Considering launching a business in the Talent Acquisition space? Let’s get real:

Know your funding path before you start

The valuation of a business changes dramatically the minute you start making money. Ironically, this means that in the venture community, you may be worth far more as a piece of paper and an idea than you are as a company earning revenue. So before you start, you need to know if you’re going to raise money or not. You can’t wait and see about that; you have to pick a funding approach day 1.

Get early wins that matter

Part of what constitutes an “early win” will depend on your answer to #1. Bootstrapping? Win = cash. Funding? Win = demonstrating “product market fit”… and making sure your “client wins” aren’t classified as recurring revenue (if you’re a SaaS play) so that your wins don’t impact your valuation.

Critical: in both cases, make sure you get the right to put the client’s logo on your web page and/or talk about the client in a case study. This industry moves as a herd, so if you can’t show who you’ve already worked for, you’ll be starting your next sale at ground zero. Collecting logos is a major accelerant.

Actually, it’s an imperative.

Sustaining growth: Unlocking dollars from enterprise

TA in big companies is a completely different animal than TA at SMBs. In small/mid-size businesses, TA leaders tend to not only operate autonomously, they’re often “one-man bands” who handle everything from sourcing to contracting, and they’re hungry for new tech and new ideas that will help them manage their workflow. In enterprises, TA may be distributed, with the head of TA acting as either a player/coach (with responsibilities for strategic aspects of recruiting, like employer branding), or a true manager. This means that despite having the same title, what they care about is very different.

photo of Jason Seiden on HRExaminer.com

Jason Seiden, HRExaminer Editorial Advisory Board Contributor

Plus, there are four much bigger issues to contend with: first, TA tech buy decisions at enterprises may pass through TA, but are more than likely controlled by IT, business operations, or even legal. Second, enterprise TA is bombarded with technology pitches and so are less likely to be impressed by your new mousetrap. They want to know that you can handle the stuff that keeps the company from getting sued more than they want to know about your latest feature, because that’s the stuff that keeps IT and legal from signing off. Third, any new piece of software will likely mean “change management,” so they need to understand how your tool plays in the sandbox with other tools before doing anything. And lastly, budget cycles can be brutal: it will take a year or longer to open up an enterprise deal, and that first check will likely be small.

So if you have a tool that’s good for enterprise, tuck in: you’re going to be self-funding your business for about 18 months at least.

Most TA metrics don’t matter

The business metrics around TA are not well defined. What I mean is that metrics within the space, like time to fill or source of hire, are clear, but the line that connects these metrics to revenues and profits is not clear.

As a result, there is a lot of stuff that TA cares about that no one else in the organization thinks is important… and that becomes powerfully clear the minute your sales cycle takes you to the C-suite, or a General Manager, or a head of IT.

Vendors may get a bad rap, but my experience is that vendors—not practitioners—are the ones who have been pushed to truly understand the business of TA!

To party or not to party

The TA industry is lovely: I’ve never met such a tribe in any other industry! The flipside of all that friendship is that conferences can pose a conundrum: your friends got you started and you want to reward their support with your time (and maybe a round or two of drinks), but as your business demands that you spend time courting new relationships with buyers, and your budget lacks the expense account you used to have, you find yourself opting out, and potentially turning off the very people who got you to where you are.

The real competition: 800 lb gorillas

It’s Oracle’s world (and Workday’s, and maybe SAP’s, ADP’s, and Ultimate Software’s), we’re just living in it. If you’re not an HRIS, you’re a spot solution. No joke: ATS’s are spot solutions as far as enterprise buyers are concerned. This is important for would-be entrepreneurs to know, because it defines your exit opportunities: you are probably going to sell your company to a bigger fish, period. And the company buying you will be one that knows your business better than you do (because they’ve bought scores of companies like yours, and also hired thousands of former entrepreneurs whose businesses they didn’t need to buy, because those businesses simply ran out of cash), so the negotiation will be fairly one-sided. Smart investors will know that… and will (de)value you accordingly.

The upshot? If you love TA, work in TA. And if you love being an entrepreneur, be an entrepreneur. And if you want to combine the two, know the score!

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