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You might consider targeting a niche market by specializing in a certain aspect of your industry, such as staffing IT or creative professionals.
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Written by: Natalie Fell
Published on May 26, 2022
Updated on December 25, 2022
Investment range
$4,600-$10,350
Revenue potential
$120,000-$240,000 p.a.
Time to build
0-3 months
Profit potential
$108,000-$156,000 p.a.
Industry trend
Growing
Commitment
Flexible
A company with an open, high-level position generally hopes to find the perfect applicant. But many organizations struggle to find a good match, and turn to experienced staffing agencies for help. Right now, demand for recruitment services is at an all-time high, which is why the US employment and staffing industry is worth almost $24 billion and set for steady growth in the coming years.
Staffing firms do all the heavy lifting in terms of sourcing candidates, setting up interviews, and extending job offers. But before you start flipping through that virtual rolodex, it’s important to understand the fundamentals of starting and running a business.
Lucky for you, this step-by-step guide has all the information and insight you need to put you on the road to staffing success.
Before starting a staffing agency, it’s important to weigh the pros and cons.
Trends within the staffing industry include:
Challenges within the staffing industry include:
Costs to start a staffing agency range from $4,600 to $10,400. Your costs will greatly depend on how much you spend on advertising your services and posting your client’s positions on job boards.
If you’re interested in obtaining certification, the American Staffing Association offers several programs. You can even get certified to staff positions specifically in the technology and healthcare sectors, which would be appealing to potential clients in those fields.
You’ll need a handful of items to successfully launch your staffing agency, including:
Start-up Costs | Ballpark Range | Average |
---|---|---|
Licenses and permits | $100-$300 | $200 |
Insurance | $100-$300 | $200 |
Marketing and advertising | $2,000-$5,000 | $3,500 |
Website | $1,000-$2,000 | $1,500 |
Software | $100-$250 | $175 |
Office Equipment | $1,000-$2,000 | $1,500 |
Miscellaneous | $300-$500 | $400 |
Total | $4,600-$10,350 | $7,475 |
The average rate charged by permanent staffing agencies is 20% of the hired individual’s first-year salary. You’ll have very few ongoing expenses, aside from advertising and posting jobs. Expect a profit margin of around 90%.
In your first year or two, you could run your business from home and fill one position every two months. Assuming each job paid a yearly salary of $100,000 and your commission is 20%, you’d bring in annual revenue of $120,000. Assuming that 90% margin, you’d make a profit of $108,000. As your business grows, you might hire additional staff and rent an office, reducing your profit margin to 65%. If you doubled annual revenue to $240,000, you’d make an impressive profit of $156,000.
There are a few barriers to entry for a staffing agency. Your biggest hurdles will be:
Now that you know what’s involved in starting a staffing agency, it’s a good idea to hone your concept in preparation to enter a competitive market.
Research staffing agencies in your area to examine their services, price points, and client bases. You’re looking for a market gap to fill. For instance, maybe the local market is missing a staffing agency that specializes in filling temporary positions.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as staffing IT or creative professionals.
This could jumpstart your word-of-mouth marketing and attract clients right away.
You’ll be providing recruitment and staffing services for companies with open jobs to fill. Many agencies specialize in a specific industry, which helps narrow down viable candidates and customers. Some staffing agencies may also focus specifically on temporary or seasonal workers.
When recruiting full-time employees, staffing firms usually charge 10-35% of the employee’s annual salary. Rates depend on the agency’s reputation and the positon being filled.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target customers will be companies that need assistance filling their open positions. Advertising your staffing agency on LinkedIn will help you build your network of potential clients and job seekers. You could also spread the word about your recruitment services on social media platforms like Facebook, Instagram, and TikTok.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to staffing agencies.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your staffing agency will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a staffing company. You might also try crowdfunding if you have an innovative concept.
Starting a staffing agency requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your staffing agency as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Bullhorn, Recruiterflow, or Harver, to track candidates, schedule interviews, and post jobs.
Some of your business will come from your existing network or word of mouth, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your staffing agency meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your staffing agency could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a staffing agency, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in staffing for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in recruiting. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a staffing agency include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
With your own staffing agency you can build long-lasting relationships, help companies find the talent they need and help people carve out fulfilling careers. Staffing can be rewarding work, and you’ll make great money along the way!
After reading this guide you’ve got the requisite business know-how. It’s time to start your entrepreneurial future and launch the staffing agency of your dreams.
You could start a staffing company for around $5,000. Your main costs will be related to advertising your business and posting on job boards.
Yes, a staffing agency can be highly profitable. Make sure you charge competitive rates for your services and spend time building up your network of candidates and clients.
While obtaining certification isn’t mandatory, there are several certifications available for those looking to elevate their staffing skills. Check out the American Staffing Association for more information.
You may be required to obtain specific licenses to run your staffing business. Check with your state and local government and visit MyCorporation’s Business License Compliance page.
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