Launching Your Recruitment Agency In the USA
Ketan Gajjar: Hello and welcome to the Recruitment Curry show. Today we’re going to be talking about the most exciting topic in the UK recruiting industry, launching your recruitment agency in the USA. And we have our special guest, Will Pendleton from the PGC group with us today. Will, welcome to the show.
Will Pendleton: Hi Ketan, thanks for having me.
I’m really excited to be talking today about all things US with you.
Ketan Gajjar: Absolutely. Will, without further ado obviously we want to talk about a number of points ranging from The market size to, obviously the trends the stuffing landscape, et cetera, et cetera. Why don’t we kick off with the, obviously the market opportunity, in terms of the size growth opportunities.
And further on.
Will Penedlton: Yeah, fantastic. Thank you. So it’s a great place to start because it’s probably the most exciting part of the U S and why so many businesses are pivoting and focusing all of their efforts onto the U S market. It’s almost becoming one of the worst kept secrets in recruitment is how amazing It is to recruit in America, and when you look at the size of the market and the size of the opportunity, it becomes quite clear as to why that focus and why a lot of people will have peers and colleagues who are in other businesses who are doing that and have heard about bigger fees and have heard about the opportunity that they do have.
But when you consider last year, The world in general the global staffing industry created about 500 billion in revenue. So just shy of half a trillion dollars, which is amazing to think about in general. So it’s a really exciting industry to be involved with. The U S generated 186 billion off that.
$500 billion the revenue de generated by that market. So that was about a 31% market share of the entire world’s kind of revenue generated in that, the recruitment and the staffing industry. When you compare that to other markets, so Japan came in second about 15%, and then the UK came in th third.
So in the uk there is about. 50 billion or so was generated last year with that same revenue generated by the industry. So you’ve got nearly three and a half times a bigger market in America. And the thing that blows everybody’s mind is SIA released some figures last year, where they estimated that in the U.
Versus in the UK. So you’ve got a much larger piece of the pie with much less people going after it. And so what that leads to really is far higher margins in us market, because you’ve got clients who are much, much more desperate for your services. The value of a recruiter in America compared to the value of recruiter in the UK, even though you’re doing the exact same role.
is double, sometimes triple in terms of the fee that you can build. And one of the reasons for that, like we said, is that market saturation. So it’s a far less competitive market and the need for your services and the demand versus the supply is so high that you probably will see most businesses operating on about 25 to 40 percent margin range.
We tend to see. Whereas in the UK, you’re probably looking at about 12 to 20, maybe on a good day. And then with considering that alongside your higher salaries that people typically are paying in America for the same roles as well. That’s why you can see double, sometimes triple the value of those deals in the US.
Ketan Gajjar: Wow. So twice the size of the UK. And same number of agencies. So obviously, there’s a massive ground for the agencies to cover there and an opportunity, especially with the fees you’re talking about between 25 and 40%. That’s phenomenal.
Will Penedlton: Yeah, exactly. And I think if you look at that as well, in terms of how the market is predicted to look for this year too, because it’s been a fantastic few years for recruitment in general, just due to the bounce back after the pandemic, everybody’s been setting record after record, it seems within their businesses and the years have got bigger and bigger this year, it’s looking like it’s going to be slightly different, isn’t it?
Because we’ve got. Things like recessions being floated around, inflation is happening everywhere. And so there’s a lot of people that are a bit more worried about the market, but even with those inflationary pressures in the US, the market is still predicted to grow. And when you remember that last year was a record year.
This year, even with all those inflationary pressures is still predicted to be even bigger. So it’s predicted to grow by 2%, which they class as moderate growth. So that, that 186 billion is going to become roughly 217 billion this year. So even though it’s the biggest market in the world, even though there’s all of this kind of inflation and worries about recessions going on.
The market is still predicted to generate even more revenue than it did last year and be another record setter. So it is like we said, a lot of people say to us when they’re first speaking to us at PGC are we a bit late? Have we missed the boat? Is the US too, is it too far gone? You can see there from the amount of businesses that there are in America currently and the fact that the market is just getting bigger and bigger.
there really is no missing the boat. It won’t, you won’t have missed the boat for a good few years. So it’s never too late to get started.
Ketan Gajjar: Wow. Wow. So in terms of getting started let’s talk about the growth sectors, in, in your opinion. Because, one, the sheer size off the country.
What are the growth sectors? One is across the U. S. And, when you talk to your clients, do you talk, growth sectors specifically in terms of the respective states? Or, is it nationwide? How do you consult them?
Will Penedlton: Yeah, that’s a really good question.
There’s one that we speak to on every call that we have. When we first speak to a business is what’s your goal, what’s your game plan for the U S. And when you, like we said, considering the absolute size of the market there, Joe Biden can’t even govern the whole government on his own. He needs 50 other governments, the state governments to help him because it’s too big.
So how are you supposed to tackle the entire country? So if there’s one thing that we say, it’s don’t take the whole U S on. You want to break it down into chunks and really focus your efforts on one market. Really, if you can, when you get started, it really helps you a drill down, start to understand the legislation within that state, within that sector.
But it also helps you to build a bit momentum. Understand the people that you’re speaking to because people will vary massively depending on where the region is in the U S. So when you’re getting started, one of the key things that we say is have a niche and have a focus, both from a sector point of view and also a target location as well.
And so being an inch wide and a mile deep. Is one of the best tips that you can get when you’re getting started in America. And so in, in terms of specific sectors and growth areas, you’ll find that there’ll be different locations within the US that will suit you better depending on what that niche is.
So for example, if you’re an IT consultant recruiter, there’s going to be, markets like Austin Miami’s up and coming at the minute as well. Where it’s life sciences, it’s probably going to be more like Boston. Maybe North Carolina, California, those places. And so it the location you choose will be dependent on the sector that it is, that you’re focused on.
But the opportunity within those sectors, again, are really growing faster than a lot of the others. So the big one that we see most of the agencies we speak with that launch into the U. S., they’re focusing on tech and IT. And that is obviously an amazing market to be involved in. Last year.
The temporary, so just contract placements in America in the IT sector specifically. So just it temporary placements generated a revenue of 45 billion. So the contract IT market alone is nearly the same size as the entire UK staffing industry. Which is like crazy. And that’s predicted to grow by another 8 percent this year.
Accountancy and finance, that sector is predicted to grow by 7%. Life sciences is about 5%. So when you think that the whole market in general is predicted to grow by 2% you can really see that all of those growth figures that are happening tend to be happening in the contract market. Which is really when you see.
what you would expect with a recession on the horizon or the kind of inflation pressures people do tend to look a bit more short term from a client’s perspective and they’re thinking about their hiring strategy to be short term and thinking right the next six to twelve months rather than the next four to five years and so they maybe might be switching from perm to a kind of a contract mindset.
And that’s where we’re seeing probably the general growth happening. The fastest is within those, that kind of contract market in general. And so I suppose the, when you’re getting started and just do a bit of research, first of all, Find out what areas you think are going to be the most exciting for you.
We’re happy to help with that as well and provide any guidance that we can. But in general, some of the more kind of trends that we’re seeing is that mind switching clients from that long term permanent approach and towards project and temporary work as well. And I think a driver of that too in America is this is also another kind of key difference between the two markets is in the U S there are no notice periods.
So notice periods are at will by default. So immediate. So you do get like people being dismissed straight away or handing in a notice or not turning up and they just pack their brown box up like they do in the films, put all this stuff in the desk and walk to the lift and leave and say, I’m out of it.
So you will find that it is a really quick turn around in the US and because of that, even with permanent roles, you don’t actually find that permanent has the same job security that it does in the UK or in other markets, because notice periods by default are at will. People might tend to generally.
Offer around the two week notice period is like a good will gesture, but they don’t actually have to serve that. That’s just a good bill gesture. So what you can end up with is like VPs of businesses and really high up senior roles leaving either immediately or within two weeks. And really what that does is a drive the value of a recruitment business through the roof, because you’ve got huge holes in businesses being left really quickly that the clients often didn’t see coming.
So if you can play someone quickly and have that speed to hire, you’re going to find you’re going to a really improve your standing with that client, but also be able to charge, a much higher fee because you’re able to provide a much more urgent and impressive in some aspects service to them.
But then the notice periods that are because they’re so short a lot of people are not necessarily. Tied to permanent jobs, the way that they will be in example in the UK. And so that can again lead to just that general mind shift that we’re seeing of people moving from permanent to project.
So I think it was the statistic estimate that by 2027, over half the US will be employed on a contract basis. So that’s going to be the main kind of focus that we’re seeing from the market anyway.
Ketan Gajjar: That’s a massive opportunity, when it comes to contracts. And then, we, you mentioned about the notice and that was my next question like you mentioned.
So the notice periods are, roughly about two weeks across the levels then, isn’t it? It doesn’t matter if it’s junior middle or even a senior.
Will Penedlton: Yeah, exactly. Yeah. So they’re about standards. You’re going to find maybe two weeks is normal and you don’t find those really traditional long term.
Notice periods that you might find in the UK, for example, of a three month, six month. Some people even have a year notice periods. And a lot of them will your final be requesting and not required. So like we said, almost like a goodwill gesture. So please, could you give us at least two weeks, four weeks about hanging in your notice and vice versa.
But actually it’s not something that’s legally binding. If it does push comes to shove. People can just leave or be dismissed immediately and without cause. And so that, like we said, just really great, that really transient where I’ve said transient about 15 times in this conversation, but it really great is that transient workforce in the U S so the speed to hire is going to be so different to it is in the UK and you can make a placement so much faster because you, if you’ve got a candidate who you think might be interested in a role for you.
They can leave their role within two weeks, maybe immediately and start, within a few days. So it’s a really quick turnaround.
Ketan Gajjar: So how does it work? Because it’s a huge country within almost over 50, 52 states. And then, what I’ve heard is every state has a different legislation especially when it comes to recruitment.
And, even when it comes to contract placements if it can, talk about that, because that’s one point where lots of businesses, wanting to launch in the U S have a question around, the government, the governance, the legislations the terms et cetera, et cetera.
Will Penedlton: No, absolutely. And that is one of the things to almost That really helps get your mind around the market. When you get started is it’s understanding that really to treat the U S like it’s 50 different countries rather than one. As we mentioned before, you’ve got the federal government, obviously in America.
So the president Joe Biden, what comes out of the white house? That’s the minimum that all States have to abide by. You then have each state has their own governments. So then again, you’ve got 50 different. States there within that. So it’s a bit like the EU in terms of you’ve got loads of different economies, loads of different governance structures, tax structures, employment rights, all crammed into to one kind of region.
And you’ll have people in neighboring states who are employed completely differently and have different employment rights. So when you’re getting started, that’s why we said before, having a niche and a focus on one location can really help just get your own head around that because like we said, It really is like its own country.
So California has the fifth biggest economy in the world if it was a country, but obviously it’s just one state in America. I think Florida will be like the 17th biggest economy in the world if it was a country. So all of those states. Realistically, they have enough business in them to focus down. So I would say don’t get put off by focusing down on one place because actually the market is massive and it’s really going to help you understand the legislation of the people in that state.
I also understand the culture too, because all of those differences that have happened over the last few hundred years in America have created big regional differences. So people in. Different regions are expecting different approaches. For example, someone in California, New York, Texas, Florida, they’re all going to have different employment rights and expect different things when you’re speaking to them.
So obviously if you have a one size fits all approach not only can that cause a bit of a headache for you from. a legislative standpoint in terms of how you’re supposed to keep track of my candidate in California gets that amount of sick pay. My candidate in Texas gets no sick pay, just little things like that.
So by having that focus, it really helps from day one to get started. But from a permanent perspective, If you’re making permanent placements the most things that you need to be worrying about are things you can and can’t ask a candidate because a lot of the employment rights that will change that will be taken on by the client.
But the main things that will happen is in different states, you can ask a candidate something. in some states that you can’t. For example, at New York, they have salary history ban, which means you can’t ask what a worker previously earned in their last job, but you can do in other states. So things like that, really understanding the legislation of your states that you’re targeting is really going to help you get started from day one.
From a contract side of things, That is a lot more complicated because obviously there’s an ongoing obligation to pay a contractor and that’s being outsourced from the client. Usually they want to outsource that out. That’s what PGC actually do. So we are an employee of record. So anyone that is interested in making contract placements and making those 30 percent margins on those deals please have a chat with me afterwards.
And we can talk about how you can do that and how PGC. It can actually work with you to mitigate that risk and all those complications that come into things That’s what we basically remove from agencies so they don’t need to worry about that They can just think make the placement and then we’ll sort the rest out for them but like you said get on it is really interesting and that kind of mind shift of What it’s not one country and think of it as 50 different countries can really help get started
Ketan Gajjar: Definitely.
So in terms of the timelines, you know on that note you know in terms of setting up the business and You Getting it up and running. What kind of timelines are we looking at?
Will Penedlton: Yeah. So one of the things we talked about beforehand that we really wanted to touch on was corporate governance and the actual operational side of being in the business in America, because obviously like we said, a lot of people might have heard of the market already, might have heard of the opportunity, but it’s actually the operational and the logistical side of running a business in America that puts a lot of people off or might put the dampers on things.
So one of the things that I would say to just start off with that is it’s actually because of the trade agreements that the U. S. has specifically with the UK, if you’re in the UK, but other countries as well. The U. S. has lots of different trade agreements and they basically want to make it as easy as possible for you to do business in America.
And so from the UK specifically on from other businesses to actually make placements, recruitment placements in America, you don’t need an entity to do that, so you don’t need to worry about setting up a business or, incorporating a U. S. entity, and you don’t need a license to get started either.
And you don’t even need the bank account to and a lot of those things actually might come along with setting up an entity. And there’s reasons you might want to do that. For example, if you were setting up an office, which we can talk about in a bit as well. But when you’re getting started, you don’t need any of those things.
So you can literally use your existing staff. You exist in resources, you exist in phone system, computer system. You don’t need any kind of different infrastructure really at all. And so it’s almost a zero cost approach and you can trade into America and start generating revenue and really prove that concept from wherever you are in the world.
So whatever your, wherever your office is, it doesn’t matter at all. You can literally. Prove that actually we should maybe commit a bit more revenue. It might be that after six months to a year, you’re doing fantastic. And you think we actually do want an office and then you’ve got the revenue. You’ve got proof of those relationships in America that you can do that, but you don’t need to do that from day one.
The thing that we would stress that you do need to have in place in day one is to have your terms of business. Sorted. So I would say speak with a us attorney or someone with cross border experience in the us to draft those terms of business. The reason for that is if you’re trying to use an international contract or a UK contract with an American company if they don’t pay you, you can’t do anything about it because a us court of law is never going to enforce a not us contract.
So realistically, just to protect yourself, that’s the main thing is just get those terms of business sorted. First of all. Once you’ve done that that’s the big legal thing really ticked off. There are little things that you can do to make your business development approach a lot easier after that.
We talk about putting up a virtual shop front. So my colleague Maria always uses that phrase. So you can get like a virtual us phone number. So for example, if you are going to be targeting Texas, you can get like a Texas extension. So it looks like you’re calling from Texas as well, which is a good little kind of hack as well.
And then you can get like a PO box or a virtual address within your target market again, or giving off that impression to your clients that you are serious about the US, you’re US focused. And it really helps basically to almost remove a little bit of the issues that can sometimes come if you’re calling from an international number, you can sometimes get a bit screened.
So that’s something that you can do really to just remove those little barriers. Even something silly, like changing your location on your, on LinkedIn to be in your target market. That could actually just again just remove any roadblocks that there might be during your business development stage.
When you’re getting started, like I said, actually don’t be too worried. It isn’t really, it isn’t too scary as long as you’ve done the big things. First of all, so you’ve got your terms in place. And then you can start thinking about actually, how are we going to focus down and, Are we going to get a number?
Are we going to get an address and things like that? And if you’re just looking to trade into the U S from wherever your international offices from then, that’s really all you need to do from the start of things. Once you started to get a bit more revenue through the door and it’s a bit more of an established business you started to generate some serious fees and some good traction you might look at set up an entity.
And the reason that you might do that is one. Eventually, you’re probably going to owe some tax in the US. So from day one, you’re probably not going to have to file for any taxes if you’re the guy generating lower than a certain threshold. Because only a few states charge tax on recruitment services.
But again, once you’ve made a few placements within a specific state in a certain year, and then you’re probably going to Have an entity because to file for taxes, you do need that entity. So that might be a reason to look at setting up an entity. And then the other one is this has gone fantastic.
Actually, we’ve got to get even more business. If we have boots on the ground and we set up an office and to do that, again, you’re going to need entity. If you want to hire, get a bank account in the U S you need us entity, all of those things. So if you’re serious about. Building that side of things and landing and expanding is the phrase that we refer to it as a in opposed to recruiting from afar, then that’s where things can get a little bit more complicated.
But that’s why you just want to make sure you’re speaking to trusted professionals who’ve got experience in the US who can help with that. And yeah, basically. Just know that if it is, if you are going through that process, it’s a little bit more expensive to, to incorporate in the U S it’s not like it is in the UK where you can just log onto companies house and pay you small fee and you’ve got a business.
You’re probably looking at the 000. And it’s quite a long process. So again it’s a great option if you’re really serious about building an American business, but if that’s not, and you’re just trying to prove the concept when you’re getting started, don’t worry about that entity, because it’s just going to cost loads and actually you don’t necessarily need it from day one.
Ketan Gajjar: Definitely. Definitely. Start slow. from wherever you are and then, build it up from there. And, if they need help, they can approach somebody like yourself to, guide them through. And then, on that note we’ll, and we touched upon this point, last week when we were talking boots on the ground.
What would you recommend, in your experience are the U S companies, open to meeting in person or, is it more teams and zoom based discussions, how do you go about it?
Will Penedlton: Definitely. Yeah, I know you, you’ve got some great ideas around that. I guess I don’t know actually that we align in a lot of our views on that as well, because especially businesses in the U S they do like to do things in that traditional sense.
A lot of the times that you will have no issues actually finding clients and doing business development with them. Often a lot of the cold approach and the cold calling in America will actually be a lot more effective. Again, if you think back to the amount of base recruitment businesses compared to the need that there is, these businesses are really wanting your services.
And so a lot of the time you won’t find it hard to actually. get on on the phone with clients and even with decision makers but actually keeping hold of them and keeping that, that stickiness moving forwards can be a little bit harder because again, you’ve got, if you’re in the UK, for example, you’ve got the entire Atlantic ocean in the way that’s just separating you both.
One of the best ways. That you can really secure and start that growth and kickstart it. And with those clients that you’ve already been having conversations with is maybe within the first few months of your business development that you’re doing. If you’ve just kicked off the US once you’ve started to build a few relationships and things like that, get over to America and actually go and meet these people.
Booking, a two week trip it gives you a reason to call them again. They’ll often, again, like we said, they’re a bit more traditional, really want to meet you and have that face to face relationship. Just pack that two weeks full of every meeting that you can imagine. Even we’ve got some people that organize events at the end of that.
So they’ll go and meet everybody. We’ll then organize a big event for their industry and get all their clients in the same room. That type of thing. Same with candidates as well to put an event on for candidates and build that base too. And basically all of that is just going to lead to that relationship skyrocketing and going to the next level.
What are your views on that? Cause I know you yourself and you found that’s really helped you.
Ketan Gajjar: I second that because, I’ve been doing this. Same activity, for the UK for over a decade now and, even a bit for the US. So I spent a couple of weeks every quarter in the UK and, I believe prospects and clients like seeing you in person.
So I wouldn’t outrightly reject the idea of flying over. Of course, it’s going to cost you. And, like you mentioned that, if you want to prove the proof of the concept, you might have to, start small, but making a point to visiting in person, always is cherry on the cake.
You can end up getting much more. Totally agree with that.
Will Penedlton: Yeah, definitely. And I suppose for yourself as well, making that trip over all those thousands of miles. It means that a little bit more to the client. And also, they’ve probably seen you more than they’ve seen their actual domestic based agencies that they’re working with anyway.
So it just reaffirms you as, you’re really serious about that client. I’m really committed to them.
Ketan Gajjar: Absolutely. One is you’re spending a lot of money, and then two is, you’re flying over you’re spending your time just as to meet those clients. So it definitely shows, sheer commitment.
Of doing business with them. And, it also says that, you value the relationship and the time, it talks a lot about, your overall business objective.
Will Penedlton: Definitely. Absolutely. Yeah. One of our clients who, who really believes quite strongly in that concept said to us that is, you will never see more return on investment from business development approach than by doing something like that.
So obviously it will cost a lot to, in the first place to do that. For the most part, probably going to do that every month. It might be once a year, it might be twice a year, for example, like you’ve kept that might be once a quarter. But the actual return on that investment that you make is incalculable because
Ketan Gajjar: Absolutely.
Because, in, in person relationships and, there are a number of podcasts and blogs on that. We don’t want to talk a lot about it, but, people know, especially in recruitment the value of. Spending time in person and meeting clients in person. Definitely.
So in terms of some of the best possible scenarios and case studies that you have will of helping your clients through what are the, top three or five sort of points you would recommend agencies who are wanting to launch in the, in, in the U S.
Will Penedlton: Yeah. Oh, that, I love that question. I would say number one is have a niche. So know what your kind of known for, or like find something that you want to be known for and focus down on that niche that will really help you build a name for yourself. Like we said before, and build some momentum.
I would try to keep your approach to a minimum, like we said, so focus down that niche and that target market as well. It will really help when you’re getting started. And then one of the other things as well that we’d say is referrals. Referrals are massive in America. Again, it’s the cheapest investment ever is asking someone on the end of a call that you’re already on with.
Do you know anybody else who can help us or that who’s done the same role? If it’s a candidate and we have one client make 10 placements off the back of asking one candidate, do you know anybody else that can do this role? So that’s, and it’s really effective having somebody else pitch your business really seems to go even further in the U S and then other than that, just speak to professionals.
If there’s ever anything you’re unsure of, don’t take a chance in the U S it is a litigious market. While it is amazing. It can be really high risk. So you want to make sure that you’re speaking to people who understand that you get it and understand the pitfalls that maybe you’re not seeing and we’ll point them out to you as well.
[00:28:00] And if you’ve ever got any kind of random needs of whatever it might be, whether or not it’s some kind of really random contact that it might be that you require, just give us a shout. We’ve got like a really good roller decks of people that we can introduce you to.
Ketan Gajjar: Sure. So in summary, it’s obviously not twice the size of the UK market and then obviously a bigger pie to actually, capture from and then two is, a highly legislative driven market.
So every state has different laws and legislations. So that’s another thing to keep in mind, especially when it comes to, contract compliances, isn’t it?
Will Penedlton: Yeah, exactly. Yeah, definitely. So I’d say, yeah, no, the market opportunities amazing. It’s, three and a half to four times bigger of a market to go after.
And because of that, yeah, like you said all those states will be very different. So to break them down state by state and have that approach there because from a legislation point of view, from a relationship point of view, from a tax point of view, All of those states operate independently of each other in some respects.
Ketan Gajjar: Definitely. Definitely. And then in case our audience, obviously listeners want to reach out to you you’ve got your LinkedIn profile and they can reach out and, in case anybody has any questions here, they can, put in the chat box and we’ll be happy to answer.
Will Penedlton: Yeah, absolutely. Yeah. Please ask any questions that you’ve got, either put them in the comments and I’ll come back to them because we’re wrapping up now, or you can send me a message directly on LinkedIn on my LinkedIn profile, as well as a link to our website. So if you’ve got any questions about anything we’ve covered today or something specific for your business and your needs in the U S that link will take you through to a bit on the website where you can just book in some time to have a chat with us.
So please don’t hesitate to reach out at any time.
Ketan Gajjar: Fantastic. So we’ll thank you very much for being on the Recruitment Curry show. Really enjoyed the conversation. And yeah I hope you get lots and lots of UK businesses to launch in the U S.
Will Penedlton: Oh, fantastic. Thanks very much for your time and having us on Ketan.
I’ve really enjoyed the conversation.
Ketan Gajjar: Thanks Will. Cheers.
