Starting an HR Consultancy for SMEs: How Can I Match Talent with Opportunities?

Hi Everyone, I'm Bhargav Seeram from Hyderabad, currently working as a Manager in my dad's company. I would like to start an HR Consultancy/Services company. I have no knowledge about anything except for a few concepts learned during my MBA II SEM. I feel there is a need here in our Industry Estate to maintain a record and database of employees who are looking for jobs in SMEs and want to match the right profile candidate with the right job. Until now, the recruitment was only employee and other referral-based. I want to tie up with institutes like CITD and others that provide Tool Design and CNC Training, thus providing placement services to the people for companies. My idea is to further advance by registering every person working in the companies here, monitoring their performance, and maintaining a database. I can see a very high attrition rate in these companies, and there are also no dedicated workers in every industry, with many companies having unfilled vacancies.

I would appreciate your suggestions, comments, as well as legal and technical help. Please share any thoughts you have.

Thank you all.

It's nice to see entrepreneurs entering the SME segment. Please take note of the following points that might be helpful to you:

1. This sector is quite disorganized when it comes to recruitment. One major issue here is the perception of disorganization from the outside, coupled with reluctance from companies to engage consultancies for recruitment due to consultation fees. Instead, they prefer advertising in DC papers.

2. Establishing connections with government training agencies like CITD, NSIC, ALEAP could be beneficial.

3. Employee retention is a challenge in this sector. Employees tend to switch companies quickly for higher salaries, even shortly after joining a new company. When signing an HR recruitment contract, be prepared to replace a candidate free of charge if they leave within three months.

4. Despite the challenges mentioned, I am not discouraging you. Proceed with caution and patience in every decision you make. Success in business is everyone's goal. I wish you all the best.

Regards, Alex Praveen

Thank you, Alex, for your guidance. I am currently running a Machining Shop where I'm encountering the issues you've addressed. Considering these aspects, I aim to gather all potential candidates to assist the small and medium enterprises (SMEs) that employ them.

Query on Employment Contracts

I have a query: Can I require them to sign a 1-year contract if I guarantee them work? Is this feasible, and would it lead to success? I am contemplating a contract where they would need to reimburse the consultancy if they exit the job within 6 months or a year.

Exploring an HR Sourcing Company

Additionally, I am exploring the idea of establishing an HR Sourcing company with workers as lifetime members. The concept involves providing HR solutions, where I would cover the salaries while they work at client sites. Do you think this approach could work, or am I overthinking it?

Regards,

As mentioned by Mr. Alex, this is an unorganized sector, and great care needs to be taken to handle employees in this area. Also, as the trend goes, every employer (Client) asks for reliable employees at a comparatively low cost. In turn, employees have to work on the edge of the basic minimum salary, thus giving rise to high attrition and poor quality services. I suggest you conduct a thorough survey of the industry and understand the legal implications attached to this sector. I appreciate your efforts to start up this business, but make sure to nurture your employees and try to understand their needs from the bottom line. Your employees will be your most valuable assets to leverage your business.

You will be successful. Wish you all the very best of luck.

Regards,
Bijay

Pooling of workers is not an easy task at all. You are in business, so let's avoid the term "helping SMEs."

I sincerely suggest not entering into any contracts with workers that include a clause of guaranteed work for one year. In case you are unable to provide work, they will demand payment, which you will need to cover out of pocket. That's not good for business.

Please don't expect workers to pay anything if they leave within an agreed-upon timeframe. These workers are low-income individuals and will not be in a position to pay.

Starting an HR company is a good idea. I didn't understand what you meant by "lifetime members."

Suggestions Before Starting

Before starting, I would like to suggest a few things. Let's be practical:

Start with a small, time-bound project. Meet as many SMEs as possible and visit their factories or workshops to understand their worker needs and sourcing challenges. Learn about management's difficulties in sourcing workers and their retention levels.

When visiting factories, also meet with the workers to understand their issues. Prepare a questionnaire to gather information from both management and workers.

Collect direct contact details of recruitment managers and workers' union representatives in each organization you visit.

Carefully analyze and seek feedback from others who can provide suggestions and constructive criticism.

By completing this project, you will be better equipped to decide whether to proceed. This experience will help you understand practical aspects and provide firsthand knowledge. Avoid delegating this work to someone else.

Consider freelancing for a company to source candidates and understand the challenges firsthand.

ALL THE BEST BHARGAV.

Regards,
Alex

Starting Your Own Business: Key Considerations

If you want to start a business of your own, you need to think this through very carefully. First, do your research and verify beyond doubt that an opportunity exists. Put together a comprehensive business plan detailing every aspect of the business and how you are going to make it work, and be different from other similar businesses.

I have mentioned on CiteHR before that it seems like every man and his dog in India wants to start an HR Consultancy business. The economy can only sustain a certain number of these types of businesses.

Secondly, do a SWOT analysis, both on your skills and experience to run such a business, and all the other similar businesses within a 100-mile radius of you because that is your competition.

Thirdly, have you got enough money saved to cover all your expenses for both the business and to live and eat for at least 12 months? Your business will not make profits for at least 12 months, and your establishment and marketing costs will eat up your capital.

I am not trying to talk you out of it, but I am trying to make you understand that this will not be easy. I read so many postings here on CiteHR about members who have rushed into starting a business and are now desperate because the work isn't there, or they cannot get clients, etc. I suspect many do not have a business plan and did not think it through beforehand.

Think very carefully before you give up the financial security of the job you have.