Staffing agencies are a vital part of the modern economy. They help to grease the wheels of the labor market, funneling unemployed people to where they’re needed the most.
If you’re planning on starting a staffing agency, there are a host of factors that you need to consider. It’s not as simple as canvassing for people with skills to work and then matching them up to employers with vacancies. If you want to turn a profit, you need to use the right strategies and build your business from a position of strength, not weakness.
Here are five things that every staffing agency needs to know before getting started.
Your Startup Costs Will Always Be Higher Than You Imagine
While it might seem like matching up employers with suitable candidates would be a relatively inexpensive operation, it’s usually anything but. The costs of your business will soon mount up in ways that you didn’t expect.
In general, you can divide your costs into two categories: operational and establishment.
As you might be able to guess, your establishment costs are the costs that you face initially to set up your business. One-time expenses could include all kinds of things, from buying an office to purchasing computers. You might also have to pay legal set up fees to form contracts and set up your company as a legal entity.
Operational costs are the costs that you face on an ongoing basis. These expenses include things like staff wages, lighting, heating, phone bills, and so on – essentially anything that goes out of your company accounts weekly, monthly, or quarterly.
While you might think that you can set up a staffing agency for very little, it takes a lot of careful planning to pull it off. In general, add 25 percent to your estimate of what your new company will cost you to run.
Cash Flow Is Not The Same As Profitability
Tragically, many staffing agencies fail not because they’re unprofitable, but because they don’t know how to manage their cashflow. You can have a perfectly viable company, but it can still go out of business if your bank balance runs dry for particular weeks or months of the year.
Having a cashflow plan ahead of time is vital. You need to know when you’re likely to be low on cash to hand, and when there will be plenty in the kitty.
Temp Agencies Need Quality Recruiter Software
Temp agencies need recruiting software: sophisticated digital tools that allow them to filter, manage, and select job candidates. While there are numerous software offering on the market, not all are created equal. Staffing agencies can often find themselves inadvertently taking a piecemeal approach, using a variety of products for a range of different tasks, leading to confusion and incompatibility.
Smart companies take a different tack. Instead of reaching out and grabbing the first product that comes along that seems to meet their needs, they invest in comprehensive solutions that provide all the functionality that they need from a single dashboard. Taking this approach avoids compatibility issues and makes it easy for any member of the team to access candidate information and manage workflow.
Staffing Agencies Need Plenty Of Insurance
Going into business is always risky, but doing so as a staffing agency is often even more so. This fact means that you can never have enough insurance coverage.
As a recruiter, you could benefit from all kinds of insurance.
- Receivables insurance. Staffing agencies can get into cashflow difficulties when a client goes under. If a client can’t pay their invoice for the month, the staffing agency doesn’t get paid and then can’t afford to compensate its staff. Receivables insurance covers part of the total value of the invoice, ensuring that you receive the money you’re owed.
- Theft and damage insurance. This kind of coverage is vital for preventing you from incurring additional costs, especially during the startup phase.
You Won’t Succeed Unless You Provide Specialized Staffing Advice
Employers want partners who provide them with specialist staffing advice. Hiring new people is a legal and regulatory minefield. In some industries, the requirements are even more demanding. Thus, there’s a great need for expert consulting knowledge. Clients want agencies who not only know how to find the right kind of people for their vacancies but can provide support too.
Being one of these specialists can put you at a competitive advantage. Staffing agencies that provide specialized staffing advice add more value to clients and tend to retain their business.