How To Start A Staffing Agency From Scratch – Recruiter’s Guide

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:

  1. Choosing a niche
  2. Developing a business model
  3. Calculating the costs
  4. Getting the employer identification number
  5. Obtaining licenses
  6. Finding an office space
  7. Hiring
  8. Marketing
  9. Getting an insurance
  10. 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.

Questions to ask yourself in order to determine your business model more easily

  1. Do you want to chase new clients or stay longer with the existing ones? Or you can do both?
  2. What is the niche/industry you wish to serve?
  3. What part of the recruitment process do you wish to specialize in? Or will you be an all-inclusive staffing agency?
  4. 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:

  1. Office rent and supplies
  2. Web design
  3. Legal fees (entity formation & contracts)
  4. Insurance
  5. Software (applicant tracking systems, resume reformatting tools, etc.)
  6. Marketing
  7. 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.

Hire the right people for your business

We won’t talk about this too much, since you are already the expert in hiring.

Make sure to hire the right people for your business needs.

In the beginning, you might hire freelancers and part-time employees, but as the business grows, you should consider full-time personnel.

Market your agency

You need to get the word out there, and the only way to do so is through marketing.

You have to craft a good value proposition, explain what are the benefits of working with you, and what differentiates you from the competition.

Then choose the right format for your message (video, text, image) and the right channel based on your niche.

For additional info on this topic, check out the article on recruiting marketing strategies.

Must ask questions in terms of marketing before you launch your staffing agency

  1. Do you have a good, informative, and optimized website?
  2. Is the website designed appropriately for the industry you serve?
  3. Is the website mobile-friendly?
  4. Is the unique value proposition clearly stated on the home page and every other landing page of your website?
  5. Are you going to use social media, and if yes, which ones? You should have established a presence on at least LinkedIn and Facebook.
  6. Do you use social media for networking?
  7. Do you share valuable, educational, and valuable content on your website and social media?
  8. Are you keeping your communications with clients and candidates personalized?

Get a good insurance

Insurance is critical.

We strongly advise you to consult professionals to get the right insurance for your staffing agency.

Here’s a list of some popular insurances among staffing agencies:

  • Key employee insurance
  • Businessowners policy
  • Business auto insurance
  • Commercial general liability insurance
  • Employment practices liability insurance
  • Employee theft and crime coverage

Also, research whether or not your business and employees should be bonded.

Find the right software for a staffing agency

Thinking you could manage everything without a good CRM will be a huge throwback.

If you want to run a successful and profitable staffing agency, you need to have a good applicant tracking system, if possible the one that has in-built CRM functionalities.

This will be a huge game-changer, since it will allow you to automate numerous tasks, such as:

  1. Track all the communications in one place.
  2. Bulk emailing, while keeping up the personalization.
  3. One-click posting job offers to multiple platforms.
  4. Career page management and customization.
  5. Interview scheduling.
  6. Applicant tracking.
  7. Resume sourcing, parsing, reformatting, and storing.
  8. Blind hiring.
  9. And many more.

You should also get a resume automation tool, which will help you save both time and money. Recruiters lose on average 40 minutes reformatting one resume, while the software can reformat dozens of resumes for you in less than a few seconds.

One of the best software on the market for staffing agencies is Recruiteze.

Before you say, “oh so you are recommending your own software!” hear us out.

Recruiteze is designed to suit the needs of staffing agencies. It is both ATS and CRM in one. Plus it has a fully compatible resume reformatting software, iReformat that can reformat hundreds of resumes in one go.

Recruiteze is made to fit your hiring process, while many recruiting systems require you, the recruiter, to fit and adjust your processes to the software.

Recruiteze is created to support staffing agencies of all sizes through its flexible pricing plan: