The Accounting Department Blog

Starting your own recruitment business - money mistakes to avoid

When starting up a recruitment business, there are some common mistakes you should try to avoid. It is far better to learn from the mistakes of others than to learn the hard way. The very reason I set up my own business is to help business owners get it right, after witnessing some great business failures during my time as an insolvency practitioner.

This article will focus on recruitment on-hire (temporary and contract staff), but many of the points below are salient to the industry in general. In fact, given that the need for permanent staff fluctuates hugely depending on the state of the economy, recruitment agencies that do not have a thriving temp desk could be making a money mistake themselves! Knowing how to find and keep great on-hire candidates and clients is something that can benefit many recruitment companies.

If you are starting up a recruitment business that either partially or solely focuses on on-hire, there are a few money minefields to avoid on the path to becoming a thriving business with a great reputation, helping to grow your employees’ careers and your clients’ businesses alike.

Here is some of what you need to keep in mind when you are starting and growing your business.


  • Don’t be scared to value your temps at what they are truly worth – be confident in their level of service and the value they add to your client. Competing in a price war with other agencies may result in your temps being unfairly compensated. Your people are your greatest asset - with a plethora of options available to temps due to the rise of the freelance “gig economy” it is now more important than ever to secure great candidates and to keep them happy and loyal.
  • Don’t be tempted to lower your margins to a point that they are barely viable – be aware of industry benchmarks and find the right balance between pricing your temps at a competitive but profitable rate. Nigel Harse's RIBreport is the perfect way to benchmark your margins. 


  • Make sure you have enough capital to start and grow your business. Keep in mind, you will need to pay your temps their wages before receiving any money from your clients. As your business grows, so too will your need for working capital.
  • Make sure you get your funding right. Back when Kevin Rudd was handing out money left, right and centre, I was able to help one of my clients to start an on-hire business with a start-up capital of $15,000, and sell it in less than 5 years as a very successful business with a turnover of more than $13 million per year! We live in different times now, and it is more important than ever to invest the time in getting your funding right. Since Kevin Rudd, with the right funding partner involved, I have been able to help clients set up their business using invoice finance with no existing equity. Experienced finance providers like Danny Marlow of APositive have products designed for start-up businesses.
  • Getting the right funding involves a lot of work, and you need to ensure you have the right person to advise you through the process. It is best if this person is a qualified Management Accountant who has the expertise to prepare detailed three-way forecasts. This may seem like an expensive up-front cost, but by investing in the services of someone who specialises in preparing these forecasts for your industry, you will get an excellent return on investment, potentially saving yourself thousands of dollars down the track.  


  • Don’t make the mistake of seeing your client relationships through a short-term money-first or even money only lens – it’s not about transactions, it’s about people. Instead, see each relationship as an opportunity to build wealth over time by nurturing them into long-term loyal relationships.
  • Don’t approach your business strategy with a micro view instead of a macro view – it is all about scalability for future growth. 


  • Whilst money may be tight in the early years, the biggest mistake any business owner can make is not paying your superannuation on time (please refer to my blog on paying super on time). The penalty is that the superannuation you do pay will no longer be tax deductible, resulting in a hefty tax bill that can absolutely cripple a new business.
  • Make sure you have a streamlined process in place for your temps to get their timesheets submitted – if they don’t get their timesheet in on time you will not be able to invoice the client. I have seen new business owners spend precious hours chasing up their temps for timesheets. By having a strict streamlined process in place, those hours could be better spent growing your new business.
  • Make sure you familiarise yourself with the awards that your temps operate under – you must know the ins and outs of your employee entitlements or risk facing a nasty fine from the Fair Work Commission. Even if you outsource your payroll or contractor management to someone like The Accounting Department who can take care of all of this for you, it is important that you have a good understanding of legal rights and entitlements as it will impact your margins.


  • Make sure you understand your true financial position at all times – without the right people and accounting systems in place, you will never have an accurate understanding of your cashflow, your liabilities or how your business is performing. You may see your bank balances grow and be tempted to buy that sports car, but you could find yourself getting caught short when you are struggling to find funds for an unexpected tax bill. The sheer nature of the recruitment on-hire industry and the rate at which money comes in and out means that it is more important than ever to have a watchful eye cast over your cashflow at all times. The worst thing that could happen is that you find yourself not being able to make payroll before receiving payment from your clients.

Fortunately, if you get the right team in place to support you, each of these areas of the business will be a breeze. For more information on having the right support team in place from a business owner's perspective, please see Tony Metcalf’s blog entitled Operations, Sales and The Other Bloke.



Posted By: 
David Payne