Starting a business isn’t something that can be done overnight. There is a lot of thought and effort to be put into it if you wish to make it big.
Here’s our guide on how to start a staffing agency from scratch, in which we will cover everything you need to set you up for success:
- Choosing a niche
- Developing a business model
- Calculating the costs
- Getting the employer identification number
- Obtaining licenses
- Finding an office space
- Hiring
- Marketing
- Getting an insurance
- Choosing the right recruiting software
Choose a niche
Choosing a niche for the very beginning is always a good idea, rather than stretching out and covering various industries.
Many companies decide to focus on one specific niche for the beginning. After they have grown and well-established themselves in that niche, they expand onto the other related ones.
When choosing a niche, make sure it is a niche you find interesting and fun.
For example, you could choose to start a healthcare staffing agency, which only focuses on hiring health workers.
Develop a business model
This is a business model canvas that can significantly help you develop and determine your business model.
Filling this information here can greatly help you become aware of your target audience, cost structure, resources, and revenue streams.
Spending some time to think about all of these can, in the long run, differentiate you from the rest of the small struggling staffing agencies.
How does a staffing agency actually make money?
Staffing agencies make money by paying their employees, and in general, having smaller business costs than what they charge clients. These margins vary depending on the industry, demand, and location but can be anywhere between 30% and 70%.
Understand the cash flow
You need to understand how cash flows in the staffing industry. There is a bit of discrepancy between how the clients pay you and how you should pay your employees.
The clients will usually pay you monthly or based on the contract you have made with them. But in most cases, staffing agencies pay their workers every two weeks.
This can create financial problems if you don’t manage it properly. Either make sure you have enough resources at every given moment on the account or negotiate the payment schedule with your workers that works the best for both parties.
Additional read: Understanding the costs of a staffing agency and, Controlling the staffing costs.
Questions to ask yourself in order to determine your business model more easily
- Do you want to chase new clients or stay longer with the existing ones? Or you can do both?
- What is the niche/industry you wish to serve?
- What part of the recruitment process do you wish to specialize in? Or will you be an all-inclusive staffing agency?
- How do you plan on charging for your services?
Calculate the costs
You should understand the costs of your business before starting it.
These costs can greatly vary depending on your location, business model, the technology you decide to use, and how many workers you plan on having.
Here’s what you should take into consideration when calculating the costs:
- Office rent and supplies
- Web design
- Legal fees (entity formation & contracts)
- Insurance
- Software (applicant tracking systems, resume reformatting tools, etc.)
- Marketing
- Wages
Startup costs for a staffing agency are often minimal.
However, it’s important to make a budget that includes costs for registering your business’s name, incorporation fees, registration costs, advertising, office equipment, a place to house your business, and a reasonable salary for yourself.
If you plan to have employees, you’ll also need to factor in their wages.
If you need to, consider applying for a small business loan. There are several different types that may be beneficial for you. However, because startup costs are not always excessive, you may not need a loan.
Get an employer identification number (EIN)
When working to start your own staffing company, it’s possible to get the business up and running within three months, once you have decided that you really want to get into this business.
The first step should be to get an employer identification number. The EIN will be obtained from the IRS. It will be your company’s identification when it comes to paying taxes. It also comes into play when paying employees.
Find out more about necessary licenses
Once you’ve obtained your EIN, you may consider contacting the local and state government to find out more information about licensing, certificates, and registration that might be needed to start and run your staffing agency.
There are certain industries that require various certificates and licensing. It’s best to consult with the government to make sure you are adhering to guidelines and regulations. Starting off on the right foot by being compliant is essential for your company‘s success and growth.
Get an office space
Once you have your budget in place, and all the licenses obtained, it’s time to start looking at a space to house your business. Most likely, you’ll be leasing office space rather than purchasing it.
Make sure the space is large enough, works with your budget, and can offer room to grow. In the beginning, you may only need one small office, reception area, a conference room, and a small waiting area.
Starting off with a small space may be best for your budget, depending on how much you have estimated your startup costs to be. There’s always room to grow within the first year or two of being open.