For an entrepreneurial spirit with a little industry know-how, starting a staffing agency is one of the best and most rewarding things you can do. Staffing is a varied, competitive, high-energy field that rewards scrappiness and hard work. And it can be lucrative, too, depending on your vertical. Typical margins range from 14 and 41 percent, with a median of 25% across all temporary staffing.* According to IbisWorld, there are over 41,000 staffing agencies in the US and it’s a $150 billion dollar industry
If you are looking to start your own staffing agency, one of the main questions on your mind might be, how much is this going to cost me? Based on our 24+ year history of helping staffing firms grow – including many start-ups – we can help you answer that question.
How much does it cost to start a staffing agency?
It typically costs anywhere from $3,000 to $250,000 to start a staffing agency. Depending on your location, size, and if you need an office, the costs can vary greatly. It also depends on how much you want to outsource and how fast you want to be up and running.
We tend to see three broad start-up cost categories for most new staffing owners:
DIY, $3-10K: In this category, owners will typically spend a few grand to get their firm up and running. It requires a lot of manual work where they are putting the pieces together on a shoestring budget and not outsourcing a ton.
Hands-On but with Help, $11-34K: In this scenario, new owners are still hands-on in setting up the business, but probably hiring someone to do it properly. They are most likely outsourcing many back office tasks like payroll and invoicing.
Outsource Everything: $35-250K: This is a scenario where a new owner has a decent amount of money to spend and will outsource everything possible in order to set up the business quickly and free up their time to focus on development.
The types of costs you will have to take into account are:
- Office space/ rent
- Equipment and supplies
- Legal set-up expenses (entity foundation, contracts, etc.)
- Website development and set-up
- Software such as payroll, HR, training, etc.
- Employee and freelancer costs
- Advertising and marketing
What are the steps I have to take to start a staffing agency?
To start your own staffing agency and have it be successful, there are certain steps you must take. Here are a few:
1. Determine Your Niche
As there are many types of staffing, the first step to starting your own firm is determining what kind of agency you are starting. Your passion and experience will help you determine this, as well as outside factors like competition and market.
2. Draft Your Business Plan
This step should not be overlooked – a business plan is your roadmap and is critical to success. A good business plan guides you through each stage of starting and managing your staffing business. We have a free template here as a place to get started.
3. Take Care of Legalities
Research the state requirements to become a business entity and fill out the proper paperwork. You will need the proper permits and licenses and also various insurances such as workers’ compensation. Note that when filing as an entity, your staffing agency name needs to be unique and descriptive!
4. Find a Location
If you have a physical location, you will need a good atmosphere in which to interview candidates and hold meetings. You need to consider lease costs and terms, accessibility, and client proximity.
5. Write Up Contracts and other Documents
A business lawyer will be able to help you draft contracts for the companies that will employ your services. There are also free example contracts online. Other helpful documents to have are employee handbooks, employment agreements, job descriptions, etc.
6. Raise Capital
Beyond your start-up costs, you also need to consider unexpected expenses as well as meeting week-to-week payroll while your revenue is tied up in unpaid invoices. Invoice factoring is a common staffing industry service that can help.
7. Marketing and Advertising
Getting found online and having a great website are both extremely important in the digital age. Get your listings on prominent job boards like Indeed, invest in a good and mobile-friendly site, and consider advertising tactics like direct mail, online ads, SEO, social media, and email campaigns. Outsourcing a freelancer or a local agency can help if you don’t have the bandwidth internally.
I hope this post helped answer questions you might have about the costs of starting a staffing agency. If you would like to set up a time to speak about payroll financing for your start-up firm and how we can help, please request a consultation. We also have resources like the Business Plan Template, SWOT Analysis template, and Pricing Calculator for start-ups.
Subscribe to the AP Resources Mailing List
Get notified about the latest AP blogs and resources on staffing topics