Value Added By Agencies

[MaltSokol]

Reads to me more like he wants to act like Resource Solutions at Barcap or Adecco at Credit Suisse, where they're the agents for direct recruits. A lot of large places will have it covered in a similar fashion (they're just the two that spring to mind).

OP, can you clarify under what resourcing circumstances you would expect your newco that you've described here would be engaged please?

Perhaps it's a need that is already covered. It's just I had a couple of examples in which the direct recruits were having to go via regular rec agencies that were taking their full cut without having sourced the candidate. These were engagements where the rec gets a fixed percentage.

Apologies, I've probably been reshaping slightly the concept in my mind as your contributions were coming through.

The scenario that comes to mind is that a candidate is referred directly by the team but the client can't or won't engage them directly. I was being naive to how to make it to the client's PSL in the first place, but they will indeed be saving money and it's not impossible if it adds value.
This agency will then manage the contractor from then on. The twist (or USP if you like) is a lower fee for the client and some kind of reward or cashback for the referrer and/or the new hire.
A variation is when the interview process requires a purchase order or interview invitation to be put through a procurement system. In this case the agency would just do it on behalf of the hiring team or the referrer.

Adecco sounds a like a big mammoth to onboard just for this but maybe they'd be fine taking small contracts for a handful of contractors at a given site.

[LondonManc]

Perhaps it's a need that is already covered. It's just I had a couple of examples in which the direct recruits were having to go via regular rec agencies that were taking their full cut without having sourced the candidate. These were engagements where the rec gets a fixed percentage.

Apologies, I've probably been reshaping slightly the concept in my mind as your contributions were coming through.

The scenario that comes to mind is that a candidate is referred directly by the team but the client can't or won't engage them directly. I was being naive to how to make it to the client's PSL in the first place, but they will indeed be saving money and it's not impossible if it adds value.
This agency will then manage the contractor from then on. The twist (or USP if you like) is a lower fee for the client and some kind of reward or cashback for the referrer and/or the new hire.
A variation is when the interview process requires a purchase order or interview invitation to be put through a procurement system. In this case the agency would just do it on behalf of the hiring team or the referrer.

Adecco sounds a like a big mammoth to onboard just for this but maybe they'd be fine taking small contracts for a handful of contractors at a given site.

If a large bank has over a 1000 contractors, they'd rather simply deal with Adecco, end of story.

[MrMarkyMark]

If a large bank has over a 1000 contractors, they'd rather simply deal with Adecco, end of story.

Oh, they are quite happy to take on a group of contractors as long as they get a slice, usually around 5%.
I did a similar thing with Resource Solutions, which was fine until they got greedy and decided to lie and tell the perm hirers it was against company policy to go through me.

That's one of the reasons why you need to get on the PSL.

[DodgyAgent]

Thanks for your response!
I try to stay always optimistic

50 contractors at £500, 17 billed days on average + VAT = £510,000 billed per month

If the client is paying at 30 days and (my) agency is paying the contractors at 7 days, that's 23 days of accounts receivable financing. For that value and that term can be financed for a £6,700 fee (according to Market Invoice after 5 minutes of Googling ), which is a 1.4%, say 2% to be on the safe side. This would be factored in in the fee paid by the client. The issue is that they only advance 85% of the invoice amount.
I would still need a working capital of £76,000 or it can be discussed with the contractor to pay the remaining 15% in a second instalment at a later date in exchange of getting that cashback I mentioned.

If the client is paying at 90 days, it comes at 2.2%, so say 3% to be on the safe side. The net working capital required triples to £210,000, which makes it less viable for this volume. In any case it's clear that building a nice war chest of net working capital would be the Nr1 priority to reduce the cost of financing.

Is there anyone with recruitment industry knowledge that could please corroborate or refute these figures?

What about the cost of finding clients?

[LondonManc]

What about the cost of finding clients?

I think he's purely talking about acting as a middleman for client to contractor direct links who would prefer a middleman involved, suggesting that he can do it cheaper.

[MaltSokol]

I think he's purely talking about acting as a middleman for client to contractor direct links who would prefer a middleman involved, suggesting that he can do it cheaper.

Yes, and now I understand it'd be particularly for cases with small headcount of direct contractors where the big players either don't find it worth getting in or they'd charge too much marginally due to the low volume. If Adecco is happy to go in even for just a couple of contractors and still charge just 5%, then I definitely have no business case...


With a mere net margin of 2% that's £170 per month for the typical £500pd contract. I'm seeing it with the workload distributed in a similar way to an accountant. Big work chunk when setting up new client, little work month by month, big work chunk once a year onboarding a new contractor or renewing contract.

[malvolio]

Yes, and now I understand it'd be particularly for cases with small headcount of direct contractors where the big players either don't find it worth getting in or they'd charge too much marginally due to the low volume. If Adecco is happy to go in even for just a couple of contractors and still charge just 5%, then I definitely have no business case...


With a mere net margin of 2% that's £170 per month for the typical £500pd contract. I'm seeing it with the workload distributed in a similar way to an accountant. Big work chunk when setting up new client, little work month by month, big work chunk once a year onboarding a new contractor or renewing contract.

With the usual payment terms from you to the contractor and the client to you, for each contractor you will be holding a minimum £147,500 dead cash at all times. Take on 50 contractors and that's something north of £7m that you can't spend. And your income for that period is £17,500.

Doesn't sound all that appealing to me...

[northernladuk]

You are also taking about established agencies who have done the legwork and are now coining it in. There will be plenty out there that didn't make it or running on a shoestring trying to get the clients being talked about here.

[MaltSokol]

With the usual payment terms from you to the contractor and the client to you, for each contractor you will be holding a minimum £147,500 dead cash at all times. Take on 50 contractors and that's something north of £7m that you can't spend. And your income for that period is £17,500.

Doesn't sound all that appealing to me...

I don't know where you're getting that £7m figure. For 50 contractors it's more like £500k if the clients pay at 30 days (thats is 50people*17days*£500*1.2vat), which is the most typical payment term according to an agent I spoke with today. He said a few clients pay them at 60 days, but that's it. And sometimes there are screw-ups with a timesheet being delayed until the next month.

As it says in a previous post, with accounts receivable financing, 85% of the invoice value can be covered for a month for a 2% fee. That reduces the net working capital that needs to be kept to £75k for those 50 contractors (anyway if we lived in happy land were invoices are never written off)
But I get it, I get it, too much risk involved for so little money to be made.

[northernladuk]

B2b can be anything up to 90 days and I'd imagine some of them are around that. Try the sums with that figure on. I would be a little careful with what agents tell you unless he's a mate and you knows he's telling the truth.