Table of contents
  1. Choose the Right Niche
  2. Know Your Startup Costs
  3. Get Legally Covered
  4. Choose A Business Name
  5. Get All Licenses And Permits
  6. Take Out Insurance
  7. Use The Right Software
  8. Open A Business Bank Account
  9. Hire The Right People
  10. Build A Website
  11. Start Marketing
  12. How to Start a Staffing Agency that will Actually Make Money?
  13. Why Starting a Staffing Agency is a Solid Business Idea
  14.  The Bottom Line on How to Start a Staffing Agency

There’s no better time than right now to start building a staffing agency. 

Thanks to the impact of the pandemic, workers are leaving jobs in their droves, deciding to try their hand at something different or just leave ungrateful workplaces. 

This, dubbed the “Great Resignation”, presents a huge opportunity for anyone looking at starting a staffing agency. But, knowing how to start a staffing agency, and actually doing it, are two very different things! 

We’re here to help! Here’s our 11-step ultimate guide of how to start a staffing agency, so you can hit the ground running once you do!

Choose the Right Niche

Building a staffing agency begins with choosing the right niche to specialize in. 

Sounds baffling? It doesn’t need to be! Here are 3 strategies to get your first round of recruits and cash flow: 

  1. If you have any experience in a particular field, use your connections to source people and job positions. 
  2. Check out some job boards and see if you notice any recurring themes, jobs or industries that seem to need a lot of the same thing, for example, retail workers being in high demand around the holiday season.
  3. Think about the supply and demand cycles of the industry you choose. 
    • Supply and demand at a local level: look into the job types available in your area and what the potential demand for labor supply is as you will need temporary staffing agency (heads up: temp agencies are super easy to find online) and clients to succeed. 
    • Look at niches within a field: for example, there are a whole range of niches within office administration, such as mid-level administrative support staff to Fortune 500, light industrial work admin, or admin for lone workers
    • Background experience: if you have a background and expertise in a specific field, it’ll be easier for you to easily assess candidates for jobs in that specific field and even adds more credibility to your company. For example, only looking for the most experienced retail workers

Once you choose the right niche, you can get into the real work of building a staffing agency.

Two things to remember here: 

  • Supply and demand are ever-changing (as the pandemic showed us!) Be prepared to switch up your business model and don’t focus on just one industry – be flexible. You never know when a slump could happen so it might be wise to test out some niche service offerings.
  • Your recruits will likely be signing up to several job agencies, as their end goal is to land a job, not be loyal to a certain brand. You need to go above and beyond to make it clear what added value you can bring to them (such as excellent, responsive communication, or having seamless organizational skills and scheduling). 

Action items: 

  • Do research into the correct niche to go into for your staffing agency. Check out local job boards, use your existing connections, and think about the value you can bring to both your recruits and clients. 

Know Your Startup Costs

The basic principle of keeping your business costs low and your profits high is one of the most important things when you want to start a staffing agency. And, once you know which niche you’ll target, rounding up the initial costs becomes easier. 

Typically, startup costs range from $60,000 to $130,000. Depending on your location, size, and if you need an office, the costs vary. 

Action items: 

  • You’ll need to look into the following costs as a baseline: 
    • Office (rent)
    • Insurance
    • Legal setup fees
    • Website development 
    • Software such as payroll, HR, training, etc. (Connecteam’s employee app offers all this, and all for free: learn more here)
    • Other office needs, such as supplies
    • Wages (part-time or full-time staff)
    • Advertising and marketing

Get Legally Covered

By creating a legal business entity, like a corporation, LLC, or DBA, you can help prevent your new staffing company from being personally liable if your business is sued.

In addition, depending on the business entity that you choose, know that it will have a direct impact on things like your business name, liability, filing taxes, and so on. 

However, know that if you choose a specific business structure, you may change it later on as your business grows. 

staffing agency workspace
Photo by Austin Distel on Unsplash

Another subsection of the legal logistics is to choose a business name.

Action items: 

  • Do some research into the types of insurance you’ll need, depending on your niche. 

Choose A Business Name

Think wisely – your business name is the very first impression you’re putting out there for potential clients to see! 

  • Double-check that your business name is not trademarked or in use by someone else. 
  • Then, register the business name. 
  • Register your domain name (typically your business name, or some combination of it) online.

Next, you need to get all of the licenses and permits that are needed for your business. 

Action items: 

  • Choose your business name, and then register the domain name. 

Connecteam’s Pro Tip 🧠

Connecteam offers agencies the ability to easily schedule shifts, assign tasks, and track employee time and attendance, all from a single platform. We ensure that all staff stay connected and informed, making it easier to manage a large and diverse workforce. Try Connecteam’s free trial today!

Get All Licenses And Permits

Depending on where you start your business, as in the state and location, then there are various licenses and permits that are required. You will have to do some quick research as to which apply to your business. 

Action items: 

  • Research the licenses and permits you’ll need for how to open your own staffing agency. 

Take Out Insurance

Insurance is absolutely essential for staffing agencies and is a step that cannot be overlooked when starting a staffing agency. Since we’re not insurance experts, unless you are, it’s best to consult an insurance agent who understands the industry to ensure your company is covered. 

Some common insurance examples include:  

  • Business owners 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 a company car)

Not all of these insurance policies will be relevant to your staffing agency, but depending on your niche, you’ll likely need some form of insurance, if not several! 

Action items: 

  • Find the right insurance for your staffing agency, and take out a policy. 

Use The Right Software

One of the biggest mistakes you can make from the off is thinking you can do everything and anything to save money, and that includes trying to find cheap solutions for everything around your business, from communication (hey, WhatsApp is free to use, so why not?) to waiting until it’s too late to deploy the right technological solutions, and worse: refusing to invest in anything for fear of spending more than you’re earning. 

That’s why a lot of staffing agencies start off with cheap and free solutions, like using pen and paper for staff scheduling, Excel spreadsheets, text messages, phone calls, and emails. However, this always leads to chaos as it’s impossible to keep track of what your employees have recieved or sent with these outdated forms of communication. 

So, what’s the solution? 

A free to use app, allowing you to manage your entire business and employees efficiently. 

Enter: Connecteam. It’s the all-in-one employee management app that gives you total control and helps streamline your daily business operations.

connecteam's staffing agency app interface

Here’s what Connecteam can do for you when starting a staffing agency: 

  • Provide you with efficient job scheduling and real-time availability regarding your employees’ schedules. That means, you get to keep on top of the schedule, and assign shifts based on various requirements, as well as provide relevant information including time, address, and special instructions, allow employees to accept and reject shifts, and more. 
  • Get automatic notifications whenever an employee clocks in to their shift, rejects the shift, or doesn’t show up at all. Remember, your reputation is one of the most important aspects of all when you open a staffing agency!  
  • Get to-the-second reports of the hours your employees have worked, meaning there’s no chance for any payroll errors to slip by you: you’ll pay employees (and charge your clients) according to their clock-ins and clock-outs. Also, Connecteam integration with QuickBooks Online and Gusto ensures 100% accurate payroll.
  • Keep all of your business’ information (client information, needs and more, as well as employees’ information and documentation, such as employee benefits) in one place, and at the click of a button. That means happy clients and happy employees, which is one of the most important aspects when you’re working out how to open a staffing agency successfully from the get-go!  
  • Automate annoying admin: Connecteam’s checklists and forms makes it quick and easy to improve response times and processes, such as expense reporting, reimbursement, equipment checks, and more.
  • Ensure compliance and sign contracts through digital ‘read-and-sign’ forms, such as policies and procedures, uniform and dress code, and more.

And there are about a dozen more features designed to help your staffing company function perfectly across processes, clients and employees, but the best part about Connecteam is that there’s no extra training required, is super affordable and can be rolled out in under 2 minutes. 

Sign up for a 14-day free trial to experience the Expert plan. All paid plans are affordable and start at just $29/month (a fixed price for 30 users).

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Action items: 

  • Sign up for a free plan at Connecteam

Open A Business Bank Account

If you mix your personal bank account with your business one, then this can open a whole can of worms. For example, your personal assets such as your home, car, and other valuables are at huge risk if you should even get sued. 

As such, opening a business bank account separates your personal assets from your business assets. Additionally, it makes it a lot easier to manage accounting and filing taxes. 

Action items: 

  • Do some research into the best business bank accounts for you, and open the one with the best benefits! 

Hire The Right People

Finding the right candidates is all about understanding what qualities you are looking for and ensuring you ask the right questions during the interview process. A lot of this can be determined by knowing what separates you from other staffing companies.  

”Consistently build your talent pipeline of those you want to attract to the business. You can’t scale a business without great people. The type of person you want to join you can be hard to find, so always be networking and building your connections and following up with contacts.”

Abid Hamid, Group CEO of Recruitment Entrepreneur

Knowing how to start a staffing agency is one thing but knowing who your company is and what it stands for can make all the difference in hiring a good employee, and having to manage a difficult employee.

Look for skills and characteristics like:

  • Is professional, well-spoken, presentable and calm
  • Has innovative ideas
  • Has problem-solving skills
  • Is ambitious
  • Has ideas on how to improve their skills and daily tasks
  • Is capable of conflict resolution
  • Is dependable
  • Is creative
  • Has a positive attitude

The above are recommendations, of course. But these are the “standard” skills and qualities of good employees

If you aren’t getting any referrals from trusted friends and colleagues, then it’s time to use social channels to your advantage such as LinkedIn. 

Action items: 

  • Start your hiring, and see a lot of candidates. Remember, it might take a while before you find the right ones that you can work with. 

Build A Website

Throughout this entire process, especially after you’ve given your business a name and have secured a domain name, you must build a great website.

Even just a simple and well-designed website can offer you a competitive advantage. 

Think about your specific user experience and the journey the user will go through as they navigate your site. Whatever the fundamental goal of your website is or whatever the focus may be, users should be easily able to achieve it, and the goal itself should be reinforced as users navigate throughout your site

Gabriel Shaoolian of Blue Fountain Media

Action items: 

  • Build a website, or hire a graphic designer or website builder to do this for you. 

Start Marketing

Finding the right employees isn’t easy, but it’s likely even harder to find customers. However, to grow a staffing agency from scratch, remember what we shared in point one, it might be easier because you’re targeting a specific industry and niche. 

Make it clear what sets you apart from the competition (it could be your easier processes, thanks to automated workflows), why you’re better, so it’s easier to answer questions about what your company has to offer. 

Think outside the box when looking for customers, as traditional methods may be overrun with the competition. Such as networking, cold calling, trade publications, the internet, newspapers, and trade publications. Be creative, have a creative value proposition so you can stand out in your chosen niche.

And, if it doesn’t go according to plan, have a contingency plan ready to deploy. 

Action items:

  • Start your marketing plan: do some research into the types of content your recruits and clients want to read about, and then make it happen! 

How to Start a Staffing Agency that will Actually Make Money?

Of course, one of the most important questions when starting a staffing agency, is understanding how it makes money! 

Unless you’re supplying staff out of the goodness of your own heart, then here’s what you need to know: 

There are several models for staffing agency profit margins. The way it works is, the staffing agencies ‘lease’ employees to companies, deducting a fee from the employees’ paychecks, and also charging a hiring fee from the hiring companies. 

The fee charged to both the employee and employee can vary on the location, the industry and the supply and demand, which is why some industries in hard to reach areas might have higher profit margins for staffing companies, than a more accessible location and less desirable industry with a lot of potential candidates. The margins a staffing agency receives could be anywhere between 30-70%, depending on the above factors. 

If you’re trying to work out how to start a staffing agency, your pricing and profit margin is the one of the most important aspects to work out. 

Why Starting a Staffing Agency is a Solid Business Idea

Regardless of how the job market is going, especially thanks to COVID, many Americans are leaving their jobs. In fact the U.S. Bureau of Labor Statistics reported that 4.5 million Americans left their jobs as of May 2022.

Many are leaving because their industry is seeing a slump, like the restaurant and tourism industry. Others are leaving for better pay and some are choosing their mental health because they want more control over their time.

So, the time is just right if you’re looking at building a staffing agency. There was a massive growth in employment numbers in December 2021 and continues into 2022. Additionally, staffing is currently one of the fastest-growing industries in B2B services. 

Both large and small businesses are looking for strong candidates to grow their company – and fill up those pandemic-inspired vacancies – even if onboarding may be remote.  

If you’re only just starting to look into the idea or are already writing down detailed plans, it can be helpful to look at the tips and strategies we outlined above on how to start a staffing agency to ensure everything goes smoothly.

 The Bottom Line on How to Start a Staffing Agency

Staffing firms deal with a lot of moving parts but if you have all your ducks in a row from the off, then starting a staffing agency is a piece of cake. 

The steps we outlined above are a great starting point but make sure you do your due diligence to really get ahead of the competition. 

And a final piece of advice – be firm about your rates. It can be easy, or even seem like the right strategy, to offer free and low-cost services as favors to friends and family. But  that adds up and can quickly become a habit where everyone gets some sort of discount. The problem with this method is that it only discounts your services and value. When you focus on customers who value your company, your business will grow and scale.

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