How to Start Your Own Staffing Agency
Starting a staffing agency can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful staffing agency.
Importantly the most important step in starting staffing agency is to complete your business plan. To help you out, you should download Growthink’s Ultimate Staffing Agency Business Plan Template here.
15 Steps To Start a Staffing Agency
- Choose the Name for Your Staffing Agency
- Develop Your Staffing Agency Business Plan
- Choose the Legal Structure for Your Staffing Agency
- Secure Startup Funding for Your Staffing Agency (If Needed)
- Secure a Location for Your Business
- Register Your Staffing Agency With the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Staffing Agency
- Buy or Lease the Right Staffing Agency Business Equipment
- Develop Your Staffing Agency Marketing Materials
- Purchase and Setup the Software Needed to Run Your Staffing Agency
- Hire Employees
- Open for Business
1. Choose the Name for Your Staffing Agency
The first step to starting a staffing agency is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your staffing business:
- Make Sure the Name Is Available – Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep It Simple – The best names are usually ones that are easy to remember, pronounce and spell.
- Think About Marketing – Come up with a name that reflects the desired brand and/or focus of your staffing business.
2. Develop Your Staffing Agency Business Plan
One of the most important steps in starting a staffing agency is to develop your staffing agency business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
To enhance your planning process, incorporating insights from a sample staffing agency business plan can be beneficial. This can provide you with a clearer perspective on industry standards and effective strategies, helping to solidify your own business approach.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your staffing business.
- Company Overview – this section tells the reader about the history of your staffing agency and what type of staffing agency you operate. For example, are you a temporary
staffing agency, contingency employment agency, or executive search firm? - Industry Analysis – here you will document key information about the staffing industry. Conduct market research and document how big the industry is and what trends are
affecting it. - Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, are they part of a particular industry?
Where do they live? What do they find important when searching for services like the ones you will offer? - Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – the marketing efforts you lay out in your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your staffing company? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your daily business operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your staffing agency business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Staffing Agency
Next you need to choose a legal business structure for your staffing company and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole Proprietorship
A sole proprietorship is an entity in which the owner of the staffing agency and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a staffing company together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a staffing agency include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a legal business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a staffing agency is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your staffing agency, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Staffing Agency (If Needed)
In developing your staffing agency business plan, you might have determined that you need to raise funding to pay establishment costs and launch your business.
If so, the main sources of funding for a staffing agency to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a staffing agency that they believe has high potential for growth.
5. Secure a Location for Your Business
You may decide to run your staffing agency from your home or prefer to secure office space.
If you choose the latter, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
6. Register Your Staffing Agency With the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your staffing agency’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your staffing agency to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
Every state, county and city has different business license and permit requirements.
Nearly all states, counties and/or cities have license requirements including:
- General Business License – You will need to obtain a general business license which is issued by your city or county.
- Employment Agency License – You will need to check with your state’s labor department to find out if you need an employment agency license in order to operate your staffing agency.
Depending on the type of staffing agency you launch, you will have to obtain the necessary state, county and/or city licenses.
10. Get Business Insurance for Your Staffing Agency
Choosing the right insurance for your staffing company is cricual. Business insurance policies that you should consider include:
- General Liability Insurance – This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Workers’ Compensation Insurance – If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents.
- Professional Liability Insurance – This protects your business against claims of professional negligence.
- Business Auto Insurance – This protects your company car and any accidents that occur with the car while being used for company business.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Staffing Agency Business Equipment
Most staffing agencies don’t need much equipment. To start a staffing agency, you probably only need a computer, reliable internet connection, and phone. If you plan to do many virtual interviews or meetings, be sure to invest in a good-quality webcam. You occasionally might also need to have access to a fax machine.
If you plan to operate your staffing agency from an office space, you will also need reception furniture, desks, and other office supplies for your employees.
12. Develop Your Staffing Agency Marketing Materials
Marketing materials will be required to attract and retain customers to your staffing firm.
The key marketing materials you will need are as follows:
- Website – Likewise, a professional staffing agency website provides potential customers with information about the services you offer, your company’s history, and contact
information. Importantly, remember that the look and feel of your website will affect how your target market perceives you. - Social Media Accounts – Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help
customers and others find and interact with your staffing agency. - Logo – Spend some time developing a good logo for your staffing agency. Your logo will be printed on company stationery, business cards, marketing materials and so forth.
The right logo can increase customer trust and awareness of your brand.
13. Purchase and Setup the Software Needed to Run Your Staffing Agency
A staffing agency will need software to help manage their operations. This can include software for tracking employee hours, managing payroll, and creating invoices. There are a number of different software options that cater to the needs of staffing agencies, and it is important to find one that fits your specific needs.
Research the software that best suits your needs, purchase it, and set it up.
14. Hire Employees
If you’re looking to start a staffing company, you’ll need to hire employees to help you run it. You can post openings on local job boards or with online services. There are a few different job titles you can fill depending on the type of staffing firm you want to create. Here are some of the most common positions:
- Recruiter – Recruiters are responsible for finding qualified candidates for open positions at the company. They typically use databases and other resources to identify
potential candidates, and then screen them to make sure they meet the requirements specified by the employer. - Account Manager – Account managers are responsible for maintaining relationships with clients and ensuring that they are satisfied with the services provided by the staffing
agency. They may also be responsible for negotiating contracts and pricing agreements. - Staffing Coordinator – Staffing coordinators work with both employers and employees to match them with appropriate job openings. They may also be responsible for conducting
interviews and providing feedback to both parties.
15. Open for Business
You now know everything about how to open a temp agency and are ready to open your own staffing agency. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
How to Start a Staffing Agency Infographic
How to Start a Staffing Agency FAQs
Is It Hard To Start a Staffing Agency?
No, it is not hard to start a staffing agency, but there are some key steps you need to take in order to make your business successful. Your biggest challenges as a new staffing agency will most likely be finding clients and paying initial costs. Running your own business in any industry also comes with problems to navigate. Just follow the strategies we have outlined above and you will be on your way to owning a successful staffing agency.
How Can I Start a Staffing Agency With No Experience?
Starting a staffing company can be a lucrative business venture, but it’s important to do your homework before jumping in. Make sure you research the industry and understand the important aspects of how staffing agencies operate. You might also consider speaking with staffing professionals who can offer insights into their work and how other staffing agencies are run. As you work to open a staffing agency, one of the most important things you can do is effectively market your services and build a great team to support you.
What Type of Staffing Agency Is Most Profitable?
The most profitable type of staffing agency is typically a professional placement agency. This type of staffing agency specializes in finding jobs for highly skilled workers, such as accountants, engineers, and nurses. Professional placement agencies often charge a higher fee than other types of staffing agencies and have a higher success rate in finding jobs for their candidates.
How Much Does It Cost To Start a Staffing Agency?
The cost of starting a staffing agency will vary depending on the state in which you reside and the size of the agency. Startup costs for staffing firms can range from $58,000 to $127,000, and you should have a suggested operating capital of between $80,000 to $135,000 in the bank.
What Are the Ongoing Expenses For a Staffing Agency?
There are a few ongoing expenses that staffing companies need to budget for. One is payroll. This includes the costs of hiring and paying employees, as well as any payroll taxes. Agencies also need to budget for marketing and advertising, office supplies, software, and insurance. It's important to remember that these are just some of the ongoing expenses - there may be others depending on the specific agency's operations.
How Does a Staffing Agency Make Money?
A staffing agency makes money by charging the client company a fee for every employee that the staffing agency provides. In this business model, the fee is typically a percentage of the employee's wages, and it is paid by the client company regardless of whether or not the employee is hired permanently. Sometimes, the staffing agency will also charge the client company for supplying temporary workers.
Is Owning a Staffing Agency Profitable?
Owning a staffing agency can be profitable, but it also depends on a lot of factors, such as the market and the competition.
Ways to improve your profitability include:
- Focusing on quality service
- Building a good reputation
- Keeping up with industry changes
- Offering competitive rates
- Managing Your expenses
- Screening potential employees thoroughly
- Marketing your business effectively
How Much Do Staffing Agency Operators Make?
Staffing agency operators and its employees receive varied pay amounts based on the success of their company. According to Payscale, the national average salary for a Branch Manager of a staffing agency is $46,000.
Why Do Staffing Agencies Fail?
There are many reasons staffing agencies may fail, but some of the most common reasons include not having the right team or leadership in place, not enough capital to sustain the business, and failing to keep up with industry changes.
How Big Is the Staffing Agency Industry?
According to IbisWorld, there are 41,461 staffing agencies in the U.S., that generated $151.2 billion in revenue last year. This represents an annual growth rate of 2.4% over the past 5 years.
What Are the Key Segments of the Staffing Agency Industry?
The Staffing agency industry provides temporary staff to a range of sectors.The two largest segments of the staffing agency industry are Industrial staffing and Office, clerical and administrative staffing. The remaining key segments of the industry include:
- Professional and managerial staffing
- Healthcare staffing
- Information technology staffing
- Engineering and scientific staffing
What External Factors Affect the Staffing Agency Industry?
A number of factors affect the performance of the staffing agency industry. These drivers include:
- Number of Temporary Employees – An increase in the number of temporary employees is beneficial to industry operators because they receive greater demand from businesses for these types of staff. The number of temporary employees is expected to increase, presenting a potential opportunity for the industry.
- National Unemployment Rate – As unemployment increases, the industry is less likely to be able to source temporary staff for companies, causing revenue to decline.
- Corporate Profit – Corporate profit refers to the profit earned by businesses across all industries. An increase in corporate profit will have a positive effect on demand for office staffing and temp agencies because clients will be more likely to invest in their workforce when they have funds available.
- Demand From Construction – Construction companies are a major market for temporary workers and represent an important source of industry demand. The construction sector is expected to improve in recent years.
- Demand From Professional, Scientific and Technical Services – Professional service providers are one of this industry’s largest markets.
What Are the Key Customer Segments in the Staffing Agency Industry?
At about 40%, the industrial segment is the largest customer segment for the industry, followed by retail and other service-related businesses. Other professional markets, healthcare and technology make up the remaining customer segments.
What are the Key Costs of the Staffing Agency Industry?
Wages – IBISWorld estimates that wages will account for 69.8% of industry revenue in the recent years, up from 63.6% in the past five years. Labor costs are also high for the permanent staff employed by operators due to the need to provide personal, face-to-face service to clients and job applicants
Other Costs – As a labor-intensive service industry, temporary staffing has a very low capital intensity. Depreciation and Marketing costs are also low for temporary agencies.
Total purchase costs, which primarily include purchases of standard office and desk equipment, account for an estimated 14.9% of industry revenue. Other industry expenses include insurance premiums, interest and traveling, accommodation and entertainment expenses.
Where Can I Download a Staffing Agency Business Plan PDF?
You can download our staffing agency business plan PDF template here. This is a business plan template you can use in PDF format.
Additional Resources in the Staffing Industry
For additional information on the staffing agency industry, consider these industry resources:
- American Staffing Association: www.americanstaffing.net
- National Association of Personnel Services: www.naps360.org
- Advanced Staffing Associates: www.advstaff.net
- Staffing Agency Mavericks: www.staffingagencymavericks.com
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