Purpose built platform to find contracts

[JacobMason]

Ex-contractor here so no vested interest.

Your offering:
A recruitment agency without the agents but with all the other processes and functionality, such as:
Website, with searchable vacancies for candidates & website, with searchable candidate database for clients? (Both risk clients/candidates/other agencies rinsing you in various ways)
Invoicing pass through - you act as an admin function to collate invoices and signed timesheets from the candidates and pass the invoices plus your percentage (5-8% presumably) on to the client.
Lower margins to clients because there's no package to pay recruiters

You'll need as a starter:
Company incorporation
Accountant
Lawyer to sort your contracts out (including IR35 scenarios)
Insurance

The big issue I see for a start-up agency is invoice factoring - clients pay 56/90 day lead time, candidates expect weekly or monthly upon completion of signed timesheet and invoice. In your case, I'd say that you'd have to pay weekly to mitigate the candidate's risk of you collapsing give your lack of (credit) history.
As an example on rolling the numbers up:
Let's say you do well, engaging 20 contractors at an average of £500 per day for 20 days each month from the start of 2020 all on six month contracts (fantasy island, but it's an illustration of where you want to be). That's £50,000 per week + VAT that you'll have to pay out from the second week of January and you won't see any money until either the end of February or the end of March, depending upon the terms of your supplier agreement with the client. Let's say 90 days because those are the terms that three different agencies have told me about. Before you have a single pound come through the door, you'd have paid out to clients £1,080,000. That's not all though. If you invoice monthly to clients, which is typical, you'd then have £256,800 (assuming average 7% commission) arrive in your account from January. Then you'd have to pay out £240,000 over the course of the next month. You'll have to be going for several years before you get the base costs back for your margin to catch up with your factoring costs. Based on those 20 contractors, your margin would be c.£50k per annum. Less costs, salaries, etc, you'd really need to be ramping up to about 100 contractors to make it worth while.

Great analysis here, thank you.

What I would say though is that yes, contractors expect timely payment, however if we're trying to be as transparent as possible and lessen the gap between the contractor and client why but just inform the contractor of the clients lead time and pay them accordingly. That's exactly how it would work if there were no agencies - to be fair my last few clients have paid pretty promptly so I don't think 3 months is standard.

[eek]

I think that's a bit of a generalisation. I've worked with multiple clients who cared about the overall cost.

I do, I used it as an example of an advert board.

Yes clients care about the overall cost - what they don't care about is the split of who gets what - that was half the point of my post.

The other half was that clients are often happy to pay more in return for doing less. The specialist agencies can happily charge 15-20% margin at times as they provide the specialist contractors the mainline agencies can't rapidly find.

[wattaj]

What I would say though is that yes, contractors expect timely payment, however if we're trying to be as transparent as possible and lessen the gap between the contractor and client why but just inform the contractor of the clients lead time and pay them accordingly.

Aye, good luck with that. Up to 90 day terms? FRO...

You are dreaming. You seem to think that you can just sit there and let the money roll in with little to no risk. I'll say this once more for the cheap seats: YOU ARE DREAMING.

You are offering no benefit to the contractor that they cannot get on better terms elsewhere.

Stop trolling us and go and open a chip shop.

[Cirrus]

We don't like recruiters.

I see this time and again here. You are looking at it from the point of view of the contractor. As I indicated earlier, as a contractor I'll go wherever there is a lead.

You have to look at it from the perspective of the customer.

For that you need to know who your customers are. You don't seem to have mentioned anything about your customers or what they think about this. Have you asked them yet?

I would guess most contractors supply big companies. Big companies don't like lots of small suppliers. They get really upset by the cost and hassle of the accounts payable ramifications. They also take solace in the size and credibility of big suppliers. On the other hand there may be a number of small outfits who would warm to a lower price. But as I said before, you have given us absolutely no insight as to how you could run an agency cheaper than the present incumbents.

One final point. Are you a contractor or are you a salesman? This all about sales and not much about contracting. Is that really you? Are you any good? Do you really want to do that?

[GhostofTarbera]

Aye, good luck with that. Up to 90 day terms? FRO...

You are dreaming. You seem to think that you can just sit there and let the money roll in with little to no risk. I'll say this once more for the cheap seats: YOU ARE DREAMING.

You are offering no benefit to the contractor that they cannot get on better terms elsewhere.

Stop trolling us and go and open a chip ship.

Mmmmmm chips


Sent from my iPhone using Contractor UK Forum

[Lance]

I see this time and again here. You are looking at it from the point of view of the contractor. As I indicated earlier, as a contractor I'll go wherever there is a lead.

You have to look at it from the perspective of the customer.

For that you need to know who your customers are. You don't seem to have mentioned anything about your customers or what they think about this. Have you asked them yet?

I would guess most contractors supply big companies. Big companies don't like lots of small suppliers. They get really upset by the cost and hassle of the accounts payable ramifications. They also take solace in the size and credibility of big suppliers. On the other hand there may be a number of small outfits who would warm to a lower price. But as I said before, you have given us absolutely no insight as to how you could run an agency cheaper than the present incumbents.

One final point. Are you a contractor or are you a salesman? This all about sales and not much about contracting. Is that really you? Are you any good? Do you really want to do that?

I'll answer for him.

No.
Not a salesman.
No.
No.
Having second thoughts now (or should be anyway).

[LondonManc]

Great analysis here, thank you.

What I would say though is that yes, contractors expect timely payment, however if we're trying to be as transparent as possible and lessen the gap between the contractor and client why but just inform the contractor of the clients lead time and pay them accordingly. That's exactly how it would work if there were no agencies - to be fair my last few clients have paid pretty promptly so I don't think 3 months is standard.

Question for you:

If there are three agencies on the PSL, including yours, why would I go with one that puts three months of signed timesheets at risk rather than using an agency who can pay weekly and mitigate that risk?

I'll answer that for you - you pay me a higher rate to take that risk on or you have an exclusive deal with the client. If you can do either/both of those then you'll have a chance of success.

[b0redom]

Great analysis here, thank you.

What I would say though is that yes, contractors expect timely payment, however if we're trying to be as transparent as possible and lessen the gap between the contractor and client why but just inform the contractor of the clients lead time and pay them accordingly. That's exactly how it would work if there were no agencies - to be fair my last few clients have paid pretty promptly so I don't think 3 months is standard.

Ahahahahahahahaha..... 90 days..... LOL

If I was contracting direct with central government directly, I might consider 90 days. If the rate was high enough.

A noddy start up with no track record and no substantial cash reserves.



Good luck with that.

[JacobMason]

Aye, good luck with that. Up to 90 day terms? FRO...

You are dreaming. You seem to think that you can just sit there and let the money roll in with little to no risk. I'll say this once more for the cheap seats: YOU ARE DREAMING.

You are offering no benefit to the contractor that they cannot get on better terms elsewhere.

Stop trolling us and go and open a chip shop.

Fair point, but imagine a world where all contractors were hired directly by the client, that would still happen.

Thank you for your criticism.

[Lance]

Fair point, but imagine a world where all contractors were hired directly by the client, that would still happen.

Thank you for your criticism.

That's a very different world though. And not exactly helpful to you.


One of the reasons agencies exist is clients often have strict purchasing rules.
I have a client who'd happily pay me direct, but as a 3 month contract would exceed £25k they have to go out to tender. That's a pain for them, and it also means I might not even get the work. That's why they'll get an agency, or two, through the tender process so they can onboard people quickly.

There's lots of problems with your idea, but I'll be brave and suggest that the fundamental problem is that you don't know what an agency's business actually is. You've just not been contracting long enough, and never been an agent.
To become a disruptor in a sector, you MUST understand that sector in great detail.
Why not get a job as a pimp for a while? See it from the other side and then see if your business will float.