Starting a temp 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 temp agency.
Importantly, a critical step in starting a temp agency is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Temp Agency:
- Choose the Name for Your Temp Agency
- Develop Your Temp Agency Plan
- Choose the Legal Structure for Your Temp Agency
- Secure Startup Funding for Your Temp Agency (If Needed)
- Secure a Location for Your Business
- Register Your Temp 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 Temp Agency
- Buy or Lease the Right Temp Agency Equipment
- Develop Your Temp Agency Marketing Materials
- Purchase and Setup the Software Needed to Run Your Temp Agency
- Open for Business
1. Choose the Name for Your Temp Agency
The first step to starting a temp 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 temp agency:
- 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 temp agency.
2. Develop Your Temp Agency Plan
One of the most important steps in starting a temp agency is to develop your 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.
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 temp agency and what type of temp agency you operate. For example, are you a staffing agency, recruitment agency, executive search firm, temporary help agency, or an outsource firm?
- Industry Analysis – here you will document key information about the staffing agency industry. Conduct market research and document how big the staffing 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, how old are they? Where do they live? What do they find important when purchasing 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 – 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 temp agency? 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 day-to-day 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 temp agency 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 Temp Agency
Next you need to choose a legal structure for your own staffing agency 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 a legal business entity in which the owner of the temp 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 agency 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 temp 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 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 temp 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 own business, 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 Temp Agency (If Needed)
In developing your temporary staffing agency plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a temp 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 company that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location for your temp agency, there are a few things you’ll want to keep in mind. Here are a few tips:
- Choose a location that is accessible to your target audience. This means choosing a location that is easy for people to get to, whether it’s by car or public transportation.
- Make sure the location is affordable. You don’t want to spend too much on rent or other associated costs.
- Choose a location that has room for growth. You may want to consider renting or leasing a space that can accommodate future expansion.
- Find a location that is comfortable and professional. You want your clients and employees to feel at ease when they’re at your office.
6. Register Your Temp 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 recruit 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 temp agency’ 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 temp 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
In order to start a temp agency, you will need a business license and a permit to operate as a temporary help service.
Nearly all states, counties and/or cities have license requirements including:
- General Business License: getting your Articles of Incorporation as discussed above
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the location, you will have to obtain the necessary state, county and/or city licenses. Make sure to research the specific licenses and permits required for your area.
10. Get Business Insurance for Your Temp Agency
The type of insurance you need to operate a temp agency will vary by the type of temp agency and the scope of operations.
Some business insurance policies you should consider for your temp agency include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Business Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
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 Temp Agency Equipment
To start a staffing agency, you will need some essential equipment. You’ll need a computer, phone, and fax machine. You’ll also need to have marketing materials to advertise your business. You might also need office furniture.
12. Develop Your Temp Agency Marketing Materials
Marketing materials will be required to attract and retain customers to your temp agency.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your temp 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.
- Website: Likewise, a professional temp 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 customers perceive 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 temp agency.
13. Purchase and Setup the Software Needed to Run Your Temp Agency
To run a temp agency, you’ll need a software package that can manage your business operations. This will include features like applicant tracking, scheduling, invoicing, and payroll. There are a number of different software packages on the market, so you’ll want to find one that meets your specific needs.
You will also need accounting software and customer relationship management (CRM) software.
14. Open for Business
You are now ready to open your temp agency. If you followed the steps above, you should be in a great position to build a staffing agency successfully. Below are answers to frequently asked questions that might further help you.
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How to Start a Temp Agency FAQs
Is it hard to start a temp agency?
No, it's not hard to start a temp agency. In fact, there are a lot of things you can do to make it successful. You'll need to have a good business plan, market your agency well, and make sure you have the right staffing solutions for your clients.
How can I start a temp agency with no experience?
There are many ways to start a temp agency with no experience. One way would be to consult with an experienced temp agency owner who can provide guidance. Another option would be to research the process online, through workshops, or other courses to learn about the steps involved. Whatever route you choose, make sure you have a solid business plan in place and are prepared for the challenges that come with starting a new business.
What type of temp agency is most profitable?
There is no definitive answer to this question as it largely depends on the specific type of temp agency and the staffing services that it offers. However, some general trends can be observed. First, staffing firms that provide higher-level skilled labor tend to be more profitable than those that provide lower-level labor. Second, businesses that offer temporary staffing as a core service are typically more profitable than those that only offer it as a side service. Finally, larger recruitment agencies tend to be more profitable than smaller ones.
How much does it cost to start a temp agency?
It can cost a few thousand to tens of thousands of dollars to start a temp agency, depending on the size and scope of the business. The initial costs typically include the fee to join an agency network, licensing and insurance costs, and advertising and marketing expenses. You'll also need office space and equipment, as well as employees to staff the business.
What are the ongoing expenses for a temp agency?
The ongoing expenses for a temp agency are costs associated with the recruitment and placement of workers. These costs may include salaries for account managers and recruiters, advertising, and rent for office space. Some expenses can be passed on to the employer such as the cost for background checks and insurance.
How does a temp agency make money?
There are a few different ways staffing companies make money. The most common is by charging the workers who are looking for jobs a fee. They also make money by charging the businesses who are looking to hire temporary employees. Sometimes, the temp agency will also get a commission from the businesses when they hire a temporary worker.
Is owning a temp agency profitable?
Yes, there are many reasons owning a temp agency can be profitable.
For one, businesses and other organizations often need temporary workers for specific projects or to cover for employees on leave. Temp agencies can fill this need by providing a pool of qualified workers who are available on short notice.
Additionally, staffing companies typically have lower overhead costs than traditional staffing firms, since they don't have to maintain a large permanent staff. This allows them to charge lower rates to their clients, which can attract more business.
Finally, many temp agencies also offer other services such as payroll and benefits management, which can add value for their clients.
Why do temp agencies fail?
Staffing agencies fail because they do not properly screen their employees, leading to high turnover rates and less efficiency. Other staffing agencies may fail to retain quality employees if they do not offer benefits, which makes it difficult for people to stay with the agency for an extended period of time. Finally, temp agencies can be expensive for businesses, which means they are not always willing to use them.
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