The Reasons Why Recruitment Start-Up's Fail - ft. Rhys Jones (Vol 6)
Welcome back to the #HireWire newsletter on the UK recruitment industry!
In this edition of the newsletter, we have dedicated the full article to Rhys Jones of Davidson Gray | Recruitment Business Start Up Investors and Support Providers and we’ll thoroughly dive into the numerous factors that are the cause of start-up failure.
Whether you are an aspiring recruiter, recruiter or director with ambitions of opening your own firm one day then this edition will certainly equip you to prepare for the challenges that you will face further down the recruitment rollercoaster.
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Who is Rhys Jones and WTH does he know about start-ups?
Rhys Jones, the start-up investor, vlogger, blogger and podcaster. The man built 3 recruitment firms from the ground up until the point of sale. Currently, Rhys is leading the Davidson Gray brand, which is an investor, support-arm for start-ups. He’s a man that knows everything there is to know about start-up’s and he’s successfully proven it time and time again.
In the most recent Hire Wire meeting Rhys grabbed the mic and stormed to the stage and answered the following questions relating to recruitment start-ups triumphs and failures.
Where do start-ups usually make mistakes?
Before set up: Data science. Rhys stresses how people must prepare the data and explains that he doesn’t see people doing their sales forecasts and because of this they can’t do a cash flow and this is the biggest reason he believes that people set themselves up for failure. Due to not having a sales forecast nor a cash flow people cannot look at how much they need to survive, keep the business afloat and begin to profit. If you know what you need to earn then this can help reduce stress during the start-up phase and this will show if the business is viable.
Rhys’ tip: Study your previous 12 months billing to figure where everything related to your deals came from i.e. exactly where the candidates were sourced from and where vacancies came from. It’s only with this information can you factor in which resources you will need, and some you will no longer have.
After set up: Forecasting. When you begin a business, you can encounter unexpected bills if you’ve not planned and this can be the reason why business’ don’t make it out of the 2 year death zone. You must factor in PAYE, licensing, Personal Tax, VAT and Corporation Tax. Both with Personal Tax and Corporation Tax it can be 18 months before you get your first bills and when you do get them the HMRC will want some paid on account for the following year, so both are huge bills you need to plan for. For you VAT bills they come once a quarter, but again the first bills are delayed, it can be 9 months before your first one, but that one will be for all the VT collected to that point, so again you cannot let yourself get caught out. Not only will the VAT be one of the biggest fees a start-up will pay, but as Rhys points out… the VAT man not wait to get paid, you are in effect collecting the VAT on their behalf, so it’s not a tax on your profits, it’s simply what’s there’s, so don’t mess with the tax office ! Rhys explains how most people don’t understand these things and then they don’t manage their budget or plan for bills adequately.
Rhys’ tip: Get an accountant and have your accountant tell you as early as possible when bills will roughly be due, this way you can plan to pay these as and when required.
Why exactly do you believe start-ups often fail?
1. Inexperienced consultants rush into their own venture – Rhys believes that people need to have the quality experience and proven billings under their belt before they decide on venturing out on their own. Experience brings market knowledge, a vast network and managerial skillset and therefore, those without these key skills are often setting themselves up for failure.
2. Founders sometimes don't plan for taxes ahead – When you work for somebody else your taxes are all covered before your pay reaches you, which makes life easier and you don’t bump into any unexpected scares. However, you don’t have this luxury when setting up on your own and as explained previously, those who don’t work with an accountant and those who don’t budget, or plan forecasts will soon learn the unfortunate and hard way.
3. People aren't prepared for the effect it has on their mental health – Now, this is certainly a point that I never considered before setting up on my own. However, Rhys highlighted how setting up alone can begin to feel seriously lonely after a while and the transition from working in a busy and buzzing office environment to suddenly working alone at home can really have an unexpected and detrimental toll on your mental health over time. So, what can you do? Try to get yourself into a shared office space every so often, but factor in the cost.
4. Start-ups don’t hire soon enough – Rhys stressed how it’s crucial to make your first hire somewhere between year 1 and year 2. Hiring staff within your first 2 years will lead to an increase in motivation, accountability, and focus. Additionally, the human interaction will be a giant bonus for your mental health. Rhys added how businesses often make the mistake of being too picky and then end up losing out on the right person; he went on to explain how it’s imperative to hire people who share the same values as this’ll enable the business to grow in the intended direction. The biggest win here is if you can hire an ex colleague then you know exactly what you are getting.
You’ve surely heard of the Benjamin Franklin quote ‘if you fail to plan, you’re planning to fail’? Well, get planning.
What do you see in start-ups that are post 2 years that makes them successful?
1. Confidence - In Rhys’ experience he’s noticed how successful start-up entrepreneurs often have the confidence to set realistic, high targets and achieve/exceed these goals. Those who aren’t willing to push themselves to that next level often will miss out on opportunities and consequently will not take their brand to the next level when most needed.
2. Humility – It’s vital even as a solo start-up owner not to take all of the workload on by yourself, Rhys’ says that people should have the humility to put their ego to the side for the sake of the business and reach out for support where and when needed. He believes it’s important to find people that are better than you in certain areas and offload work onto them when needed, for instance when it comes to marketing, graphics, accountancy - rely on these guys who specialise in these fields to do a better job than you can do!
Rhys believes that the confidence and humility aren’t mutually exclusive and those that have these two traits working in tandem often succeed more so than other’s who don’t.
Do you have the confidence to go for it and to push yourself? However, are you aware that you must also require humility to be successful long term?
If you could go back in time to when you set up your first business, what would you change and why?
Rhys instantly threw his hands up and declared how he would’ve got a mentor in a lot earlier to help prevent a lot of mistakes as he believes that they would’ve helped him achieve more in the long-run and as opposed to learning from your mistakes you can dodge the curveball by learning from the mentor instead.
Mentors, business coaches, non-exec’s and learning group’s are key in all businesses, their development and performance. Rhys added how the great’s i.e Zuckerberg, Gates and Buffet all have had mentors themselves and that these entrepreneurial icons often give credit to their mentors for guiding them and pushing them into the positions that they’re in today.
So, if you’re planning on setting up – go and find yourself a mentor.
For more info on Rhys’ encyclopaedia of recruitment knowledge head over to the following links and learn more:
Website: davidsongray.co.uk
YouTube: https://www.youtube.com/channel/UCYJQ_0L0KwDOwltI1alyNYg]
Should you be interested in contributing to an upcoming edition or collaborating on a future project, please get in touch. I’m keen to hear your ideas and work with you!
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Director & Co-Founder @ Equanimity Search | Rec2Rec
1yIt was mint speaking about all things business, lube & agricultural revolution ha. Looking forward to that pint in Beermoth! Rhys Jones thanks again!