Tips for Starting Your Own Staffing Firm

When wondering how to start a staffing agency, you'll need to figure out what niche you'll fill in your desired market. This should be something that gives you a one-of-a-kind advantage over other businesses. When you identify a gap in services, develop a process or product that customers need. Create a demand for your agency by solving a specific problem. Start with your own pain points and work on identifying solutions that can be marketed to others. Working within an industry you know well, and are passionate about, will allow your business to grow naturally. Talk about the realities of forming a firm with others in your industry, but outside your geographic area, to get a sense of how they operate. 

Staffing agencies are a good fit for those who want to match individuals looking for work for roles with specific employers. You can serve your clients by helping them streamline the hiring process by offering qualified candidates. 

While it's important to set policies, you must also allow yourself to adapt when you face challenges. You'll need to keep working hard to stay ahead of the competition. Entrepreneurship is rarely a straight path; you'll face ups and downs in your journey to become a business owner. While passion is an essential ingredient, you'll also need the perseverance and foresight to turn challenges into growth. 

Industry experience is essential; ideally, you'll have worked as an administrator within your niche, and intimately know the ins and outs of the business. Make sure you understand existing legal and governmental requirements, especially those that vary by state such as employee benefits, compensation, taxation, and licensing. Cutting corners in these areas can be costly in the long run.

During the first year of your agency's existence, you should conduct a monthly cash flow projection so that you can realistically plan for your financial needs. This projection should account for all your monthly costs, including rent, phone and utility bills, and worker's compensation insurance. Subtract your expenses from your expected income, which will allow you to budget for your daily operating costs with the remaining funds. 

If your staffing agency will employ other people, you'll need an employer's identification number (EIN). This number is assigned by the IRS and is used to pay your employees, and file state and federal taxes. Investigate the legal requirements for registering a staffing agency in your state. Certain industries may require additional licensure

Information on the Staffing Industry

The staffing industry is considered part of the personnel supply services sector, an area expected to grow quickly over the next 10 years. In the staffing industry, agencies hire qualified candidates and place them within roles in businesses seeking staff. The staffing agency is paid by the business, then pays the worker's salary and withholds income tax and insurance costs. Staffing agencies earn money by adding a percentage to the labor charge, or charging clients a finder's fee when they place an employee. While this can be very profitable, having a staffing agency is a major responsibility.

Staffing services may provide permanent and/or temporary employees, in types of employment including professional, industrial, technical, and clerical. Many staffing services operate within a specific industry.

Types of Staffing Services

Types of staffing services include the following:

  • Most staffing agencies provide temporary employees. These workers are placed with a company for the short term, either during busy times, or to replace staff who are on leave. 
  • Some services specialize in long-term assignments for indefinite time periods. These are most common in the professional and technical sectors, who often hire workers for project-related assignments. 
  • Some staffing agencies provide both temporary and temp to permanent assignments. With the latter, clients can try out an employee on a short-term basis and evaluate performance before committing to a long-term hire. 

Staffing Service Sectors

About one-third of the staffing industry is made up of agencies who place workers in the clerical sector including secretarial, administrative, and general office work. Another third comprises the industrial sector, including jobs in manual labor, food service and preparation, driving, maintenance, factory work, and other trades. The final third is made up of many smaller professional and technical divisions, including positions in marketing, computers, health care, and related specialized areas. These areas are growing quickly and many of these higher paid workers appreciate the flexibility of contract or project-based work. This sector includes a wide range of positions, including scientists, engineers, doctors, nurses, medical technicians, architects, writers, technical illustrators, financial professionals, home health aides, managers, legal professionals, and accountants. 

If you need help with starting your own staffing service, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.