Back in May, I wrote an article about whether now – during COVID-19 – was a good time to start your own recruitment agency. Since then, a number of startups have sprouted up across the Hong Kong and Singapore markets. The volatility in the market has stabilised as we head towards a long road to recovery and arguably there is no better time to start an agency than today.
In this guide, we explore the considerations and steps that you, a budding recruitment entrepreneur, need to take if you’re ready to launch a new firm from scratch. We cover the journey from both a planning and operational perspective, so you can take necessary action to get things moving.
In the past and in the present day, I’ve launched recruitment agencies in both Hong Kong and Singapore. I’ll be talking about my experience starting with Singapore first and Hong Kong next week.
Step 1: Business plan, financial and cash flow projections
Before getting ahead of yourself, writing up a comprehensive business plan is key to keeping your thoughts and ideas structured. With the amount of information you need to consider before you start to trade, there’s no doubt it will be overwhelming at times. Having a plan keeps you accountable and organised within a specific time frame.
Within your business plan, you should have your financial projections ready to go, including your cash flow document which I think is one of the most important documents of all. Cash is king when running a business, and when you’re battling time, keeping yourself honest with this document will help you sleep at night in the early days.
It’s highly likely you will produce less revenue than you project and spend more money than you forecast. My rule of thumb when it comes to cash flow is writing a 20% variance above your projected figures.
Whilst planning is essential, it’s important to avoid getting carried away by writing pages and pages of documents that you won’t read. Keep it short and sweet. Place emphasis on action to stop falling into the trap of over-planning.
Step 2: Secure your funding
Once you have your plan ready to go, securing your funding is the next step to recruitment entrepreneurship. If you’re not completely self-funded or if you haven’t secured funding yet, then kick this off now.
You may be relying on a chunk of investment, a facility from a bank, crowdfunding or perhaps you and a partner have invested equal amounts into the business. There are lots of creative ways you can start to raise capital, but one thing is for sure: more often than not, it will take longer than anticipated to secure.
Keep in mind when planning your funding that a significant deposit of paid up capital in the bank account will certainly assist in any EP applications you may make.
When it comes to compliance with company formation and opening a bank account, you’ll need to provide back-up documentation. It takes time and will distract you from the important task of kicking off revenue generation.
Step 3: Company formation
Singapore is renowned for its transparent company registration and formation process. You will need the services of a law firm or a company formation agency.
There are lots of options in Singapore at different price points. My advice is to shop around, but ideally you want to obtain references – preferably from individuals involved in the recruitment industry.
The good news is that the cost is not astronomical. Forecasting the cost should also be very predictable thanks to the high level of transparency throughout the process. I know of a service that costs around SGD $4,000 for the basic company formation, and returned a successful EP application. I would happily recommend the firm I used if you want to contact me directly. You could pay a lot more, but you don’t need to in my opinion.
Step 4: Open a bank account
Opening a bank account is easy; the formation company is highly likely to include assistance in this step if you paid for it, as per your package. Formation agents will arrange everything for you and the bank representative will come to see you in their office. A formation agent I’ve worked with in the past recommended OCBC, and the process was speedy, simple and painless.
Step 5: Obtain a recruitment licence
You need to obtain a recruitment licence from the Ministry of Manpower (MOM) before you begin to operate as a recruiter. This is where things get a little more complicated as you need to appoint a Key Appointment Holder and determine whether you need a Comprehensive (all, local or non-FWD) or Select licence.
A Comprehensive (all) licence allows you to perform recruitment with no restrictions on the size of placements you make. On a Select licence, you can only place candidates who are earning more than SGD $4,500 a month.
Choosing a licence will determine if you need to take a CEI exam (if you haven’t already) and how much investment you need to make for the licence. A Comprehensive licence requires a SGD $60,000 security deposit, whilst a Select licence requires a Banker’s Guarantee of SGD $20,000.
In most cases, to keep costs low, you can start on a Select licence and see if you need to upgrade in the future.
This can seem quite daunting initially and if you dont research this properly, you won’t fully understand the differences between the licence types. The good news is that everything you need to know can be found on the MoM website which I would recommend investing some significant time into reading.
Step 6: Employment pass (if applicable)
This step only applies to non-Singaporeans or non-PRs. This is one of the trickier steps in the process because obtaining an EP, even if you’re the founder or the first employee of the business, is not guaranteed.
I would strongly recommend consulting with a company formation agent or lawyer, who will advise on the documentation that you need to provide to give you the highest chance of getting an EP approved. They do this for a living and will be able to guide you through the pitfalls and challenges of the approval process.
To set the expectation, the application process will probably take longer than anticipated, especially taking into account the current economic climate. Consider the possible outcome of a rejection along with an appeal. Often you will be asked to provide additional information to support your application.
Preparation and research is the key.
Step 7: Find an office
You’ll find that almost every startup opts for a serviced office. In Singapore, there is a massive choice and you, as the consumer, have many options to look at including coworking and private office solutions.
Firstly, decide where you want to locate your business. Consider the needs of your future staff as well as the convenience factor for visiting clients and candidates. Both are vitally important, especially as we start heading back to the office over the next few months.
Flexibility and negotiation. Negotiate hard (especially now), retain flexibility and avoid longer term fixed commitments. If you are setting up on your own, consider coworking access at a WeWork or Spaces solution to keep costs low. You can even consider Compass Serviced Offices, founded by a former recruitment entrepreneur, Andrew Chung.
Step 8: Start billing!
Your company is formed, you have obtained your bank account, recruitment licence, your employment pass and you finally have an office. This is only the beginning. You’re now ready to get on with the important stuff and start your journey as a recruitment entrepreneur.
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Disclaimer: This article is written with an intention to provide basic advice, but we stress we are not legal professionals, so please seek advice from a formation agent or qualified lawyer.