
Ask HN: Validating assumptions about the recruiting business - Avalaxy
We&#x27;re looking to start a new IT recruitment company (targetting a specific niche). We made some assumptions about this business, but we would like to hear the thoughts of other people to check if these assumptions make sense. Of course I thought about asking recruiters what they think of it, but they probably don&#x27;t want to give their secrets away and help a potential competitor.<p>Some background info: we are based in the Netherlands and are looking to hire an experienced recruiter. There won&#x27;t be a pool of candidates or customers from the beginning, we will start looking for those from scratch. We will try to match both freelancers looking for gigs, as well as employees looking for permanent jobs.<p>Here are the assumptions:<p>1) We will be able to match our first candidate with a job within 4 months after starting.<p>2) We will be able to convert 2 succesful matches per month (with 1 recruiter).<p>3) A €3000 gross base salary per month + 10% bonus (of the total fee) over every match that the recruiter manages to convert is a fair salary (the base salary might be difficult for people from other countries to judge, but does the performance bonus structure make sense?).<p>4) A freelancer will probably stay at his job (and thus provide us revenue) for 6 months on average.<p>5) Asking for 3 months&#x27; worth of salary for a permanent employee match is a fair compensation.<p>Are there any people with knowledge of the recruitment business who can shed some light on whether or not these assumptions are accurate?
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cayetano
I've been in tech recruiting for 8 years. Mix of inhouse and contingency
search. I'm not sure what the IT recruiting market is like in the Netherlands
so my answers are from a US perspective.

1) 4 months is doable as long as you can generate enough viable job orders for
the recruiter to work on. 2)Depending on the niche 2 hires per month is
doable. 3) Base + commission is a standard structure for agency recruiters.
You can add a progressive tiered commission structure to incentivize the
recruiter to go above the monthly goal (eg. 0-$40k fees a month is 10%, 41-80k
15%, etc) 4) 6mo contract gigs are pretty standard. Will the contractor stay
is a question of the quality of the role and the pay. 5) For direct hire 20%
of the yearly salary is standard. I've seen as high as 40% for highly impacted
markets and skills. Others will take as low as 15%

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loopbit
I'm not a recruiter, but I have many years of dealing with them both as an
employer and an employee, a few friends are and they've asked me for my
opinion in several occasions, the latest when one of them was thinking about
expanding into my native country.

Inshort, I'm not a recruiter, I know a bit about the recruitment industry but
I'm not an expert. However, until you get more views, here are my two cents:

1) Without knowing the niche or the contacts you have in it, I don't think I
can answer this but my gut feeling is that you might be a bit too optimistic.

2) Assuming you have a big enough pool of candidates and clients, a single
recruiter should be able to handle that level of work.

3) As you say, base salary is difficult to judge without knowing the local
market. Bonus seems a bit low to me (but again, not an expert).

4) Might depend on your niche, but seems like a reasonable assumption.

5) From what I've seen, three months might be a bit high. The recruiters I've
worked with usually ask for 10-20% of gross yearly salary, half when the
candidate commences employment and the rest once the employee passes the
probation period (usually six months).

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dsk139
I'm a javascript engineer that does recruiting in NYC/SF (I've wound down a
bit to work on a SaaS product for recruiters) and I've been meaning to blog
about my experiences. Preface: YMMV greatly based on location. I was able to
sign my 1st client and match a candidate within 1 month of starting (albeit I
had a small network of engineering managers from working in SV).

Working part-time for the first 6 months I averaged 3 placements/mo, weighted
towards the latter period of that time frame as I got better & partnered with
a recuriting firm to boost # of clients. I took no salary and took home
45%-100% of the fee based on whether it was a client of my own or not and
revenue goals I hit in my partnership. 10% + €3000 seems low for an
experienced recruiter.

For client fees, I started with 20% of yearly base salary contract- I now only
sign 25% contracts. I only do perm matches, never got into the
contracting/freelance game.

Feel free to e-mail me if you have additional questions.

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s3nnyy
I am running coderfit.com - a tech recruiting agency - after working for three
years as a Python/Javascript engineer.

I would say recruiting is like poker, you should be skillful in what you do,
but it also depends on the cards you get (good candidates that look for jobs
now & clients that don't suck).

So "recruiting progress" is much harder to predict than - let's say - a
software project, where things are much more deterministic because you don't
depend on people so much saying yes to what you offer them.

Also, a big question is, do you want to do linkedin-spam (outbound) or build a
reputation writing high-quality content and play the "long-game" or do
something entirely different? What do you hire your recruiter for? What should
he/she do?

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JSeymourATL
> We will try to match both freelancers looking for gigs...

There exist several platforms that do this already - Toptal, Freelancer,
Gigster, Upwork > [https://www.forbes.com/sites/reneemorad/2016/10/24/the-
skill...](https://www.forbes.com/sites/reneemorad/2016/10/24/the-skill-thats-
paving-the-way-for-freelancers-to-make-500k-or-more/#65ac060513ae)

Can you deliver a faster, better, more economical experience for clients? More
interesting/rewarding for job-seekers?

~~~
Avalaxy
What we want to do is completely different. Those websites are barely used in
my country. The market here mostly consists of big companies looking for temp
employees that will work on-premise. The sites you mentioned are mostly cheap
off-shore employees from Asia that all want to work remote.

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amorphid
I was a technical recruiter for 8-ish years, and now I'm a developer. There
are a few basic models in recruiting:

1\. Pay contractors X/hour, and you charge X+Markup per hour. You need to be
able to EVERY contractors NOW, and have enough money to wait until LATER, or
you'll go BROKE

2\. Charge a fee for a successful placement. In the USA I've most commonly
seen 20%, and some agencies can get away with 25%. Ver few charge more than
that.

3\. Retainer. You get paid cash up front to fill a position, and more when the
position is filled.

4\. Hourly recruiting. You charge for a recruiter's time.

It sounds like you're looking to operate as business model 1 and/or 2.

First, the basics:

\- If you don't have any jobs to fill, you won't make money. So if you don't
already have a proven method to get clients, I assume you're planning on
dialing for dollars. "DIALING +1-415-200-0000... ring... 'hey, wanna i'm a
recruiter and...' CLICK... DIALING +1-415-200-0001.."

\- If you don't know how to source candidates already, you'd better figure
that out really darn fast. The entire recruiting industry revolves around
trying to find some secret sauce to build of proprietary methods & databases
for connecting with 'top talent'. Few recruiters are truly good at finding
candidates in hard to reach places.

Now some thoughts on why it's hard to grow a recruiting business:

\- You're already in tune with the fact that successful recruiters "probably
don't want to give their secrets away", and that's correct, to a point. Any
super successful recruiter's real secret is that they work their butt's off as
hard as anyone you've ever met, because being a persistent machine of a person
is really the only way to make it (that I've seen). There is absolutely,
positively no shortcut to success in the recruiting business. And someone who
makes big $$$ has no incentive to come work for you.

\- A mediocre recruiter will work for you, take all your money, get fired, and
go do the same for another company willing to hire a mediocre recruiter

\- An inexperienced hire with a lot of potential will work for you, get good,
and leave when they realize they can make more working independently than they
can working for you. The barrier to entry for starting one's own dialing-for-
dollars recruiting business is incredibly low. You only need a phone and a
desk. That's all I had when I got started! And as soon as I got good enough to
make it on my own, I left my boss' company & started my own!

\- When trying to drum up new business, you will have a very hard time getting
quality clients. The crappy clients will hire any recruiter that calls them,
and the good clients will only take your business if you have quality
candidates to present BEFORE you call them. No CTO/VP/Director/Manager wants
to spend most of their time explaining their jobs to recruiters who will never
show up with a quality candidate, which is what happens most of the time.

\- Any attempt you make to automate your recruiting business is going to be
extremely hard. Writing your own software is always hard. And writing software
that ties into other recruiting platforms is difficult, because in my
experience every recruiting solution on the planet tries to build a walled
garden and/or owning the user interface through which all recruiting work is
done.

\- If you do manage to hire a successful recruiter who wants to keep working
for you, you'll need to keep them happy, and that will eat up more & more of
your capital. It will also be able to capture the magic that lives within your
awesome recruiter to the point where you can hire other people & teach them to
be awesome, too.

To learn a bit about running a service business, check out Managing The
Professional Service Firm. [1] . It touches on a lot of the challenges related
to running a business like that one you want to create.

My advice to you is... if you really want to run a recruiting business, first
learn how to be a recruiter yourself. Without that knowledge, I fear any time
& effort you spend on trying to build a business that will depend on people
you don't know to do work you don't understand will be a hole into which you
pour all of your money. I'll tell you what. Send me all of your money, and
I'll send you 50% of it right back. That way you can say you hired a
recruiter, failed fast, and cut your losses while you still had some cash to
speak about :)

Good luck!

[1] [https://www.amazon.com/Managing-Professional-Service-
David-M...](https://www.amazon.com/Managing-Professional-Service-David-
Maister/dp/0684834316).

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ivan_ah
3 mo seems steep as finder's fee. I've heard of 1mo/2mo, but never 3mo.

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hguhghuff
Charge 12.5% of annual salary. That works.

