The Ultimate Guide to Starting and Running a Successful Temporary Staffing Agency
December 10, 2021
While temporary staffing agencies may have changed a bit in scale and organization, their overall goals have remained the same: to provide businesses with an army of qualified laborers who are available to work on a temporary, seasonal, or temp-to-hire basis.
When managed correctly, temporary staffing agencies can grow quickly and be very profitable. For the right individual or group, they represent a great opportunity for a successful business. But running one requires an owner that knows where their head is. There’ll be business structures and budgets to decide on, questions about taxes and insurance, staff to interview and hire, all of which require a detailed plan to be successful.
To aid you in this, we’ve put together the ultimate guide to running a successful staffing agency. Consider this your business primer as we lay out everything you need to know about this exciting venture.
What is a Temporary Staffing Agency?
First off, let’s clarify what a temporary staffing agency actually is and how they work. And, from the off, we can tell you that it is not recruiting. Staffing and recruiting are very different things. Now we’ve cleared that up, let’s continue.
As you know, every business requires qualified staff to operate. However, they may not always have all the staff they need due to vacancies, sudden surges in workload, or permanent staff that are ill or on vacation. In these scenarios, companies turn to temp staffing agencies who can match them with qualified employees for these temporary roles.
For the clients, staffing agencies provide a highly flexible approach to handling their staffing needs. Since temp employees are provided on an “as-needed” basis, they require minimal overhead and can be dismissed when no longer needed. They’re essentially outsourcing their human resources department, allowing the staffing agency to handle background checks, drug testing, reference screening, skills training, and placement.
For the employees, staffing agencies provide them with new opportunities and a flexible working environment. While these jobs are temporary, they can lead to permanent employment. Many see them as an easy opportunity to find seasonal work and rack up a killer list of references for their resume.
As for the staffing agency, they make their profits by charging clients more than what they pay the employees. These markups are brokered between both parties at the start of each contract and can sometimes be as much as 100%. Profit margins vary but can range from 30% to 70% depending on location, supply, demand, and industry. In cases where the client wants to bring a temp worker in full-time, known as a “temp-to-hire” position, a contract buy-out will be negotiated. This typically, though not always, leads to a permanent position for the employee after their temporary work period ends.
Why Are Staffing Agencies in Such Demand Now?
There’s been a recent upsurge in the demand for temporary staffing due to the COVID-19 pandemic, which has led to record numbers of Americans leaving their jobs. According to one report by the Department of Labor, about 4 million Americans resigned from their jobs in April 2021. As for why so many have left, the reasons they cite include a major slump in their chosen industry, the desire for better pay, and more control over their time. Whereas in the past some people were asking are staffing agenies legit, the pandemic has more workers embracing them for flexible employment opportunities.
All this means that now might be the perfect time to start a staffing agency. Industry growth for 2021 is predicted to be 11% and that can be expected to continue rising as businesses everywhere grapple with understaffing issues.
How to Start a Temporary Staffing Business
Whether you’re only in the planning stage of starting a staffing agency or already in the midst of running one, having a clear idea of the steps involved will make everything easier. Here are 8 steps you can follow to ensure everything goes smoothly.
1. Choose the Right Niche
Most staffing agencies choose to niche down and focus on a particular industry. For instance, medical, hospitality, light industry, or management. Doing so allows you to focus on the needs of your chosen industry and market yourself more effectively. When choosing a niche, keep in mind the following:
- Supply and demand at the local level – What are the main types of labor available in your area and how much labor demand is there? You won’t build a successful business unless you can offer the very services that your potential clients will be looking for.
- Find the niches within your niche – Let’s say you’ve chosen to focus on providing clerical and administration roles. You might choose to niche down even further by focusing on specialties within your field. For instance, clerical roles in the medical field. The more specialized you are, the higher the rates you can demand. Just be sure that there’s still enough supply and demand to make such a specialization worthwhile.
- Background experience – Do you have background experience in any particular field? The more you understand the requirements of a job, the easier it’ll be to assess candidates and market your agency as an expert.
- Financially sound – Based on all the above, is your chosen niche a financially sound approach? If not, then you may have to find another niche. At the end of the day, it’s all about turning a profit.
2. Review Initial Costs
You’ve got to spend money to make money and no business can get off the ground without some startup costs. Once you know what your chosen niche is, reviewing the initial startup costs is relatively straightforward. Determine how much you’ll need for things like:
– Office space
– Legal fees
– Website development
– Software for handling payroll, tracking, and HR services (all of which and more are provided by Timerack’s Time and Attendance software)
– Office supplies
– Wages for paying staff
– Advertising and marketing
3. Sort Out the Legal Side of Things
There’s a lot of legal stuff you’ll have to deal with before you can declare yourself open for business. First, you’ll need to create a legal entity, such as a corporation, LLC, or DBA. This will protect you from any personal liability if your business is sued. Be aware that the type of business entity you create will have a big impact on taxes, so make sure you understand the pros and cons of each type.
Another legal thing you’ll need to decide on is your business’s name. Check and double-check that your chosen name is not trademarked or in use by someone else. Once you’re sure that it’s not you should register it immediately. Now might also be a good time to purchase a domain name for your website.
Lastly, get all of your licenses and permits sorted. These will depend on where you are located and will likely include federal, state, and local requirements. Consider hiring a local business lawyer to oversee and handle all of this.
4. Get Insured
Insurance is the one thing no business can ever risk overlooking, especially when it comes to staffing agencies. Below are some of the most important insurance policies your business is likely to need. However, there may be more, so ensure you remain fully covered by consulting an insurance agent who understands your chosen industry.
– Businessowners policy
– Commercial general liability insurance
– Employee theft and crime coverage
– Employment practices liability insurance
– Key employee insurance
– Liability insurance
– Workers’ compensation
– Property coverage
– Umbrella policies
– Business auto insurance (if you have company cars)
5. Find the Right Software
The Internet of Things (IoT) has revolutionized so many areas of our lives in the last few decades. When it comes to running a business, it’s made it easier than ever before to track, monitor, automate, and organize almost everything down to the smallest detail. For your business to thrive and succeed, it will need a proven software platform to handle all of this.
Timerack is your one-stop-shop for time and attendance software, payroll integration, and HR processes. Using a fully integrated line of services, Timerack allows you to easily manage your employees, automate time-consuming processes, and cut down on business costs. Already in use by industry leaders in a host of different sectors, Timerack aims to provide business owners with all the flexibility and integration they need, all through a seamless approach that makes it easy to track and monitor data.
By having effective management software, you can provide your clients with the best experience possible. Thus, giving you an advantage over competing businesses that are still trying to track everything through simple pen and paper.
Investing in the right software is just one way you can be a forward-thinking staffing agency. For some other tips, check out our blog on staffing industry trends for 2022.
6. Open a Business Bank Account
You do not want to mix your personal bank account with your business one. This can lead to a whole load of problems that are almost impossible to untangle later on. For instance, if your agency gets sued, it could put your personal assets, home, car, and other valuables at great risk. Do the smart thing by going in person to your bank and opening a separate business account. It will also make things a lot easier when it comes to accounting and filing taxes.
7. Find and Hire the Right people
You can’t run a staffing agency without staff. With the structure of your business laid out, you can now focus on finding the right candidates. Establish what it is you’re looking for in a candidate and get to work with hiring them. Some standard skills to look for include:
– Good problem solving
– An ambitious and driven personality
– Understands the roles and what will be required of them
– A dependable, positive, and committed work ethic
– Good at conflict resolution
– A professional, well-spoken, and presentable appearance
Timerack can also make the recruiting process far easier through its HR services. Keep all of your candidate’s information centralized in a database that you can easily search and categorize. Simplify the hiring process through automated paperwork and processes. Use performance reviews to provide feedback and goal tracking for your employees. All of this and more can be had through Timerack’s proven software.
8. Build a Website and Start Marketing
Finding the right employees will be tough, but not as tough as finding the right clients. Your first step with this should be getting a company website up and running . This is likely to be your first introduction for potential clients so make it a good one. Hiring a qualified web designer can be well worth the expense.
With your website up, move on to creating your first marketing campaign. If you’ve been successful in finding a good niche, then you should have an easier time with this. What’s more, be sure to look into social media marketing for staffing companies. This is where you can establish a rapport with your audience and, along with your website, make it clear what sets your agency apart from the competition.
Getting the gears moving in any business takes a lot of time and effort. Success comes to those who spend enough time planning out every step of the process. Use the above guideline as your starting point and then get to work. It won’t be easy and things will likely be a bit touch-and-go once you do get things running, but have faith in your ability to overcome challenges and adapt to a changing environment.