How to Start a Temp Staffing Agency in 6 Steps

Creating your own business may seem daunting, but staying organized and focused is key. Follow our six steps on how to start a staffing agency and you’ll be well positioned for future success.


1. Gain Staffing Industry Experience

Too many people try to start their own company with little to no experience in the staffing industry. It’s always a good idea to come in with some knowledge of the industry — not just as a temporary employee, but as an administrator, as well.

2. Research Governmental Requirements

Evaluate governmental requirements in your area such as licensing, tax, and workers’ compensation, as requirements vary by state. And 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, staffing agencies should do this monthly to plan for cash flow needs. There are also costs that many firms don’t take into account, such as 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

There’s always free advice available. Talk to people who have started a staffing agency. Talk to other agency owners who are not in your niche or geographic area to avoid competition to learn more 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 jack of all trades, it is more beneficial to operate primarily within a single niche. This will allow you to limit your competition and stay up-to-date on current needs and trends in the industry. Look at where your strengths lie, which industries are prevalent, and what niche is underserved in your geographic area.

Due to the critical nature of the roles and the specialized skills and knowledge required, some of the most popular verticals within the industry include:

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

6. Hit the Streets

You’re going to need both clients and employees. Use your contacts to bring experienced employees into your agency. If your contacts are unable to help introduce you to potential clients, knock on doors. 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. Creating your staffing agency business plan will act as a guide as you start developing a pool of qualified candidates, building a team of talented recruiters and support staff members, and growing your staffing business. Back-office support services will help make this process quicker and easier. 

Additionally, factoring services allow you to make payroll and business expenditures, like:

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

How Do Staffing Agencies Make Money?

The specific niche, geographic region, and staffing business model you choose will affect how much you charge. For example, the fees for a staffing firm that hires executive-level talent are different from a temp agency that specializes 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.


Contact us with any questions or concerns about starting your own staffing agency. Encore Funding is here to help you succeed.