How to Start a Staffing Agency in 6 Steps

Starting your own staffing business may seem daunting, but I’ve seen plenty of new entrepreneurs succeed by following a few key steps. In general, you’ll want to focus on organization and ensuring you have the time to fully commit to your new endeavor.

I would pass that advice along to any aspiring business owner, but staffing requires more nuanced advice. The six steps below are starting points specifically for entrepreneurs interested in how to start a staffing agency. Read on to see how you can position yourself for future success.

1. Gain Staffing Industry Experience

Too many new staffing entrepreneurs try to start their own firms with little to no experience in the staffing industry. It’s always a good idea to come in with some knowledge of the industry. While experience as a temporary employee is a good start, consider how you can gain experience on the administration side, as well.

2. Research Governmental Requirements

Staffing is a fairly regulated industry. Be sure to evaluate governmental requirements in your area, like licensing, tax, and workers’ compensation, as requirements vary by state. Don’t skip out on your taxes or borrow from your tax money—it will catch up with you in the end.

Often, entrepreneurs either forget about or spend money that they’re supposed to use for payroll or quarterly taxes. When it comes time to pay, they don’t have the cash. By partnering with Encore Funding, we’ll hold these funds and offset negative cash flow with payroll funding.

3. Execute a Realistic Cash Flow Analysis and Projection

In the first year, you should analyze your cash flow and projections monthly to plan for cash flow needs. There are also costs that you may not take into account, like workers’ compensation insurance, rent, and phone bills. Determine your income and expenses, and then you can calculate how much cash you’ll need to operate on a day-to-day basis.

4. Talk to People in the Industry

One of the things I enjoy most about the staffing industry is the sense of community. There’s always free advice available. Talk to people who have started a staffing agency and other agency owners who aren’t in your niche or geographic area to avoid competition. It’s incredible what lessons you can learn from hearing about their challenges and successful strategies. Meeting and establishing new connections across the staffing industry can help grow your own business when you look to expand.

5. Develop a Niche

While it may sound like a good idea to be a generalist and cover as many industries as possible, it’s actually more advantageous to operate within a single niche, or several related niches. This helps you narrow your competition and stay up to date on current industry needs and trends. Look at where your strengths lie, which industries are prevalent, and what niche is underserved in your geographic area. Many staffing entrepreneurs pursue these popular verticals because the roles and skills are in high demand:

• Healthcare
• IT
• Professional/Clerical
• Light Industrial
• Hospitality

6. Hit the Streets

You’re going to need both clients and employees to create a successful, sustainable staffing agency. Use your contacts to bring experienced employees into your agency. You may also want to consider these recruitment tactics. If your contacts are unable to help introduce you to potential clients, knock on doors. It’s old-school advice that still works! One of the best ways to earn early clients is to travel the area and talk to businesses about their temporary staffing needs.

What Do You Need to Start a Staffing Agency?

In addition to startup capital, you’ll need to develop a comprehensive business plan that outlines your goals, objectives, and financial projections, as well as your marketing and sales strategies. See how to create a staffing agency business plan and how it can serve as your guide to help grow your staffing business.

Back-office support services will help make this process quicker and easier. Additionally, payroll funding allows you to make payroll and business expenditures, like:

• Office space, equipment, and furniture
• Software for sourcing and tracking candidates
• Marketing materials

How Much Should You Charge?

The specific niche, geographic region, and staffing business model you choose will affect your pricing. For example, the fees for a staffing firm that hires executive-level talent differ from those of a temp agency specializing in entry-level positions.

The two main types of fees that staffing agencies charge are client and candidate fees, which aren’t as common. Client fees come from the hiring company, and they can either be a percentage of the employee’s salary or an hourly rate. These fees cover the cost of recruiting, screening, and placing candidates. Learn more about staffing agency rates.

Why You Need a Partner, Not Just a Vendor

At Encore Funding, our passion is helping staffing entrepreneurs like you succeed. As you build your staffing agency, consider collaborating with a partner who truly understands your entrepreneurial drive. A mid-sized, family-run payroll funding firm like Encore Funding provides more than just financial backing. We offer a genuine partnership based on shared experiences, mutual growth, and a sincere dedication to your success.

Keep in mind that in staffing, your funding partner can be the key to not just surviving but thriving. Find an ally who will support you through the highs and lows of your entrepreneurial path. We’re here to help you succeed. Contact our team today.