Why Are You Throwing Money Away on Recruiters?

Steve LudwigHiring ChallengesLeave a Comment

Road sign saying Wrong Way

If it’s expensive, it must be good. 

That’s a common bias we don’t want to admit we have, but we often fall for it.

There’s also a saying in large organizations that someone never got fired for hiring the most expensive solution if it bombs. Not true if you went with the cheap approach and failed. 

This brings us to your need to hire your first salesperson for your start-up. You might be tempted to go with recruiters because, even though it’s incredibly expensive, it’s at least a known—if not always a great process. 

Based on our extensive experience in the startup space, interviews with entrepreneurs, and qualitative research, we have found a pattern for what constitutes the right mindset and skillsets for the first salesperson for a bootstrapped startup. These are the Pathfinders.

Here at The Right Five, we have codified the skills that make the first Sales hire successful in a tech startup and developed an online assessment and rules engine that classifies candidates as a Pathfinder (meaning they will be successful) or a Non-Pathfinder (they won’t).

You just need to choose the ones who best fit your company/sector and interview those. 

However, we do this for just below US$1,000. The Right Five is so dramatically less expensive than recruiters that you might wonder if we are any good. That’s a fair question.

We have made The Right Five inexpensive because we wanted to make it broadly available to startups. And, we know that bootstrapped entrepreneurs need to count every penny because we have been you!  

So, perhaps the question should be, why are recruiters so expensive? 

Let’s walk through this. A typical recruiter will charge about 20% of the base salary of the candidate. And, for that fee they are doing sourcing, initial screening, and candidate follow-up. 

Recruiters have two main models. The first is contingency. That’s where they only get paid when you successfully hire someone. This is usually a non-exclusive arrangement. Meaning, you potentially have multiple recruiters looking for candidates for you and potentially confusing your messaging or, worse, damaging your brand. It also means they can recruit for your competitors and shop candidates around.

The other is retained. That’s where the recruiting agency takes partial payment upfront and the rest upon the successful hire. These are more likely to be exclusive deals. 

The issue with contingency is how focused is the recruiter on your needs? Recruitment agents get paid a commission. Their likely bias is to focus on those potential candidates most likely to close, most quickly, so they can make their numbers. They might default to speed over the best candidate. 

Also, with contingency, how much effort will they put into sourcing candidates? Are they really going to spend a long time seeking out people they don’t know yet, or are they going to their database and shaking the tree? Again, focus on getting the hire done rather than getting it right.

Retained is a better model, but it can be even more expensive. And, as we shared in a previous blog post, recruiters often have the same bias about who the first sales hire should be. That is someone who is currently successful at an established firm looking to try their chops—and bump up their bank account—at a startup.

Our qualitative and quantitative research has shown that those are generally what we call Playbook salespeople. These are great for established firms, but most are not a good fit at a startup. 

In both the retained and contingency recruiter scenario, how does a startup control its brand? How was everyone treated by the recruiter, and how does that reflect on you? You are planning on growth. While the candidate may not be a fit now, they may be in the future. Or, they know other people that might be interested in your company in the future. Why leave a bad impression through poor communication or, worse yet, shockingly common, ghosting? 

At The Right Five we deliver all of the communications necessary for those hundreds of candidates as they go through the assessment process such that nobody is left wondering where they are in the process or why they weren’t successful. You only need to deal with and communicate with those you actually interview.

As you can see, while inexpensive, The Right Five provides a huge bang for the buck. 

Want to find out more? Watch this five-minute overview and demo of The Right Five or send us a note and we will set up a meeting.

Curious to know more about the assessment? Want to see if you are a Pathfinder? You can take the assessment here for free but make sure you check out the notes at the bottom of the post before you start. Your results are yours, we don’t share them with anyone.

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