Business Essentials: Recruitment agency seeks to accelerate expansion

A firm serving the motor trade wants to expand geographically but to put a brake on financial risk, writes Kate Hilpern

As a former motor mechanic, Steve Shaw seems an unlikely person to be running a recruitment agency. But then, if you're looking to fill jobs in the trade, it helps if you've already got your hands dirty.

As Shaw, 42, explains: "Having qualified as a mechanic, I rose rapidly through workshop control and into management roles, eventually being made redundant 10 years ago. With the experience of the industry and contacts I'd built up, it felt like the perfect time to set up my own recruitment agency specifically for the motor trade."

Shaw believes his lack of a recruitment background enables him to offer a service geared towards the particular needs of the motor industry than one that fits into the usual conventions of agencies.

It is clearly working. Ingenia Resourcing and Recruitment, based in Washington, County Durham, began by placing a few people per year. Now the company - which consists of Shaw and another two people overseeing sales and administration - is involved in filling more than 100 posts per year, ranging from service receptionists to regional directors. Its quandary is how to expand geographically.

"Currently, we service the North-east and we'd like to replicate our business formula in a wider area, eventually going national," says Shaw. "But we want to know how to do this with the least amount of financial risk. So many agencies go national and then go under."

He worries that some of the things which make Ingenia special may be threatened by expansion.

The company stands out first because all posts have been split into 15 categories, reflecting their level within a motor dealership. Each category carries a fixed fee for recruiting a person, ranging from £500 to £2,250, which is payable by the client on appointment of the candidate. The invoice for this payment is split.

"This is different from the normal way recruitment agencies operate in that the fee is not a percentage of the candidate's agreed salary and is not due in one hit," explains Shaw. "This means the cost of recruitment is fixed at a level that is little more than the cost of advertising a post and the time spent in administering applications."

Second, Shaw knows the motor trade well and knows most people in the businesses who approach him. "The beauty of this is that when someone tells me they need a technician, it's not as if I don't really know what a technician does. I will understand exactly what they want and go to my database to find if we have the right person."

That in itself is possible because when Ingenia introduces people on its books, each one will have been interviewed by Shaw and each one will have a nameless profile up to the point of meeting the prospective employer. "This suits the business because of speed and quality, and it suits the candidates because it solves theproblem in recruitment of confidentiality." (In some cases, candidates' CVs have ended up, embarrassingly, on the desks of their current employers).

Also posing a potential threat to Ingenia's growth is that the motor trade hasn't traditionally used the agencies - except for senior positions. "Generally, recruitment is done through contacts and poaching, so I have the extra task of persuading businesses to change their ways."

www.ingeniarecruitment.co.uk

WHAT THE EXPERTS SAY

Tom Hadley, head of external relations, Recruitment and Employment Confederation

"The risks of expansion can be minimised through good financial advice and research.

"As well as focusing on the number of potential clients and existing agencies, Steve Shaw should examine the local labour market. Industry data shows a continuous decline in the availability of candidates, which creates an additional challenge for recruitment agencies. However, the demand for employees means that there is a market for effective recruitment solutions.

"One of the key factors is a clear understanding of the needs of the business. The knowledge that Steve possesses of the motor industry will stand him in good stead in any area.

"The key to any expansion is ensuring that you have the right people in place to help manage different parts of the organisation. Industry-specific training programmes can help organisations address this, as well as other important business- development issues.

"Recruitment specialists provide a fast and cost-effective service. Companies may welcome Ingenia's fixed fee, although the key consideration will always be 'can you get me the right person and how soon?' "

Kevin Robson, business development, marketing and management consultant

"Steve clearly has personal drive and the ability to grasp the picture quickly. These qualities, combined with his obvious ability to be flexible and his absolute knowledge of the motor trade, are the drivers of the business.

"This entrepreneurial drive will mean that Steve will want to get big quickly, but geographical expansion on limited resources is known to be the most dangerous. Stretched lines of communication and the lack of the entrepreneur's personal presence are the reasons.

"I think growth should be developed organically in adjacent regions followed by a planned, steady roll-out to other areas over time (say three to five years), through gaining a prestigious presence in strategic centres using a virtual office service such as Regus.

"The concentration of the UK motor trade into larger national groups means that it will be easy to use local contacts to refer Ingenia to other regional centres. Ingenia will, therefore, hit the ground running in those areas.

"Ultimately, franchising the business format could be considered."

Alison Hopkins, managing director of small business, Barclays Bank

"Steve needs to plan his expansion carefully and thoroughly. He should research potential new locations to ensure there is sufficient demand for his services and to identify any local competitors. Next he needs to be clear about what it is he offers as a niche agency, and why it is better than more generalist competitors - and then tell his prospective customers about it.

"To minimise potential financial risk, Steve needs to identify all the costs of expansion. He can then assess how much extra money he might need. He needs to consider how many sales he is likely to make, initially on a weekly basis, and compare that to how much he will need to spend on weekly running costs.

"The difference represents the shortfall in cash that will need to be made up from other sources, such as an overdraft or similar working capital facility. He should then look to talk to his bank, his accountant and other key advisers about how he can finance his future plans effectively."

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