to just the most measurable

activity. It’s important not to confuse cost eciency with eectiveness. An email blast

to a cold database may be very cost ecient, but how much more eective and impactful

could a physical mailing be?

The catalyst for growth for many recruitment businesses has been a strategic focuson becoming a voice of authority in a specic market sector. Build relationships with

key journalists by becoming a useful and interesting source of information and opinion.

Social media represents the greatest opportunity for a ‘free’ marketing investment

as it only requires your time. But make sure you are disciplined enough to focus on being

‘productive’ rather than just ‘busy’ on social media platforms. Like traditional networking

there are always hidden opportunity costs to activities that just involve time. Only after

a sustained eort can you make an accurate judgement call on the eort:reward

ratios involved.

Thanks to the cloud, smaller recruitment agencies can compete against large corporates

through low rent marketing technology platforms for CRM, email etc.

One early investment that will only reap intangible returns is your brand identity.But it is a key investment. Having the ability to build great client relationships means

nothing, if prospective clients won’t contact you if they cannot see beyond a cheap

website, logo, copy style etc.

As a service provider you are essentially ‘selling the invisible’. A professional brand

identity will reduce the perceived risk of working with you and subconsciously give

you a condence boost.




2. There’s personal nancialrisk involved PARTLY

TRUE

Risk is an inevitable component of any business venture— it’s the price of opportunity. How you manage risk ismore important than the risk itself.

When starting a new agency, it’s likely you’ll be putting up some of the money yourself.Self-nance gives you control, but you’ll probably need to raise additional funds to coveryour investments.

You must ensure you have enough money set aside to pay yourself and cover your debts.Borrow wisely and understand the benets and limitations of each method. For instance,credit cards provide easily accessible short-term cash — but are expensive in the long-

term. Paying interest on inexible loans can eat away at your nances. While a mortgageor a second mortgage puts extra pressure on your household.

Also, be wary of signing a personal guarantee… A personal guarantee is a common way

to secure a loan for start-up businesses without a credit record. A director, who is also

a shareholder of the company, agrees to be liable for a certain amount plus interest,including any costs and expenses.

Personal guarantees are quite easy to secure but are dicult to get out of and shouldnot be entered into lightly. On the plus side, they allow new companies to borrow moneyrelatively easily and are only enforced if payments stop. But should the company default

on its debt, the lender may seek the money from the guarantor. If he/ she is unable topay, the lender may seek a bankruptcy order.

Explore all your options before committing to a personal guarantee — and alwaysget your liability in writing.

Benets of applying for funding through

a reputable nancing companyFor the day-to-day funding requirements of a recruitment agency, support froma nancing company can make all the dierence.

A respected nancing business will work with you to reduce your risk, managing

important processes including:

• Applying for credit insurance to protect you against bad debt

• Credit control

• Chasing payment of your invoices to clients

• Making monthly returns required under the bad debt protection policy

• Paying PAYE/NIC direct to HMRC

• Supporting maintenance of a healthy cash ow.

Helping you to get from timesheet submission to cash as quickly as possible.




3. It’s dicult to get funding MYTH

Savings (unsurprisingly)• Limit your risk using other sources as well…

Bank loan• A personal guarantee is a big commitment but will

enable you to get more funding for your start-up

Overdrafts• Not great for lump sums but useful to aid with cashow

An unsecured loan• Relatively easy to obtain, but dicult to get a large sum.

Denitely worth investigating to add into the mix

Commercial lenders — such as insurancecompanies and building societies• Potential for lower interest rates and less restrictive,

but subject to fewer regulations than banks — and youmight have to provide some security

Borrowing on credit cards• Quick cash and no questions, but not a cheaplong-term option

Getting a mortgage (or a second mortgage)• Always approach with caution, but a ready source

of capital nevertheless

Borrowing privately• A good option if you have supportive family/friends.

Private investors will want to see a return, though

— selling a share in your business could seem like agood idea until that share becomes more valuable

Equity split with a partner• Half the funding — but you’ll need twice the spoils

to share the same victory as going it alone

Selling possessions or assets• You could always buy them again when your business

takes o…

Given the current economy, you’d be forgiven for thinkingmoney is hard to come by. However, there will always beopportunities for promising businesses.

Firstly, you’ll need a business plan. Banks won’t lend to youwithout one — and it’s a good idea to have one anyway!

If you know your industry you should have a head start, but the key things to

remember are:

• Be prepared. There aren’t too many overheads for the new recruitment agency,but costs can accumulate. As long as you plan ahead they won’t creep up on you.

• Be pragmatic. The only thing worse than not being able to raise any money at all isnot raising enough. The last thing you want is to embark on a new venture, with allyour skills in place and opportunities in the pipeline, then run out of money halfway

through your rst year. If you have other shareholders it’s better to be pessimistic inyour budget projections to give yourself some slack.

• Assess what it will take to achieve your goals, then calculate what it will cost.

Seek eciencies but don’t economise on your ability to do the job properly.Raising six months’ upfront costs is a good rule of thumb. (And remember youneed to pay yourself a living wage.)

Let’s take a look at the self-nancing options available to you,including an overview of the benets and drawbacks for each:




Did you know?

With Outsauce, funding can becombined with a full suite of nancingservices including credit control and

sales ledger administration.

With up to 100% funding for temporaryinvoices, all your temps are paid on time and

in full. No need to worry about a shortfall.

No need to dip into your overdraft.We also provide nancing for perm

invoices as part of a combined oeringor on a stand-alone basis.

Want to know more?0330 100 8686

Options for temp recruitment

Factoring and invoice discounting

In simple terms, factoring and other forms of invoice nance allow recruitment agenciesto get ‘paid’ earlier. In factoring, a recruitment agency can sell its invoices to a factoringcompany at a discount, before the end-customer has paid. This means that for a relatively

modest fee, agencies can get a reliable cash ow and do not have to worry about

chasing invoices.

Invoice discounting is eectively borrowing against unpaid invoices. The end results

are similar to factoring although invoice discounting is closer to ‘pure’ lending as,unlike a factoring facility, you retain responsibility for chasing payment and managingthe sales ledger.

For many temp agencies, factoring/invoice discounting are essential tools. The key is to

choose carefully:

Questions to ask your nancing provider

• Can they adapt to your changing needs? Do they provide back oce support in

addition to funding?

• As your business grows, how well placed are they to grow with you? Can their servicesscale from pay and bill right through to invoice discounting as you bring some of your

nancial support functions in house?

• What is their experience in the recruitment sector? Do they understand the cashowcharacteristics of employment businesses?

• Can they scale up and down with you, according to the changes and seasonality of

business owing through your agency?

• Do they understand the compliance issues within the recruitment industry that canimpact on your nances?

Benets of choosing a

specialist vs. generalistThere are many nancing providers out there with

apparently similar products. The trick is to nd one thatreally knows the industry and how to help your businesshandle the unique challenges of the recruitment sector.

A specialist should understand your requirements and

work in partnership with you, from start-up and beyond.They should have a genuine empathy and where possible,rst-hand experience of your challenges. Specialists

understand the unpredictable nature of the recruitmentindustry and will be more inclined to nance phoenixbusinesses — they are aware of the pressures on

recruitment industries so there’s no reason not to becondent you’ll get funding again next time round.

Generalists have their place, but they are not ideal

for recruitment agencies. Many are unlikely to havethe insight or inclination to handle all the nuances ofcollecting temporary and permanent placement invoices.




4. It’s not a good time tobe setting up

The economy is poor. A bad debt can mean the dierencebetween success and failure. But fortune favours the brave.In a depressed economy the leaner and nimbler operationsoften thrive.

Whether it’s a good time or not to set up depends on your attitude to risk— and how you plan for any problems:

• Spread your risk with several contracts

• Plan ahead — what would happen if you suddenly lost 50% of your turnover?

• Consider carefully the sectors you are considering specialising in. Is there anyopportunity to test the water in other sectors and spread your risk by diversifying?

• Think carefully about when to take on sta — which business functions could yououtsource to avoid additional overheads?

The recruitment industry has consistently demonstrated its resilience in tough times.

The most recent Annual Trends Survey from the REC last year showed that recruitmenthad bounced by 25% to just under £25billion.

And it’s on the rise. The medium term forecast for the industry is single digit growth over

the next four years with the industry peaking at over £30 billion in 2014/15.

YOURCALL




Did you know?

While most accountants can keep your books in shapeand accurate, they can’t tailor their advice to the uniquenuances of the recruitment industry.

With Outsauce, expertise is available to advise you on

everything from your bottom line to your business plan.


5. The rst few yearsare the hardest TRUE

Running your own business is not a hands-o pursuit. There’s nogetting around the fact that in order to succeed, you will have tobe committed — and that means late nights, weekend workingand precious few holidays in the rst years. Unless you’ve set upin partnership, sanity breaks may be hard to come by.

However, it’s not a life sentence. As you develop the business you will be able to increaseyour resources, expand your workforce and free up some time for R&R.

A recommended piece of bedtime reading is ‘The E-Myth Revisited’ by Michael Gerber.This is considered a bible for small business strategy and management. The core E-Mythprinciple is that successful business owners need to work ‘on’ their business rather than

‘in’ their business. Sage advice indeed.

Outsourcing your payroll is one of the key strategies available to ensure your timeis focused on the most productive areas of your business.

It can also mean of course that your workers still get paid if you take time out. But in

reality you’ll still have to ensure timesheets are submitted, answer queries and handlenew business enquiries year-round. It’s the nature of the beast.




Starting



What was the biggest challenge you faced when setting up?

Getting a new brand recognised and o the ground is tough.Many clients are set in their ways or have long standingrelationships and nudging onto PSLs with an unknown businessis dicult. This is where dogged determination comes intoits own. You just have to keep at it and you will get your break.And once you’ve got one contract and can prove your servicequality, more follow.

Simon Noakes, Bespoke Recruitment

You will have bad days running a new organisation but it’s importantyou convert those bad days into good weeks.

Recruiters' toolkit. Starting 13



Why battle the admin?

Outsauce Accounting can provide assistance with all ofthe administration required in starting up.


6. The administration required tostart up and run a recruitmentbusiness is complicated andtime consuming PARTLY

TRUE

It’s true; there is a lot of paperwork involved when setting

up your business. However, it needn’t be overly complicated,

provided you get the right guidance and specialist assistance

where required. You can even outsource a lot of the more

technical aspects to your accountant or solicitor.

When setting up, there are many options available. For instance, you can become a soletrader, enter into a partnership or become a limited liability company. Which one you

choose will depend on you — it’s a good idea to take advice from a specialist to make sureyou are choosing the most tax ecient and compliant solution for your business.

If you are planning on going down the self-employment route, you will need to inform

HMRC. This will mean you are responsible for tax self-assessment, Class 2 NationalInsurance and PAYE if you have people working for you. Click here to nd out more:

To become a limited company, you must register at Companies House. It’s cheaper todo this online and the process can take just 48 hours. Visit the Companies House websitefor more information:

http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

http://www.companieshouse.gov.uk/about/gbhtml/gp1.shtml


You will need to register for VAT if your sales total more than £77,000 for the last 12months. This page has some useful information to nd out when and how much youhave to pay:

http://www.hmrc.gov.uk/vat/start/register/index.htm



Record keeping…To prove compliance, you have to record everything.

Agencies must demonstrate they have followed theEmployment Agencies Act 1973 and Conduct Regulations

2003 legislation. You’ll need to keep details pertaining toapplications, hirers and your dealings with other agencies.Agencies must be able to supply this information for up

to one year after creation and within two business days ofbeing requested. (Modelling and entertainment agencieshave to keep records for a minimum of six years.)

…keeping up with the rest of

the paperworkOf course, record keeping must be completed alongside

day-to-day administration: payroll, sales ledger, purchaseledger etc. It can be time consuming and there is alwaysthe risk you will take your eye o placing people and

building relationships — or perhaps go the other way and

make a crucial slip in the paperwork.You might consider outsourcing various aspects of back

oce administration to an outsourcing business so youcan focus on developing your business.

*Read more about AWR and auto-enrolment in 2013 with

our Guides available at www.outsauce.net/resources

Legislation governing employment agenciesAs well as the general legislation which applies to all businesses, both temp and permagencies are subject to specic requirements under law, including:

• Never charging workers fees in exchange for nding them a job (this doesn’t applyto performers or other workers in the entertainment eld, or workers who arethemselves, set up as companies)

• Getting adequate information on the job requirements and the work-seeker’s eligibilityfor the role

• Obtaining written consent from a parent or guardian when taking on under 18s

• Ensuring workers have all the necessary qualications required by law (includinga criminal record check if required)

• Paying workers if they are employed by the agency, regardless of whether theagency has been paid by the hirer (again, there are exceptions in the entertainment

and modelling sectors)

• Providing workers with full details of all chargeable services, including right to canceland notice periods

• Ensuring migrant workers have the right to work in the country.

You can outsource paying your workers (including NI contributions and holiday pay) butthe rest is your responsibility. In 2013 this will also mean being on top of your AWR and

pensions auto-enrolment responsibilities.*

Tips for negotiating abusiness lease:

• Request a rent-free period to help yourcash ow

• Enquire after quarterly rent payments ratherthan monthly

• Get exibility by requesting a break clause

(right to end lease early)

• Bear in mind Stamp Duty Land Tax — this isa complex calculation so seek assistance

• Get a schedule of condition so you don’t have

to foot the bill for any repairs

• Don’t pay the landlord’s legal costs

• If you have a limited company, ask for the

lease to be put in its name to limit yourliabilities (Oer rent deposit, rather thandirectors guarantee)




7. There are too many pitfallsto remaining compliant PARTLY

TRUE

There are numerous legal requirements facing recruitment

agencies. Achieving compliance is not necessarily dicult,but it demands a good working understanding of the law andcan be time consuming.

Recruitment agencies are covered by both general legislation governing businesses

as well as legislation pertaining specically to recruitment.

For businesses, these include employment and tax law, immigration law, EU regulations,VAT, PAYE and NI.

The government provides a quick check list for businesseswith employees (this includes contractors at temp agencies).So, if you have employees, you must give them:

• a written statement of employment or contract• the statutory minimum level of paid holiday

• a payslip showing all deductions, e.g. National Insurance Contributions (NICs)

• the statutory minimum length of rest breaks

• Statutory Sick Pay (SSP)

• maternity, paternity and adoption pay and leave.

You must also:

• make sure employees don’t work longer than the maximum allowed

• pay employees at least the minimum wage

• have employer’s liability insurance

• provide a safe and secure working environment• register with HM Revenue and Customs to deal with payroll, tax and NICs

• consider exible working requests

• avoid discrimination in the workplace

• make reasonable adjustments to your business premises if your employee is disabled.

Source: https://www.gov.uk/contract-types-and-employer-responsibilities/fulltime-and-parttime-contracts




Contact Outsauce now to arrange a free,no obligation meeting with one of our advisers

0330 100 [email protected]

Obligations specic to recruitment agencies If you operate a temp agency, some responsibilities fall to the client who is hiring yourworkers and the rest to you.

The client pays you, including the sum for your employees’ NICs and SSP. It is yourresponsibility to pay your workers.

Temp agencies are responsible for ensuring their workers receive their rights under

working time regulations. The client remains responsible for their health and safety.

In accordance with AWR, after 12 weeks’ continuous employment, agency workers getthe same rights as permanent employees in most respects. These include: pay, working

time, rest periods, night work, breaks, annual leave and maternity, paternityor adoption leave.

The client must provide you with information on the relevant terms and conditions

but it is your responsibility to ensure that your worker receives these rights.

Additional information There is a great deal of information available on all of these topics:

The new www.gov.uk website is a good place to start.

For instance, if you are employing migrant workers, view this section on ensuring

your employees are eligible to work in this country:https://www.gov.uk/check-an-employees-right-to-work-documents

The Employment Agency Inspectorate (EAS) is a government body that works with

agencies, employers and workers to ensure compliance with employment rights.For useful links to advice and legalisation, visit: http://www.bis.gov.uk/eas

The above sources are useful, however, due to the complexities involved, it is always

advisable to seek advice from a specialist to ensure you are fully compliant.




Growing


What’s the best decision you evermade as your business began to grow?

What lessons have you learnedalong the way?

Don’t waste money on things you really don’t need. Keep costslow, it sounds simple, but costs can run away from you if youdon’t keep an eye on things.

People. Make sure you surround yourself with reliable peoplewho you would trust to run your business in your absence.If you ever feel that you couldn’t leave these people to workon their own — you have the wrong people in your business.

Persistence is key. Keeping motivated is dicult, particularlyduring the early stages when you’re working alone and tryingto get a new brand o the ground. A fear of failure holds a lotof people back from taking the plunge but you need to believein what you’re doing and keep at it.

Giles Casson, Encon

Gary Janes, Channel Recruitment


Recruiters' toolkit. Growing 18



8. The market is volatile TRUE

The market is volatile — but then there were no guaranteeswhen you set out on your own. The fact that you’re still hereand looking to grow is a good indication you have what it takesto make it.

As an experienced recruiter you will already understand the unpredictability of income,the perils of winning and losing contracts and the impact of seasonal variation.

Mitigate your risk by planning ahead — if cash is tight, consider cutting xed costs suchas property or limit your sta overheads. Remember when expanding to check the creditworthiness of new clients — while keeping an eye on the old. Talk through any potentialissues with your lender up front.

Equally, plan for an upturn — what would you do if you won a major new pieceof business?

Upturn checklist:

• Could you fund the increase in sta payment? • Could your systems cope? • Do you have the admin support you need in place?

• Can your nancing facility scale up quickly in line with your sales?




9. There are few opportunitiesto boost your prot marginas you grow

MYTH

Would you like to increase prot margins and improve your ownpersonal wealth? Perhaps you want to enjoy the fruits of yourlabour and spend less time working on your business?

If you’re placing candidates, referring them to a reputable and compliant employment

service (commonly known as an umbrella business) could help you achieve your goals:

Remove the admin burdenIf too much of your time is being taken up dealing with the day-to-day managementof contractors, referring them to an umbrella company will remove the hassle of admin.

Because your contractors will be employed by the umbrella company, the company willbe responsible for their PAYE and will be able to oer them the security and benets offull employment, as well as ensuring they are working compliantly.

All contractors need to do is ll in their timesheets and expenses. The umbrella company

will take care of the rest.

If your contractor is earning more than £15ph, then depending on their individualcircumstances, there may be more suitable options to consider. Some contracting

support businesses can provide a full range of payment options according to the bestemployment status for them; individual limited company (PSC) or sole trader. Some alsooer full accountancy services to ensure they make the most of their hard work and stay

on top of their own HMRC paperwork.

Everyone benets As your business grows, so too does the risk involved with PAYE and keeping on top oflegislative compliance. By referring your candidates, you won’t have to manage the tax,NI and holiday pay implications yourself (as well as the liabilities and professional

indemnity insurance), while your contractors can maximise their take home pay byclaiming legitimate expenses.

Contractors can enjoy the freedom of self-employment, with the peace of mind and

benets of being employed, including sick pay and holiday pay.

Specialists bring additional advantages. For instance, construction industry experts willbe able to ensure CIS contractors comply with their specic obligations.




Outsauce can helpWe have specialist contacts within the mainstream lending,business angels,private equity and venture capitalist communities.Call us to nd out more

0330 100 8686

Growing laterally — considerations for acquiringcompetitor businessesAcquiring a competitor business could be a good way to quickly expand. It’s an appealingoption as most of the groundwork should have been done for you — but don’t

underestimate the costs or the amount of work required to ensure a smooth transition.

When considering acquiring another business, look for proof of strong existing customer

relationships, reliable income and a decent reputation. Why is the current owner selling?Make sure it’s for the right reasons. Value the assets — and the debts.

Talk to existing customers, but be sensitive to the current owner and do not reveal yourintent without clear permission. You should be able to get a good picture of what thebusiness does well and where it has shortcomings.

Try to assess the quality of employees — have you had any dealings with themprofessionally, while networking or during previous roles? Ideally they should haveexperience that you can draw on to enhance your own business.

One drawback to buying a business is that you will typically need to invest a large amountup front. This will include budgeting for professional fees — solicitors, accountants andsurveyors will all need to be involved. If the business is underperforming, you will need to

inject extra time and money to realise its potential.

Fortunately, obtaining nance might be easier if the company has a proven track record.

Consider cash ow — it’s a good idea to set aside a few months of working capital toassist with any extra costs (think: general administration, stationery, advertising etc).Rebranding the new company will add to the bill.

Provided a ‘whitewash’ certicate is provided by an accountant, the target company’s

invoices can be used to release the funds for acquisition (unless it already factors ordiscounts those debts.)

Existing contracts may need to be honoured or renegotiated, including employment

terms, and you should ensure there is no serious outstanding litigation againstthe company.

Once you have made the decision to purchase a business and your oer has been

accepted, you will be given a period of time to ensure due diligence. This is where thesolicitors and accountants come in.

There are three types of due diligence:

• legal due diligence — verifying whether all legal issues have been addressed,including ownership of assets and whether the business has the legal title to sell

• nancial due diligence — making sure there are no hidden surprises in the

company accounts

• commercial due diligence — assessing where the business sits in the market,alongside competitors and the regulatory environment.

Due diligence is a critical process and you should use this time to make sure you

know exactly what you’re getting into. Use payroll records, sta les, employment

contracts — everything you need to make the most informed decision.




Why sweat on legislation?

Ensuring conformity with legislation can be a drain on your resources.Especially when you need to focus on placing candidates and creating

and nurturing client relationships.

Compliant and ethical contracting services can take away the pain soyou can concentrate on developing your business.

Not only will you save time, money and potential legislation headaches,

you’ll also be providing added value to your contractors.


10. Referral to an umbrellacompany will mean exposingcontractors and clients todubious practices

MYTHA few companies have tarnished the reputation of the umbrellaindustry by giving unscrupulous tax advice. However, althoughumbrella companies have received some bad press, there aremany which are fully HMRC compliant and operate on an ethicalbasis, providing extensive, above board benets to agenciesand contractors.

It’s important that contractors are matched with the correct employment status — a reputable contracting business will give impartial advice that ensures contractors

choose the most nancially benecial, and compliant, status for them, and they will never

push them to make a particular decision. If joining an umbrella is not the right solution,then they will make it known and provide guidance on alternative options.

Of course you are concerned about your reputation, so only refer to a well-establishedumbrella company with a good reputation of their own. The best umbrella companiesare fully HMRC compliant and operate to the most stringent standards.

A successful, umbrella company with a strong history is also a much safer choicein nancial terms.

Unproven companies are a gamble and the consequences could be severe if they go bump.

Questions to ask your umbrella:• What is your AWR Model?

• What support can my contractors expect if they have employment queries?

• What’s your nancial track record?

• How do you monitor contractor compliance?




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Recruiters toolkit

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Transcript of Recruiters toolkit