Reply to: Setting Up An Agency

[threaded]

Being in this game for many many years I can tell you exactly how many of the agencies started: with nothing. By nothing I mean not even their own telephone and fax machine. From that starting point they got to where they are today, or did a moonlight flit and tried again.

If you think you need money and offices and staff etc. etc. to start an agency business then you'll not last even 5 minutes.

HTH

[Judge Fred]

[tim123]

"So you need 5 contractors to break even. 10 Makes loads" - Tim - I didnt say that.

Um, yes you did

Agents like contractors. Need they're hands holding. And anyway who has a few hundred thousand in the bank? Except me.

Anyone going out on their own will factor their invoices. This should cost them around 5%. This must be a better deal for them than paying a 'profit' to a silent investor.

Employing an experienced agent just has to be like buying a six month old used car. Why would this sort of person be prepared to risk working for a start-up on an 'average' deal?

I'm not saying that starting up an agency isn't a good idea. It's just:
a) not as easy as you think,
b) probably not a good investment for money in the bank. It can work just as well without putting up the money. Covering the cash flow is not the hard part here and doing so does not add value.

tim

[MarillionFan]

"So you need 5 contractors to break even. 10 Makes loads" - Tim - I didnt say that. I reckoned 5 contractors would be break even. You would need 10 to start making cash.

"f they are any good, they could just as easily go out on their own (as many do)."

Agents like contractors. Need they're hands holding. And anyway who has a few hundred thousand in the bank? Except me.

[tim123]

MF, you appear to have missed out some costs. It is not normally the case that placing 5 people on a 15% margin results in anything close to profit for a silent investor. Even with 10 placements most of the margin will be eaten up in costs.

Some OMBs are prepared to work for the returns on a small number of placements but that is because they are in complete control. I don't think that an employed consultant would be so minded, especially one that came with a book of contacts, as, if they are any good, they could just as easily go out on their own (as many do).

tim

[Generalist]

The key issue as ever is finding clients. Hiring an agent is fine to get a supply of contacts, but how many of them will be on PSLs or have other procurement/HR department barriers to entry? The omb's I know have been able to exploit a relationship with a client or their own contacts from previous jobs. Start with that and cashflow, hiring staff and expansion can follow once you've got some presence in the market. And never put up your own money (although if you have a ltd co with some retained profit you are prepared to risk, perhaps to mitigate corporation tax this can be used to cover initial setup costs).

I'd be interested in collaborating with anyone who wants to do this or simply earn money from introducing clients/roles that result in placements. Email me privately if you want to explore this further.

[vetran]

Unfortunately

The contractors will need paying monthly / weekly on time otherwise they stop work.

The client will delay paying as long as possible. Are you going to tell the client you will pull the contractor from site for late payment? Or admit you can't pay your bills?


You need factoring or a stack of cash.

[AtW]

Havent you got a search engine to debug or something.

You are right.

[BoredBloke]

Much depends on the payment terms with the end client. When I worked direct to GSK, I was on their standard payment terms of 4 weeks after the invoice was recieved. That is not a million miles away from what some agencies offer their contractors. In those circumstances, then cash flow is not much of an issue. Where it becomes a problem is where the end company pays once a quarter - In all cases you could pay to get a factoring service involved. I even had one contract with a agency where the agency was paid by another agency on the clients preferred supplier list.

"That's how they get people to lie on the phone and do anything because if they don't they won't earn a dime and get fired: this kind (too heavily geared towards commission) of schemes should be illegal in principle and any mis-deed by the agent should be immediately reflected onto the company in question who coerced them into lieing."

He didn't ask how to set up a 'nice play by the rules agency'.

"Sueable and easily winnable in court: if he testifies in court that the new company encouraged him to do so then that will be the end of it."

But it does happen - I know loads of agents who have moved to different agencies and who have taken a listing of contractors and clients with them. It is not easily winnable in court. The all the new agency has to do is deny the allegation that they encouraged the agent to bring the new contact info. The act itself would have been carried out by the agent not the new agency.

In the same way that a person buying a car on the cheap which turns out to be stolen is not usually sent to prison - the thief is the one who gets sent down or tagged these days!

[Lucifer Box]

You can see that if for example one contractor decides to sue you for wrongful dismissal, or the client goes under or doesnt pay then you could be in the tulip quite quickly.

That's why it might pay to re-factor the debt to start with. Because you can be as sure as a sure thing your clients will pay you late - 90 days after invoice submission is probably the best you could hope for as a startup.

[MarillionFan]

AtW Stop commenting. You are a moron and showing yourself up. Havent you got a search engine to debug or something.

So what do you reckon for cash flow then.

One contractor £8k per month. Say three months to cover cash flow for agency invoice to be paid as you pay regularly. So £24k per contractor.

15% Commission per contractor = £1200 per month
Agent wants to earn 50k per annum?!?! (5k per month)
Office+ PHones £1k per month

So you need 5 contractors to break even. 10 Makes loads

So 6k per month on an outlay of 240k(p/a).

You can see that if for example one contractor decides to sue you for wrongful dismissal, or the client goes under or doesnt pay then you could be in the tulip quite quickly.

[AtW]

You offer the agent a small wage but a big cut in the comission to get them pulling the work in.

That's how they get people to lie on the phone and do anything because if they don't they won't earn a dime and get fired: this kind (too heavily geared towards commission) of schemes should be illegal in principle and any mis-deed by the agent should be immediately reflected onto the company in question who coerced them into lieing.

When they move they will do so with their contacts list, nicked from their previous employer.

Sueable and easily winnable in court: if he testifies in court that the new company encouraged him to do so then that will be the end of it.

[BoredBloke]

What you do is get a bank to agree to bankroll it becuase the cash flow is the thing which will kill it. Then you look to hiring agents from other agencies. When they move they will do so with their contacts list, nicked from their previous employer.

I know somebody who works for a small agency and that was how it was setup - 3 contractors got together and formed it and got an agent to do the donkey work. You offer the agent a small wage but a big cut in the comission to get them pulling the work in.

[MarillionFan]

You still have to get contracts etc. The business is unregulated and you need to have the hide of a rhino, but the question is, has the days of one man bands vanished.

I do know one guy who places perms, who can make £10-£25k on one placement and he reckons that given 4 a year he doenst have to work that hard - but not sure if I could prositute myself in that way.

[Lucifer Box]

I think it is Scots who does something a little along these lines.

What sort of cash flow do you think you need to set up an agency, and do you need a flash cocky type to do it?

Do you think they're are that many 'one man bands' around these days?

I suppose there's no reason why you couldn't re-factor the debt yourself. Obviously this eats into your profits, but as long as you could put some security up might let you get started with a smaller cashflow than you might think.