Let's start-up a CUK recruitment agency

[financial analyst]

50 contractors at an average £450 a day for five days a week to be paid weekly out of client funds that are a minimum 60 days away and more likely 90. That is a rolling debt of (£450*5 days * 8 weeks) = £900,000. Who puts that money up?

Agencies use a combination of cash, overdraft and invoice factoring to manage cashflow. This agency would be no different in that respect.

[malvolio]

Agencies use a combination of cash, overdraft and invoice factoring to manage cashflow. This agency would be no different in that respect.

So they do, but that leads to the next obvious question; who is going to extend you a £1m line of unsecured credit with no trading history, no assets and no reserves?


As a matter of interest I've been looking at creating a non-agency for some years on exactly the lines you are proposing, using an existing pool of contractors across multiple sectors. The two main obstacles - there are others - are that the market is already sown up by the RPOs and 90% of your costs are in marketing and sales which have to be covered by your fee income. 'd be delighted if you can make it work, but at least start from a full knowledge of the market and the commercials; they are not as simple as you might think.

[northernladuk]

This really should go in to LR

[eek]

So they do, but that leads to the next obvious question; who is going to extend you a £1m line of unsecured credit with no trading history, no assets and no reserves?


As a matter of interest I've been looking at creating a non-agency for some years on exactly the lines you are proposing, using an existing pool of contractors across multiple sectors. The two main obstacles - there are others - are that the market is already sown up by the RPOs and 90% of your costs are in marketing and sales which have to be covered by your fee income. 'd be delighted if you can make it work, but at least start from a full knowledge of the market and the commercials; they are not as simple as you might think.

+1. He really needs to look at contractor club and see how that (just about) works.....

[Dominic Connor]

Another lesson from other professions...

Earlier I mentioned the partnership structures used by lawyers, accountants etc.

All have some sort of management, either a cabal or leader, there are certain decisions that are hard to make by general votes of the partners...

One that has been already raised is deciding which CVs to put forward for a contract, think through who will be making that decision ?

Yep, the inhouse agent.
How many people here are shocked that "business development" or rainmaking are key attributes of the people who end up running partnerships ?

Perhaps you're already ahead of me here in how it is easy to see the agent that is "working for you" is in fact your boss and I don't see that as what many people here want.

The sales droid will inevitably be quite powerful, if you lose him, 100% of your sales force go and the cash flow looks quite grim, lose one of 20 contractors and its 5%. Replacing him will be hard and he will know it.

Then there is managing multiple sales people, my introduction to this was at PC Mag where I was told "you don't manage them, you endure them".

Worked example, back when I was a contractor a pimp who got me a job was a natural genius at opening up new accounts for the firm, and this was his first job as a pimp. So he got paid almost no commission because he'd place the first guy and then the client would be given to another pimp who made easier money feeding in contractors and permies.
He then quit.

Allocating rewards properly between opening accounts and feeding them is tricky and there are quasi philosophical questions. IBM UK labs where I worked as a contractor amongst hundreds is not part of IBM UK and their management pyramids only converge in the US. I get a rake off for getting IBM Labs as a client, what do I get when we sell bodies to IBM UK ?

If I don't get a rake off, I won't try to sell.

This assumes you know the internal structure of the client, I have no clue about the various bits of M&S, BBC, HP and other potential clients that are big enough for serious fights to break out over rake offs, when I work on getting people into Algorithmics and the other sales droid is working on IBM UK which are nearly the same firm.

There's shedloads of tulip like this and I don't share these points to put you off, but to get you thinking about how to deal with it because it can be managed else sales firms would not exist.

[bobspud]

Earlier I mentioned the partnership structures used by lawyers, accountants etc.

All have some sort of management, either a cabal or leader, there are certain decisions that are hard to make by general votes of the partners...

One that has been already raised is deciding which CVs to put forward for a contract, think through who will be making that decision ?

Yep, the inhouse agent.
How many people here are shocked that "business development" or rainmaking are key attributes of the people who end up running partnerships ?

Perhaps you're already ahead of me here in how it is easy to see the agent that is "working for you" is in fact your boss and I don't see that as what many people here want.

The sales droid will inevitably be quite powerful, if you lose him, 100% of your sales force go and the cash flow looks quite grim, lose one of 20 contractors and its 5%. Replacing him will be hard and he will know it.

Then there is managing multiple sales people, my introduction to this was at PC Mag where I was told "you don't manage them, you endure them".

Worked example, back when I was a contractor a pimp who got me a job was a natural genius at opening up new accounts for the firm, and this was his first job as a pimp. So he got paid almost no commission because he'd place the first guy and then the client would be given to another pimp who made easier money feeding in contractors and permies.
He then quit.

Allocating rewards properly between opening accounts and feeding them is tricky and there are quasi philosophical questions. IBM UK labs where I worked as a contractor amongst hundreds is not part of IBM UK and their management pyramids only converge in the US. I get a rake off for getting IBM Labs as a client, what do I get when we sell bodies to IBM UK ?

If I don't get a rake off, I won't try to sell.

This assumes you know the internal structure of the client, I have no clue about the various bits of M&S, BBC, HP and other potential clients that are big enough for serious fights to break out over rake offs, when I work on getting people into Algorithmics and the other sales droid is working on IBM UK which are nearly the same firm.

There's shedloads of tulip like this and I don't share these points to put you off, but to get you thinking about how to deal with it because it can be managed else sales firms would not exist.

It's not an agency you want its a team of permies making you more money because your business sells them at £600 to £1000 a day and pays them £200 - £300 tops...

[Dominic Connor]

It's not an agency you want its a team of permies making you more money because your business sells them at £600 to £1000 a day and pays them £200 - £300 tops...

Agreed.

That is the model used by most accountancy and law firms. Partners get a share of the profits from their ownership as well as from their work as equity partners.

But at most firms the real money is made by associates and staff who are wage slave permies, usually with the carrot of partnership to keep them motivated.

In some cases, such as lawyers the dilution caused by having too many juniors without enough grownups is regulated, indeed that is one reason Roger Sinclair is a defrocked solicitor.

The margins can be as good as you say, but you have to pay permies whether or not you have a client to bill for them.

[CoolCat]

Indeed its the same problem that most IT consultancies have.

The problem you have managing the saleforce is nothing to the problem you have with the delivery staff when an over promoted salesperson is put in charge of them, which happens repeatedly out in IT consultancy land. Indeed most of the senior folk in all the big consultancies are really just salesfolk with flash job titles, remarkably few have any project delivery skills.

I think one of the secrets would be to keep it small, and if its in danger of getting too big just sort of franchise off the way of working rather than keep growing yourself. But that needs the majority to want to go that way.

[evilagent]

Agencies use a combination of cash, overdraft and invoice factoring to manage cashflow. This agency would be no different in that respect.

Yes, that would work.

I mean, if you are billing £400 a day, you don't actually need £400 a day to live on.

An investor/shareholder could invest a chunk of money, and give seedcorn funds for living expenses to the contractor whilst the client pays up.
So, for a £2K a week invoice, the contractor could be forwarded say 20-25% of the value.

This might help minimise credit lines, overdrafts charges,etc.
But, in some sense, what you're doing is shifting the point of risk.

[Taita]

Agreed.

That is the model used by most accountancy and law firms. Partners get a share of the profits from their ownership as well as from their work as equity partners.

But at most firms the real money is made by associates and staff who are wage slave permies, usually with the carrot of partnership to keep them motivated.

In some cases, such as lawyers the dilution caused by having too many juniors without enough grownups is regulated, indeed that is one reason Roger Sinclair is a defrocked solicitor.

The margins can be as good as you say, but you have to pay permies whether or not you have a client to bill for them.

Very good points Dominic. There are many pitfalls between wishful dreaming and running a co-operative that the members/stakeholders regard as successful for them as individuals. Particularly difficult as there is a double expectation - continuous employment AND a profit share.


I will probably get serious flak for this but I am curious. What did Roger Sinclair do to you to earn such a high degree of vitriol?

You have introduced his name randomly in several posts.

Not seen much from him in recent years but in his days as a contributor to Freelance Informer I felt he was generally helpful to the contracting community. I would like to know what I was misreading. Incidentally, I am not aware (at least in his published statements) that he claimed to be a solicitor - contract specialist, yes. Solicitor, no.