Last Updated on December 20, 2022
Finding the right workers can be a hassle. Companies can spend months vetting a potential candidate only to discover that they weren’t the top choice for a job. Nothing is more frustrating than hiring an employee, onboarding them, and then having it not work out.
This common struggle is one reason why staffing agencies have become so popular in the world of business. Large and small companies use these agencies to find the perfect workers for their most vital positions. It’s a growing industry and a great business to start.
But how does one start a staffing agency? Where can you establish a client pool of dedicated companies and temporary workers? How can you most effectively play match-maker? Learn everything you need to know about starting your staffing agency in the article below.
What is a Staffing Agency?
A staffing agency helps companies find their star employees of the future. Usually, a staffing agency builds these relationships through a reliable pool of workers and client companies. Prospective candidates will sign up with the agency or be discovered by it. Once they have a stable source of competent workers and independent contractors, they can begin distributing them to client companies.
One of the most common fields for staffing agencies to flourish is IT. Most IT positions are very specific (to a particular software or coding process), and the more specific it is, the more difficult the position is to fill.
Staffing agencies can unite companies with the PHP or block-chain developer of their dreams without the company needing to scour the planet for the perfect candidate.
Why Starting A Staffing Agency Is A Solid Business Idea
We have seen a job market slump ever since the COVID pandemic. The Bureau of Labor Statistics said that over 4.5 million Americans quit their jobs as of May 2022.
People typically leave their jobs to escape an industry in a slump, look for better opportunities, and prioritize mental health instead of demanding work. A mass departure can leave any company unable to perform their daily business operations.
These vacancies are where you come in. As a staffing agency, you can help businesses close these employment gaps by providing qualified candidates.
In fact, staffing is one of the fastest-growing industries in the business-to-business world. Therefore, there are a lot of opportunities if you decide to start a staffing agency now.
How Does A Staffing Agency Make Money?
A staffing agency makes money by charging its clients for staffing services. Depending on the staffing business, it could either charge a predetermined fee upfront or take a portion of the temporary employee’s wages as payment.
How to Start a Staffing Agency
Now you should know precisely what a staffing agency does and why they’re essential. Now it’s time to look at the step-by-step process of creating one.
Step 1: Choose a Specific Field to Operate
It’s possible to create a staffing agency with the broad goal of “supplying any type of worker to any type of company.” However, this outlook has a massive scale and is difficult to begin from a humble starting point.
Instead, you might find it more advantageous to pick a specific market to specialize in. For example, you could choose the field of IT as mentioned above. It will be easier for you to find potential staffing clients by selecting a specific field because you will appear like a specialist in that area.
It will also narrow down your marketing plan and make your customer approaches more relevant. If you don’t want to specialize in a specific field, then analyze the target market.
If you live in a city where several companies are searching for managerial position candidates, begin with managerial experience workers. By narrowing your scope, you streamline the market infiltration process and expedite client generation.
Step 2: Make Sure You Have the Capital
Temporary staffing agencies require a lot of money to start because they require a complex infrastructure from day one. You would have to be very lucky to start with five job candidates and one client and assign them all to the same place.
You’ll need a strong base of clients and candidates from the very beginning and that will require lots of funds. You can expect start-up costs of anywhere between $60,000 to $130,000 depending on the scale of the company you want to create and the market you’re entering.
Some of the expenses you’ll want to be aware of when starting an employment agency are office space, insurance, legal fees, company management software (payroll, communication, HR), office supplies, employee wages, advertising and marketing, and incentives for clients and job candidates.
Once your staffing agency is up and running, you need to make sure you have enough cash flow to sustain growth. For that, you should consider factoring your invoices or accounts receivable financing as an affordable working capital financing solution for your business.
Step 3: Decide What Type of Company You’re Starting
There are three main types of companies you can start: privately owned, a partnership, or a corporation, LLC, or DBA. For privately-owned companies and partnerships, all the results and legal repercussions will fall upon the owners.
If you start a corporation, LLC, or DBA, the company will take on status as a legal entity. This will keep you personally safe if anyone decides to sue the company or it falls into legal trouble.
The type of company you choose will also affect your taxes, the business name, and whether or not it can be traded on the stock market.
If you decide to start a corporation, LLC, or DBA, you need to follow a specific process, and it varies depending on the state and country where you are doing business. Independent companies and partnerships will also require tax designations and declarations.
Once you decide on the type of company you are, you should choose a business name and get all the licenses and permits necessary. Then you should open a bank account for your business as well.
Step 4: Get All Licenses And Permits
The required business licenses and permits differ depending on where your business is located. Most areas let you operate a staffing agency with a general business license if you only provide general staffing services. However, you may need specialized licenses if you provide temporary staff for specific fields like medicine and finance.
Step 5: Get Insurance to Keep Your Employees Safe
If you bought a car, you’d get it insured. If you bought a house, you’d get it insured. If you start a business… There is no difference. Businesses are at risk for legal action and with the amount of capital they require, you probably can’t afford for them to completely fail.
Keep track of the common types of insurance policies all businesses start with. Some of the things you should have covered include business owners, workers’ comp, property, employee theft and crime, key employees, general liability, and much more.
Many business insurance providers have umbrella policies and packages you can buy so that you won’t have to keep track of individual policies. Packaging all your coverage together will also make it more affordable.
Step 6: Find the Right Employees and Software
The employees you first hire for your staffing agency will be the foundation of your business. You’ll need competent HR staff for the hiring and interview process to filter out bad potential employees. You’ll also need an IT team capable of building and maintaining a domain for your company to operate on.
Probably one of the most important positions at a staffing agency is the recruitment and marketing teams. These will be the people who pitch your service to clients and find a talent pool that gives you an edge over the competition.
Finding the right employees is all about patience. Take time to ask the right questions and be as specific as possible. Creating the best staffing agency is about servicing a particular niche and your staff needs to accommodate that niche with their expertise.
The staffing software you choose will be the tool that allows your company to function. Check competitors to see what applications they use for communication, CRM (customer relations management), and task management.
You’ll also need a competent program for building a domain as this will be the pulse of your company.
Step 7: Build a Website and Start Marketing
In today’s market, most temporary staffing agencies operate via the internet. Companies will use a platform to select from a client base and/or workers will register and become approved on a website. Once a database of quality workers is established the domain will also be where your staff finds candidates to match with companies in need.
Marketing is a pivotal part of any staffing agency because it needs to happen on two fronts. You don’t just need clients, you need workers to sign up for your service, so you have something to provide your clients.
A great staffing marketing plan will encompass outreach to both companies and workers. You can do this by searching through common talent pools like LinkedIn or conducting searches locally.
Staffing Agency Business Outlook
Global staffing industry revenue has been steadily growing since 2009. With more companies switching to a distributed model, a growing need for competent staffers is apparent as application piles continue to tower over HR staff.
Finding the right workers in an international pool can be challenging and a great staffing agency will have insider intel that you won’t be able to find on the average LinkedIn profile. As of 2020, the global staffing revenue was at about 497bn USD and 144.5bn USD in the U.S. alone.
With these numbers continuing to grow (and only a slight dip from the COVID-19 pandemic) it’s safe to conclude that this is a solid industry to enter at this time.
As long as companies exist they will need employees. Staffing firms will continue to bridge this gap and make the life of workers and recruiters much easier. Talent pools like LinkedIn and Indeed are not specific enough and lose quality with advantages in their quantity of workers.
If you want to start your own business in this field all you need to do is keep track of the steps above. Be aware of the legal requirements for staffing agencies and get some insurance to keep you and your staff safe.
A good employment agency owner should be able to easily find employees and clients and have an in-depth understanding of what a client needs at a specific position. They need to be a great, perfect matchmaker. They will create numerous lasting relationships and a flourishing business for decades to come if they can do so.
Starting A Staffing Agency FAQs
Here are some common questions about starting a successful staffing agency answered.
How profitable is a staffing agency?
A staffing agency can earn up to 10% net profit, meaning it can be fairly profitable. You can increase this profit margin by providing temporary staff for in-demand industries.
How much money do you need to start a recruitment agency?
The starting business cost for a recruitment agency varies, but you usually need between $3,000 and $250,000, depending on the business size. A smaller initial cost means you may need to do multiple jobs yourself and have limited office space. Conversely, larger initial investments let you hire more people and ensure you are not overwhelmed by everything you have to do.
How do I register as a staffing company in the USA?
You can register as a staffing company in the USA by applying for a general business license with your local government. You may also need a specialized license to provide temporary workers for industries like medicine and finance.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.