If your recruitment business employs between six and twenty people, where should the founder’s attention be directed? The answer depends on what you are trying to achieve.
Understanding this stage
Recruitment agencies employing between six and twenty people are often hectic but enjoyable.
The founder still has span of control over the business and is closely connected to clients, candidates and recruiters. Decisions are made quickly, communication is relatively informal, and there is usually a strong culture because everyone is cooperatively involved.
The business also becomes more demanding. Staff require more guidance and support. Clients create more complexity: some have deeper and more complex relationships, and growth in number and volume is always a requirement.
The founder often discovers that every additional employee creates new opportunities but also creates new demands for time and attention. Non-recruitment functions emerge and become more defined: cashflow, payroll, internal recruitment, marketing, training, and process improvement.
At this size, the business can move in different directions. For some founders this is the size of business they enjoy owning; others see this as preparation for the next stage of growth. Either way, the founder must stop being the centre of everything.
Reducing founder dependency
Remaining at approximately the current size should never be confused with standing still, as the business will naturally mature over time.
One of the most important considerations is founder dependency. Many founders at this size remain heavily involved in business development, key client relationships and recruitment. That may be exactly where you gain the greatest satisfaction from your work. The implication, however, is that the business can become increasingly dependent on your continued energy and availability.
Over time, that dependence should be reduced and targeted carefully, creating repeatable ways of working to give you greater freedom, create consistency for clients and allow others to accept more responsibility.
Delegating processes and tasks is a key solution to reducing founder dependency. That requires developing capable people around you who can make sound decisions without referring everything back to you. Developing those people creates resilience for the business and makes the business more enjoyable to own. We all see organisations where the founder is “offline” for temp payroll processing.
It is wrong to say that businesses of this size are simple operations. A relatively small staffing company may still operate complex payroll, compliance and client-service functions, and these cannot remain dependent on the founder.
Earlier discussions around equity value apply. Delegated processes, forecastable revenue, reduced founder dependency and stronger financial management all contribute to building a more valuable business, albeit a business with strong founder dependency remaining. And running a business with these characteristics makes business ownership more enjoyable.
The financial focus can also be different. Rather than continually reinvesting for growth, many businesses at this size prioritise shareholder wealth through consistent profitability, disciplined management of the Balance Sheet, and sensible distribution of profits over time.
Many owners choose to continue building wealth over the years rather than having a shorter-term focus on realising value through a sale transaction. That may be a sensible approach, particularly while continuing founder dependency limits the likely equity value of the business.
Preparing the next generation of leaders
Founders who intend to grow beyond twenty people face a different set of priorities.
The first is recognising that the business they are trying to build requires different structures and processes from the business they currently own. Founders need to begin attracting, developing and empowering senior resources. Not simply the best recruiters, but staff with the attributes to become the organisations’ future leaders.
The distinction matters because the founder’s role is also changing. As the business grows, the business becomes less under the founder’s personal span of control, and hence increasingly dependent on the ability to build capability in other people and deliver objectives through other people.
Many (most?) founders underestimate how significant this transition is. The challenge is no longer just finding another recruiter. It is building people who can take responsibility for delivering outcomes, make decisions, achieve objectives, and improve the business without constant involvement from the founder.
And the really tough transition for the founder is that in empowering these leaders, the founder must force themselves to lead through these leaders, not cut across and “fix the problem” themselves. For many action-oriented recruitment founders, this requires courage and discipline.
Financial priorities also begin to change. Profits that might otherwise have been distributed to shareholders are often reinvested, reducing short-term profitability. But they are intended to build organisational capability and strengthen the long-term characteristics of the business. Balance should still be maintained. Reinvestment is important, but so too is continuing to build shareholder wealth on a consistent basis.
Terms that are sometimes overused such as sustainability, forecastable revenue and single points of failure now become highly relevant. Growth is not simply about employing more people. It is about building the capability of successfully supporting a larger and more complex business.
What this means for the founder
Whether the intention is to remain at this size or continue growing, the founder’s attention now needs to become more disciplined. Success is no longer measured simply by personal billing or the ability to solve every problem. It increasingly depends on building a business that can perform consistently through capable people, repeatable processes and sound financial discipline.
Founders who choose to remain at this size can build rewarding businesses that provide long-term wealth, flexibility and personal satisfaction. Achieving that requires reducing unnecessary dependence on the founder, continually improving the way the business operates and ensuring the organisation remains enjoyable to own.
Founders who intend to continue growing face a different challenge. The business must begin operating through people who can accept genuine responsibility. Delegation is no longer simply about reducing the founder’s workload; it becomes the foundation upon which the next stage of growth will be built.
The businesses that move successfully beyond this stage are rarely those with the busiest founders. They are usually the ones where the founder has begun replacing personal effort with organisational capability.
Stop being the center of everything.
This article is part of HHMC’s Appropriately Corporate series for staffing and recruitment business owners, exploring growth, leadership, valuation and transaction readiness. If these issues are relevant to your business, we would be pleased to continue the conversation.
