One of the most challenging aspects of growing a successful recruitment agency is retaining great staff within the business. The best staff members will often be top-producing consultants, managing large accounts and even running teams within the business. If your top billers leave to start their own agency, this could mean the loss of profit, loss of clients or loss of management within the business.
These top staff members will often have little reason to stay when there is no prospect of them owning a slice of the company (due to the company already having a large value) or they cannot be rewarded differently to make it unfair on the other staff members within the business. This can often lead the top billing staff to look into the possibility of starting their own agency. If the attraction is great enough, they will likely resign leaving a big hole within the business.
TOP BILLERS: HOW TO START YOUR OWN RECRUITMENT AGENCY
Over the years, we have seen a specific solution implemented by several agencies where the top billers are offered an opportunity to start their own agency, have the cashflow to retain a salary and pay overheads whilst also taking advantage of preferential rates on invoice finance, owning a share in their own company and taking dividends. The agency retains an element of shareholding and can share in the long-term profitability of the new company.
The model works as follows:
- The recruitment agency offers the top biller an opportunity to start their own company where they own 40% of the shares up front and the agency owns 60% of the shares (shareholding percentages can vary).
- The recruitment agency will provide funding to the new company to cover the top biller’s salary and all overheads. The agency would manage the back office and accounting processes for the new company.
- The recruitment agency can help the new agency to secure lower rates on certain suppliers due to the relationship with the main agency, if the agency is making contract/temporary placements, the new agency can enjoy the preferential rates on a group invoice finance facility.
- The top biller can work with their existing clients and candidates which will be billed via the new company.
- There would be shareholders’ agreements in place regarding the distribution of dividends and voting rights.
- The recruitment agency will continue to fund the new company for an agreed period of time (e.g. 2 years) or until the company becomes self-sufficient.
- Once the new company breaks even, the recruitment agency will transfer 10% of shares to the top biller at no cost (as there would be no value in the company at the break-even point) meaning the shareholding is at 50%.
- There would be options for the top biller to buy further shares in the company from the recruitment agency at market value.
- Should the new company fail, the recruitment company would have to absorb the loss and liquidate the new company.
This model has been successful for many agencies and helps retain the top biller and some of the income without losing 100% of the profit or the staff member.
WANT TO AVOID LOSING YOUR TOP BILLERS?
MAYACHI has worked with several agencies that have adopted this strategy for their top billers. One of the agencies replicated it with two consultants and has built a successful group of companies in the process.
We can advise you on this structure and help you implement this strategy for your agency to retain your top billers. The first step is to book your complimentary consultation call where we can look at your agency as it is now, and look at options going forward. Book your slot right here.
