1. Pay contractors X/hour, and you charge X+Markup per hour. You need to be able to EVERY contractors NOW, and have enough money to wait until LATER, or you'll go BROKE
2. Charge a fee for a successful placement. In the USA I've most commonly seen 20%, and some agencies can get away with 25%. Ver few charge more than that.
3. Retainer. You get paid cash up front to fill a position, and more when the position is filled.
4. Hourly recruiting. You charge for a recruiter's time.
It sounds like you're looking to operate as business model 1 and/or 2.
First, the basics:
- If you don't have any jobs to fill, you won't make money. So if you don't already have a proven method to get clients, I assume you're planning on dialing for dollars. "DIALING +1-415-200-0000... ring... 'hey, wanna i'm a recruiter and...' CLICK... DIALING +1-415-200-0001.."
- If you don't know how to source candidates already, you'd better figure that out really darn fast. The entire recruiting industry revolves around trying to find some secret sauce to build of proprietary methods & databases for connecting with 'top talent'. Few recruiters are truly good at finding candidates in hard to reach places.
Now some thoughts on why it's hard to grow a recruiting business:
- You're already in tune with the fact that successful recruiters "probably don't want to give their secrets away", and that's correct, to a point. Any super successful recruiter's real secret is that they work their butt's off as hard as anyone you've ever met, because being a persistent machine of a person is really the only way to make it (that I've seen). There is absolutely, positively no shortcut to success in the recruiting business. And someone who makes big $$$ has no incentive to come work for you.
- A mediocre recruiter will work for you, take all your money, get fired, and go do the same for another company willing to hire a mediocre recruiter
- An inexperienced hire with a lot of potential will work for you, get good, and leave when they realize they can make more working independently than they can working for you. The barrier to entry for starting one's own dialing-for-dollars recruiting business is incredibly low. You only need a phone and a desk. That's all I had when I got started! And as soon as I got good enough to make it on my own, I left my boss' company & started my own!
- When trying to drum up new business, you will have a very hard time getting quality clients. The crappy clients will hire any recruiter that calls them, and the good clients will only take your business if you have quality candidates to present BEFORE you call them. No CTO/VP/Director/Manager wants to spend most of their time explaining their jobs to recruiters who will never show up with a quality candidate, which is what happens most of the time.
- Any attempt you make to automate your recruiting business is going to be extremely hard. Writing your own software is always hard. And writing software that ties into other recruiting platforms is difficult, because in my experience every recruiting solution on the planet tries to build a walled garden and/or owning the user interface through which all recruiting work is done.
- If you do manage to hire a successful recruiter who wants to keep working for you, you'll need to keep them happy, and that will eat up more & more of your capital. It will also be able to capture the magic that lives within your awesome recruiter to the point where you can hire other people & teach them to be awesome, too.
To learn a bit about running a service business, check out Managing The Professional Service Firm. [1] . It touches on a lot of the challenges related to running a business like that one you want to create.
My advice to you is... if you really want to run a recruiting business, first learn how to be a recruiter yourself. Without that knowledge, I fear any time & effort you spend on trying to build a business that will depend on people you don't know to do work you don't understand will be a hole into which you pour all of your money. I'll tell you what. Send me all of your money, and I'll send you 50% of it right back. That way you can say you hired a recruiter, failed fast, and cut your losses while you still had some cash to speak about :)
Good luck!
[1] https://www.amazon.com/Managing-Professional-Service-David-M....
This book is quite good on the standard parts of managing professional firms e.g. accounting and law: https://www.amazon.com/Managing-Professional-Service-David-M...
Technical consulting has significant differences, however. There is a big separation between the sales and requirements side of the business and the solution/execution side.
One of the things that most resonated with me from the book is three kinds of consulting companies: expertise, experience and execution.
Expertise consultancies solve complex problems that require non-standard solutions, e.g. a big merger/acquisition or designing a complex software solution. The boss typically has decades of experience, and the "juniors" have a decade.
Experience consultancies solve semi-custom problems, things that are amenable to process and knowing the answer to common issues in a domain. An example might be setting up a new legal entity for a startup, or building a custom website to handle e-commerce.
Execution companies handle well understood problems at lower cost than it would take to do in house, e.g. monthly book keeping, building WordPress websites for small businesses.
In the book, he talks about a number of standard ways of splitting up profits in a partnership. A lot depends on the goals of the firm based on its stage. So the partners might value individual billable hours, managing staff that are billable, bringing in business, or being the "managing partner" who makes sure that the rent gets paid and the copy machine works.
It's possible that you have a mix of Expertise, Experience and Execution in one firm, but one basic rule is that in order to be a partner, you should not be relying on another partner to make your team work, e.g. bring in sales.
This is one reason that technical consulting firms are different, because being great at technical execution does not mean that you are good at sales and relationship management. In fact, it's negatively correlated, and essentially impossible to hire for. Anyone who can do the job well can run their own consulting company.