There’s no single route to growth. That’s something that all business owners come to learn as they experiment with what works for them best. But too many people think that raising capital is, exclusively, a brilliant idea. It isn’t.
Whilst our Managing Partner, Rob Jones, has written about raising capital in recruitment, third-party investment doesn’t suit everyone. You’re giving up a portion of your company, after all. It’s important to think about your situation, as well as the potential drawbacks or advantages, to ensure you make an informed decision. Here are some factors to weigh up…
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The Argument For
Raising capital can bring you a massive injection of cash at a critical time for the agency. In an ideal world, you’ll find someone who can bring more than just their financial power to your business – they will have their own previous experiences, and ideas on the future of your organisation.
Whether they’re funding state-of-the-art software, an overseas expansion, wider marketing strategies or any other major step forward for your agency, their presence provides another resource to the company, because it’s in their interests to succeed. If you have a clear vision of where the money is going – and want to cement that clarity in achievable targets – then gaining support can strengthen that.
Sparing the time to build evidence for ROIs, growth projection and the continuing state of the business in several years’ time will put you in a great position for further capital support. Investors value this stability, but also market share. How niche are you? Agencies that prove they are in an exciting, fresh, profitable area of recruitment tend to fare better than those who cross the ground that a thousand companies have trodden before.
The Argument Against
Equally, think carefully about what you’re seeking investment for. Paying for people’s time, rather than scaling up processes or corporate infrastructure, won’t suit an investment bid. You can fund extra recruiters through profit, without rushing anything, to make your growth more organic. And that will keep shares under your ownership.
An increasing number of recruitment agencies are developing their own digital tools, pushing tech harder than ever. You may be one of them. Yet a more traditional business – the sort that focuses on personal liaisons between client and candidate – won’t sink tens of thousands into R&D. Raising capital is largely irrelevant for desks and a higher staff count.
So first, decide where the money is going. If there’s no real cause to increase your capital suddenly and by a large margin, then a third-party investment shouldn’t be pursued. That same time and energy can be applied to other parts of the agency, fast-tracking your growth regardless.
RJF Accounting & Business Support can help determine whether your hope for raising capital is a solid idea or a bad one, considering your journey so far in recruitment. There are several means of funding your next best opportunities that don’t lead to investment rounds. Keen to learn about them? Contact us, and we’ll outline all the paths to a prosperous future, as well as how investors may be approached and what they want to see.