Congratulations! You have decided to get into a business of your own. A staffing agency (some prefer the term “staffing company”) can be an excellent business model both for the relative ease of entry and the potential of achieving profitability, even in the first year.
To help facilitate the successful launch of a new staffing company we will briefly discuss the following 6 important considerations.
- Buy a business or create new.
- Establish Credentials
- Good Credit Rating
- Staffing Software
- Business Plan
- Build a Website
First, an Introduction:
According to the American Staffing Association (ASA) the size (by revenue) of the Staffing Industry at the end of 2019 was $161 billion. The industry divides this figure into two major categories Temporary staffing sales at 85% of the total or $137 billion; and Recruitment and Sales at 15% or about $24 billion.
Some staffing companies specialize in recruitment and permanent placements only. That is a different business model and therefore would need to be discussed in a different article.
In this article we are going to consider that your new staffing agency will be in the larger 85% sector of the industry doing both “temporary contract services” and permanent placements.
As you consider starting a Temporary staffing agency, it is well worth considering that most of the larger staffing companies (Kelly, Adecco, etc..) operate with high revenue volume but low margins. Smaller, single office staffing companies in a niche market can be significantly profitable. We will target especially this latter model.
Buying a Staffing Agency or Creating One
Both are good options and certainly can be depending on the circumstances. If you are interested in buying a staffing agency, I have written an article that covers that topic, titled “Buying a Staffing Company – 15 Topics to Consider”. The first page gives an outline of the topics so you can easily scan the content. I believe it would be valuable for anyone considering that option. Because the article is instantly available, there is no need to discuss that option here. So, this article assumes that your new agency will be a Start-Up. Great! I love start-ups!
Formal credentials are usually derived from education. Just starting out, I would suggest getting a basic certification from one of the two major staffing associations, American Staffing Association (ASA) and Staffing Industry Analysts (SIA)
This is not simply for sales credibility, which is also important, but for very practical reasons as well.
There are some key compliance issues for staffing companies in labor law, OSHA, the legal concept of “joint employers, the legal issue of independent contractor versus employee, and the employer’s responsibility for health insurance under the Affordable Care Act.
The basic ASA certification as a “Certified Staffing Professional” will cost you $500 for all books and materials plus the trial exam and actual exam. The program is set up by state so you will have the basics from the Federal government (all states) plus your own State’s regulations.
SIA has another program called “Certified Contingent Workforce Professional. That will cost you about $1,650
In my opinion I would get the ASA “Certified Staffing Professional” credential and later see what you may want or need. OSHA has great training videos for a large variety of job Safety issues for many industries.
(ASA also has a video training for Sexual Harassment for $50 that would be a good to have considering the activity in this area and the lack of misunderstanding by many.
Good Credit Rating
A good credit rating is not only a good personal reference, important as that will be especially as a start-up, but will be very soon be vital as and especially as you grow.
Payroll is going to be your biggest expense and a good personal credit rating will be necessary in establishing a good banking relationship.
If your first contract is to supply 25 workers at $18 an hour for 2 weeks to stock a new warehouse the payroll expense alone is going to be more than $36,000. Even if you get paid weekly you will need to front $18,000 then bill and collect.
As your company grows these numbers grow. If you cannot fund these projects, you will soon be out of business.
So, keep your credit rating excellent and your withholding taxes paid in full and on time! You do not need interest and penalties in a start-up!
When you look at the example above and see the clear possibility of having 25 contract employees and 2 core staff working for your company during the first 2 months, it becomes very clear that you will need a complete “front and back office” staffing software solution, that you and your core employees know how to use efficiently, from day one!
That staffing software needs to include applicant tracking, CRM, payroll with complete tax jurisdictions, online applications, automated onboarding, bulk messaging, email timecards, etc. etc.
There are just too many data points to take in and turn out efficiently. And everything needs to be exact, securely stored, and instantly retrievable in a variety of formats to keep your company efficiently in control.
Consider those 25 day-laborers many of whom may not have checking accounts and/or may need to be paid daily. With appropriate staffing software you can issue them a debit card on day one, reload their cards daily, and do it all in minutes based on their signed and instantly received emailed timecards.
I could go on but I wrote a blog article a short time ago at the suggestion of a question at the famous website Quora.com that asked “What is the Best Staffing Agency Software” and I gave my opinion on what such a software would look like. Also see “CRM,CMS, ATS, & HR – What is Good Staffing Software”
The most important thing for any business, whether a start-up or 100 years old, is to prepare and implement a detailed plan. Times change, markets change, competitors & economic conditions change.
A good business plan will first look at the market, competitors, a realistic competitor analysis. It will have an aggressive plan both for new sales and client retention. It will have goals and timelines for achieving them.
It will have the best staffing software to keep the company on top of the numbers. (See Staffing Software section above)
In a staffing company, especially, it will have a professional cash-flow analysis considering seasonality, contingency funding, slow-pay possibilities based on industry experience.
Pricing strategy is particularly important to staffing companies. There is a good article on this subject from Entrepreneur titled “How to Price your Staffing Services” which covers this very well.
The sales plan will not only have goals and timelines but also a plan on how and why the goals will be achieved.
Because “training” for core staff and contract workers is so important for a staffing company, there should be a plan to begin a “professional in-house training program”. ( Here is an article that gives a good idea with 9 reasons why it is important to have one).
Concerning a business plan in general, here is an article that may be of some help in creating a good one.
Build a Website
Building a good website need not be expensive to look attractive, professional, and helpful to your prospective employees, clients, and your company.
As a start-up you will not want to spend a lot of money on it. I would suggest a WordPress site using a WordPress “Theme”. This will save a lot of coding costs since it is a pre-coded format with many great designs to choose from. You can see several at Themeforest.net .
There are certain ingredients for any good website as well as “rich and relevant” content for a staffing company website. I have an existing blog covering both these subjects titled, “Having Fun Building or Rebuilding Your Staffing Company’s Website” . You will see two lists there #1, ingredients any good website, and # 2, a list for an excellent staffing company website.
Finally, these six considerations are a few ideas which are intended to help those thinking of starting a new staffing agency. Make it Fun!