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Starting a Successful Employment Agency Business

written by: William Busse•edited by: Michele McDonough•updated: 6/20/2010

The business of matching qualified applicants with companies that have job openings can be profitable and personally rewarding. Those who start an employment agency business serve an important function for both clients and applicants regardless of economic conditions.

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    The Employment Counselor

    For the entrepreneur with a passion, there may be no more fulfilling endeavor than operating a successful employment agency. Especially in the current economy, the notification that a job offer has been made and accepted can bring a deep sense of satisfaction to the business owner. The employment counselor plays a vital role in locating talent for both large corporations and small businesses, and providing exceptional employment opportunities for job seekers.

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    The Importance of Planning

    For those looking to start an employment agency, it is essential to assemble a thorough business plan. For the employment agent,BUSINESSMAN AT DESK 6  this would include an emphasis on market identification and sales strategies as well as financial planning.

    The decision relating to the focus of the business will ultimately prove to be the most critical. Employment agencies either adopt a comprehensive approach which provides services to many industries, or concentrates their efforts on a particular niche where they use their specialized knowledge to gain credibility with employers.

    Although an employment agency isn’t investment intensive, it is important to identify the necessary financial requirements. For example, the location of the business must be a convenient traveling distance for applicants. This usually requires a central city facility where rents are generally higher. The telecommunications system is also of critical importance with considerable reliance on sophisticated voice and data systems. Even in a single owner-operator scenario, multiple phone lines and a broadband internet connection are a must.

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    Structuring the Business

    Sector specific agencies, often called executive search firms, provide services to a variety of business customers within a particular discipline. Common industries with this kind of narrow focus are information technology, finance and accounting, legal, health care and engineering. The advantage of this type of business is a clearly defined purpose which concentrates on a particular client and applicant. Successful niche agencies also typically experience more effective customer development, higher commission percentages and more frequent referrals.

    An agency whose efforts are directed toward general employment enjoys a much broader base of both potential clients and applicants. Complex knowledge or unusual terms and language often required in an industry specific environment is also limited. From white collar salespeople to the service sector, employment agencies that appeal to non professional occupations generally complete more placements, but usually at a lower yield per transaction.

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    Sales and Marketing

    In analyzing the appropriate application of sales efforts and marketing funds, it is important to recognize the unique structure of the business. In fact, the vast majority of employment agency fees are paid by the companies acquiring the employees. Therefore, theBUSINESSMAN ON TELEPHONE 2  job listing business is the actual client, although the importance of the applicant in the process is self evident.

    In fact, while developing a strong base of corporate clients is difficult, the process of finding qualified applicants on a continual basis is even more challenging. This is especially true in a low unemployment environment as was the case through most of the 1990’s and early 2000’s.

    The general rule is that sales efforts should be primarily directed towards acquiring business clients, while marketing initiatives are targeted towards attracting job seekers. There are numerous venues for developing business clients including cold calls from want ads or online job listings. Developing productive relationships with Human Resources is vital to advancing the process and obtaining listings for the agency. The typical approach is the presentation of a qualified applicant to an HR department with a job requirement and expanding the conversation from there.

    To attract applicants, the agency must provide a professional looking website and strive to gain a favorable placement in the search engines. Booths at career fairs are also an effective tool for meeting potential job seekers. Brochures and media advertisements, breakfast club memberships and high profile networking all can be effective methods of cultivating the talent necessary to establish credibility and repeat listings from clients.

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    Profit and Pitfalls

    Fees from business clients are generally 15-20% of the agreed upon annual salary and are contractual in nature. In a rare occurrence, a client or applicant will attempt to circumvent the agency and try and avoid paying the fee. Therefore, it is very important that remedies for such an event are included in both the listing agreement and the job seekers application. In general, payment should occur 30 days after employment begins, although some companies will try and negotiate a longer term or a proportional payment based on the length of employment.

    It is also imperative that those who start an employment agency maintain the highest ethical standards. The industry as a whole suffers from perception issues, so it is absolutely critical that there is full disclosure to clients relating to any applicant issues than can be legally discussed. It is also important to avoid the temptation to approach individuals who are satisfied with their current position with the lure of superior compensation and benefits with another company. These kinds of business practices will inevitably eliminate a possible future client as well as diminish the agencies reputation.

    With careful planning, efficient execution and maintaining a disciplined and principled industry profile, an employment agency can thrive regardless of economic conditions.