Let's start-up a CUK recruitment agency

[Dominic Connor]

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?

To me personally, nothing.
He used to drink with us a gang of contractors one of who took legal advice from him that may mean he loses his home. I see that as bad.

Also when my wife, the real lawyer, found out that our friends were getting dodgy advice she confronted him and he got all menacing at her.

I see legal advice as a bit like electricity, I'm happy dabbling with 12/5V computer stuff but I won't do anything with mains more than change a fuse and I certainly would not take money to go fix someone's ring main.

That's a boundary that Roger crossed (before we get the clients fund issues) and got himself defrocked as a solicitor. Bad legal advice is nearly as dangerous as bad cricuitry.

I had almost forgotten him until I saw him cited on CUK.

[financial analyst]

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?

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.

Cashflow risk should lie with the agency, not the contractor. There should be no need for a contractor to receive anything less than is due to him/her, but obviously it would help cashflow a lot if shareholding contractors were able to invoice fully or partially after funds are received from client co.

Invoice factoring is readily available when the client co is a blue-chip Plc. The bank prices terms on the creditworthiness of the clientco so the state of the start-up is less important to the bank.

Once a well-rated client co signs off a timesheet/invoice (ideally online), the agency is obliged to pay the contractor. The bank will transfer say 70% of the agency invoice (including margin) to the agency. With 10% margin, this is c.76% of the amount due to the contractor. As long as the remaining 24% can be met from cash and overdraft, the contractor receives full payment. The bank will take a fee once the agency invoice is paid. For a highly-rated client co the fee is tiny.

I'll knock up a basic forecast model. PM me if you would like me to send it to you.

[malvolio]

Cashflow risk should lie with the agency, not the contractor. There should be no need for a contractor to receive anything less than is due to him/her, but obviously it would help cashflow a lot if shareholding contractors were able to invoice fully or partially after funds are received from client co.

Invoice factoring is readily available when the client co is a blue-chip Plc. The bank prices terms on the creditworthiness of the clientco so the state of the start-up is less important to the bank.

Once a well-rated client co signs off a timesheet/invoice (ideally online), the agency is obliged to pay the contractor. The bank will transfer say 70% of the agency invoice (including margin) to the agency. With 10% margin, this is c.76% of the amount due to the contractor. As long as the remaining 24% can be met from cash and overdraft, the contractor receives full payment. The bank will take a fee once the agency invoice is paid. For a highly-rated client co the fee is tiny.

I'll knock up a basic forecast model. PM me if you would like me to send it to you.

Leaving aside "the agency is obliged to pay the contractor" (they aren't), the killer here is "Blue Chip client". They have a reliable supply model that works as far as they are concerned, using either major players or companies they have dealt with for years. I still don't see a market-facing USP that would convince them to change.

[eek]

Leaving aside "the agency is obliged to pay the contractor" (they aren't), the killer here is "Blue Chip client". They have a reliable supply model that works as far as they are concerned, using either major players or companies they have dealt with for years. I still don't see a market-facing USP that would convince them to change.

He's just a dreamer who doesn't know the amount of effort required in cold calling people until you get a contractor in.

[PrimulConsulting]

hi FA,


The contractor club is an interesting idea, but functionally unworkable, as you need to charge a high enough fee to ride out the troughs of the market.
If you cut the fees to notional amounts, a bad couple of quarters and you potentially have no operating cash.

.

As founder of Contractor Club it's good to see so many posts within this thread refering to the Club.

This one is interesting - the club is not charging enough. Maybe

I set the club up after 6 years of being a Contractor, so contractors could work together and share the (direct with Client) leads we get.

For 18 months I ran it in the evenings after finishing contracts. It never gained scale. However since July I worked on the Club full time, and we are developing quickly:
- we are setting local networks (geographic, business and industry)
- network leads (contractors) are working with me to get their exclients to use the Club
- we are finding members (contractors) who will be subject experts to review CVs before they are sent to the client

The Club only takes 4% for 90 billed days (and the fee for the member reviewing CVs comes out of this). Is it enough? Don't know yet - but I believe if we can get scale then it will be. Dozens of members are offering to help with the networks and/or cv review.

I would (obviously) urge any contractors keen to see a different model (to the current Agency one) to have a look, join, and if you think it's "for contractors", get involved.

I think if the Club is "functionally unworkable" it will be because insufficient Contractors really want to get involved in removing the agency stranglehold - not because the 4% is too low.

However, do please keep telling contractors the Club does not charge enough!

Cheers
Rob

[DodgyAgent]

I think if the Club is "functionally unworkable" it will be because insufficient Contractors really want to get involved in removing the agency stranglehold - not because the 4% is too low.

No, really?

[CoolCat]

It maybe "functionally unworkable" simply because too many end clients want

- the cheapest possible
- a match with some acronym they have heard about at a conference rather than a track record of successful projects
- yes men to simply tell them what they want to hear

rather than what a proper contractor organised approach would want. you cannot compete with CV shuffling pimps if clients are just driving for lowest cost.

[evilagent]

I'll knock up a basic forecast model. PM me if you would like me to send it to you.

hi FA,

If the forecast model doesnt contain anything proprietary, it may be more educational to post it here fully.

Then, any further contributions can be based on greater insight, not hearsay and supposition.
Thanks in advance if you choose to post, even if only a synopsis.

[evilagent]

As founder of Contractor Club it's good to see so many posts within this thread refering to the Club.

This one is interesting - the club is not charging enough. Maybe

I set the club up after 6 years of being a Contractor, so contractors could work together and share the (direct with Client) leads we get.

For 18 months I ran it in the evenings after finishing contracts. It never gained scale. However since July I worked on the Club full time, and we are developing quickly:
- we are setting local networks (geographic, business and industry)
- network leads (contractors) are working with me to get their exclients to use the Club
- we are finding members (contractors) who will be subject experts to review CVs before they are sent to the client

The Club only takes 4% for 90 billed days (and the fee for the member reviewing CVs comes out of this). Is it enough? Don't know yet - but I believe if we can get scale then it will be. Dozens of members are offering to help with the networks and/or cv review.

I would (obviously) urge any contractors keen to see a different model (to the current Agency one) to have a look, join, and if you think it's "for contractors", get involved.

I think if the Club is "functionally unworkable" it will be because insufficient Contractors really want to get involved in removing the agency stranglehold - not because the 4% is too low.

However, do please keep telling contractors the Club does not charge enough!

Cheers
Rob

hi Rob,

Glad to see your input here.
My overview was a judgement based on what I felt were the possible incomes, for say, getting a cut of "only" 90 days billing.
I am happy to be educated and learn more.

If you pitch against recruiters, you need to be sure that the only edge isn't just price.
Because if you pitch on price alone, you are getting 4% of a self-imposed lower price. And that for only 90 days!
If you pitch on lower price, and only charge 4%, the contractor may only be marginally better off.
You need 4 deals of 4% on 90 days to compete with a recruiter only taking 4% for the whole duration of a 12-month contract.

The ideal situation is: win the contract on the same high-rate as a recruiter. Then share the spoils as you describe.

If you have to compete on price, the eventual rate the contractor gets may be compromised, and you only get 4% of a lower price. And you have to work 4 times over for a conventional recruiter model over a 12-monther.

My assessment of functionally unworkable is based on not charging enough to build cash reserves. Because each placement is only worth 3 months of funds. 2 quarters of poor returns, and I genuinely feel you're in a fix.

I am happy to say you're not charging enough.

[PrimulConsulting]

hi Rob,

Glad to see your input here.
My overview was a judgement based on what I felt were the possible incomes, for say, getting a cut of "only" 90 days billing.
I am happy to be educated and learn more.

If you pitch against recruiters, you need to be sure that the only edge isn't just price.
Because if you pitch on price alone, you are getting 4% of a self-imposed lower price. And that for only 90 days!
If you pitch on lower price, and only charge 4%, the contractor may only be marginally better off.
You need 4 deals of 4% on 90 days to compete with a recruiter only taking 4% for the whole duration of a 12-month contract.

The ideal situation is: win the contract on the same high-rate as a recruiter. Then share the spoils as you describe.

If you have to compete on price, the eventual rate the contractor gets may be compromised, and you only get 4% of a lower price. And you have to work 4 times over for a conventional recruiter model over a 12-monther.

My assessment of functionally unworkable is based on not charging enough to build cash reserves. Because each placement is only worth 3 months of funds. 2 quarters of poor returns, and I genuinely feel you're in a fix.

I am happy to say you're not charging enough.

The 90 days is 90 billed days/working days - so 4-5 months. So that helps a bit vs the 3months assumption.

Where I have posted on behalf of my ex clients, I always require that they pay the member the rate advertised to the agency. The message is a better contractor for the rate - NOT a cheap option. So far it has worked 100% of the time. (Although I recongnise some Corporates will just want cheap)

Cash flow wise I think 4% /90 billed days is low but possible (although some still claim its too much or too long when it comes to mailing their confirmation!). If it's not, we may need to extend to 6 months. however, over the last month quite a few members are getting active which should be enough to tip it into viable at 4%

Thanks for your support of the concept.

Rob