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Starting your own HR consultancy, recruitment agency or employee learning and development service may seem like a path to success. Human resources plays a vital role in any business, and many leaders are looking for experts with years of experience to handle these functions. However, the success of your business may vary depending on location. *
What is the success rate of staffing firms?
Maintaining strong company culture and values is critical for HR professionals. But for HR consulting firms, embodying these qualities is just as important in their own right. Failure to do so may result in their services appearing inauthentic and irrelevant. Authenticity not only fosters a sense of belonging among employees but also strengthens relationships with customers.
You’ve probably heard that more than half of new businesses fail within the first few years. Research confirms that of the 17,019 staffing companies established in the past five years, 6,416 have unfortunately closed their doors, either through administration, liquidation or dissolution. This means that approximately two out of five staffing firms fail within their first five years of existence, which offers a more promising possibility than the average statistic.
Best Cities for New Staffing Firms—Did your city make the list?
Location has a significant impact on a company’s success, affecting factors such as profit potential, expenses and growth opportunities. Here are three cities where emerging staffing companies are thriving.
1. Mansfield and Sunderland
These cities have the highest success rates for new staffing companies, with approximately 86% of businesses still operating.
2. Ipswich
Ipswich is second with a success rate of 73.2%. Of the 41 human resources companies established in the past five years, only 11 have closed down.
3. Crowley
Crawley ranked third with a business survival rate of 72%, making it an attractive location for HR consultants.
The worst cities to open a human resources company
On the other hand, some cities present challenges for new HR consulting firms. Here are the cities with the highest failure rates.
1. Leicester City
With a failure rate of 79%, Leicester is the worst city for staffing companies. Of the 445 companies established, 350 have ceased operations.
2. Hull
Hull is close behind with a failure rate of 56%. Of the 34 staffing companies established between 2018 and 2023, only 15 are still in operation.
3.Swansea
Swansea is third with a business fatality rate of 52.2%.
Charlotte Anderson, director at Pace, said: “Of course, authenticity is key in any industry and we always ensure our clients have a strong company culture and values that their employees and customers identify with.”
“But many advisory firms easily forget to conduct internal investigations and make sure they check these boxes themselves,” she adds. “By ignoring these aspects, many consulting firms’ products and services may be perceived as inauthentic and out of touch with the current environment.”
“Building a strong culture and core values for a new HR consulting firm can be challenging when starting out. But today’s business leaders want to work with HR consultants who align with the company’s vision and contribute to growth,” she said.
“If you just offer generic, off-the-shelf services and solutions, your customers will have a hard time seeing the value of working with you.”
*Pace HR conducted a The study used data from Companies House to assess the success rates of new companies providing HR services. Read on to find out which UK cities offer the best prospects for staffing companies.
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