May 12, 2024

Tips on starting a recruitment agency in the United States

John Kim

Co-founder @ Paraform

In this blog

1. Niche Down: Find your focus2. Choose your business structure3. Build your dream team (even if it's just you!)4. Craft your value proposition5. Select the technology6. Build your brand7. Join Paraform

The US recruitment market is a booming industry, offering exciting opportunities for enterprising individuals.

But before you dive headfirst, a well-defined plan is crucial. Here we’ll go over some necessary tips for you to take on board as you navigate through the starting phase of your new agency.

1. Niche Down: Find your focus

The recruitment industry is vast. Don't try to be everything to everyone. Identify your niche – a specific industry (tech, healthcare, finance), a particular job type (executive search, temporary staffing), or a specialized skill set (data science, cybersecurity).

Focusing allows you to build expertise, attract targeted clients, and differentiate yourself from competitors.

Check out our blog here on the best niches for recruitment in 2024

2. Choose your business structure

Next, choose the business structure for your agency. Here are the different types of business structures:

1. Sole Proprietorship: The simplest structure, but you hold unlimited personal liability for business debts. It’s not ideal for most recruitment agencies due to the financial risks involved as there is limited coverage for you if something goes wrong and also difficult to get loans.

2. Limited Liability Company (LLC): A popular choice offering personal liability protection for the owners (called members). Easy to form and maintain, with flexible profit and loss (P/L) distribution options. Consider a Single-Member LLC if you're the sole owner.

3. Corporation: A more complex structure with stricter formalities. A corporation model offers greater liability protection but comes with additional paperwork and tax implications. It's typically used for larger recruitment agencies.

Factors to consider when choosing a structure

• Liability: How much personal risk are you comfortable with? A sole proprietor means you’re fully liable for the business losses, whereas an LLC provides a good balance but is harder to set up. Take time to evaluate this.

• Taxation: LLCs are considered "pass-through" entities, meaning business profits or losses pass through to the owner's personal tax return. Corporations pay corporate income tax and then owners pay taxes again on dividends received.

• Management and Ownership: In a Sole Proprietorship, you own everything but have to bear the brunt of all the taxation and paperwork, whereas other options have more balance in management structure and profit-sharing arrangements but are easier on taxes. Consider if you want to go at it alone or start with one or more partners.

Additional legal stuff

Here are a few other legalities to consider during this phase:

1. Business License: Most states require a general business license to operate. Find out from your local council.
2. Employer Identification Number (EIN): An EIN is crucial for filing federal taxes and opening business bank accounts. Obtain one from the IRS website.
3. Recruitment License: Although very uncommon, some states require a specific recruitment license to operate, so double-check this while you’re researching your local council.

3. Build your dream team (even if it's just you!)

Recruiting is a people business. If you don't have a team initially, hone your sourcing, negotiation, and client communication skills.

Consider your future staffing needs. Will you hire employees in the United States or outsource work remotely?

If you choose the former, be sure to check out the IRS website for more on hiring employees.

4. Craft your value proposition

There are thousands of new recruitment agencies formed every year. Ask yourself what makes your agency unique. Is it your deep industry knowledge, exceptional candidate network, or innovative recruitment methods?

Ask yourself the following questions and articulate your value proposition to potential clients and candidates alike.

What unique value do I bring to clients and candidates compared to other recruitment agencies?

This question goes beyond just your niche. Consider your team's expertise, specific recruitment methodologies, or any innovative technology you utilize. What sets you apart and makes clients choose you over the competition?

What are the biggest pain points I solve for clients in their hiring process?

Go beyond simply filling positions. Do you offer faster turnaround times? Do you specialize in sourcing hard-to-find talent? Identify the specific challenges your clients face and how your agency uniquely addresses them.

What kind of experience do I want candidates to have when working with my agency?

Your value proposition isn't just for clients. Think about how you can attract top talent. Do you offer personalized career coaching? Do you have a strong track record of placing candidates in their dream jobs? Highlighting the benefits for candidates strengthens your overall value proposition.

5. Select the technology

First and foremost, you need to invest in a quality Applicant Tracking System (ATS) to streamline your recruitment process, manage applications, and improve candidate experience. Do your research and choose one in accordance with your niche, budget, and how many people you have on your team.

Also, consider Customer Relationship Management (CRM) software to organize client interactions and track project progress. A lot of modern systems are a combination of both so it's worth investing in one that incorporates both CRM and ATS functionalities.

Here are a bunch of other tools to consider investing in that can automate your recruitment operation

6. Build your brand

Develop a strong brand identity that reflects your agency's values and target audience. Leverage LinkedIn to connect with potential clients and candidates and post content regularly.

Here are the 3 main things you should be posting every week:

1. Industry trends: Curate and share articles or infographics related to your niche area. Add your commentary to spark discussions and demonstrate your knowledge.
2. Recruitment best practices: Offer tips on resume writing, interview preparation, or navigating the job search process. Position yourself as a trusted advisor to potential candidates.
3. Company culture spotlights: Showcase your agency's work environment, team culture, and employee success stories. This attracts talent seeking a positive work environment.

7. Join Paraform

Be sure to join Paraform and get access to tons of exciting tech startups that you can immediately start recruiting for and get paid hefty rewards.

Sign up today, view the open roles, and choose one or more that align with your niche and expertise. This way you can eliminate the process of acquiring new business entirely and get straight to work.

Don’t ever worry about spending time and money on generating new leads or having to outreach.

Get started!