Guide to Double Digit Staffing Firm Growth
Last time updated: 7 September, 2023
Last time updated: 7 September, 2023
Last updated on September 7th, 2023 at 09:21 pm
To outsiders, the staffing agency model appears simple and easy to expand: you play matchmaker between employers and workers. If you want to grow, simply match more workers to more employer.
Easy right? Yeah, not so much.
You know the truth. Growing can be a challenge in staffing because of factors like stiff competition, talent shortages, and cash flow issues. That’s why less than 1% of the 19,000+ staffing firms in the US have exceeded the $100 million mark.
In 20+ years in business helping staffing firms grow, we have noticed some themes emerge from our clients who have grown successfully. In this whitepaper we will discuss lessons from fast growing firms, what qualities top performing firms have in common, the biggest growth challenges staffing firms face, how to understand your profitability in order to grow, and then to wrap it all together, seven key takeaways on growth.
When we look at the fastest growing firms in our client list, we notice some trends in how they run their businesses and there are some key lessons that emerge. Here are a few lessons to learn from the successful firms that we know. These firms:
Competitive pressure among staffing firms is enormous. The fast growing firms present high-caliber candidates really quickly and know how to sell the candidate for the job.
When owners of successful firms get savings from outsourcing or any kind of windfall, most of the time they are investing it back in the business, through training or more hiring.
Staffing is a relentless march forward. The most successful firms are resolute in pursuit of their goals and single-minded about success.
When you want to grow in staffing, you can’t take half measures and expect results. Successful firms commit to their business wholeheartedly to succeed. It’s not easy, but it’s key.
For some firms, it’s exceptional customer service. For some, it’s being the best in a certain niche market. Whatever it may be for you, figure out your advantage and use it to the fullest.
As complexity increases in compliance, insurance, funding, and HR, we’ve seen fast growing firm owners consider outsourcing more of those activities than in the past. It frees up time to run the business and focus.
We find that owners of successful firms are very involved with the sales and business development efforts – aka, the things that really drives their business, client satisfaction, and growth. They outsource or delegate the rest.
In the book “Breaking Through: Leadership Disciplines from Top Performing Staffing Firms”, authors Barry Asin and Mike Cleland researched the biggest, most successful, top performing firms in the country to find the shared qualities that determine their success. Here are five of those qualities summarized:
To succeed in staffing, you have to be committed to building your business – and it starts at the top. The leadership team has to ask the most impowrtant question. Why are you in business? If it’s to succeed and grow, you can’t just put in a half effort.. The simple reason that most staffing firms do not grow is that they don’t want to. Success means sacrificing time with your family, or taking big risks like investing your own money in your business for a time.
Even if you and your team are 100% committed, a rudderless firm will soon find themselves adrift in a sea of tight competition. That’s why direction is the second key quality that most successful firms share in common. The decisions you make about your firm from the outset are critically important when it comes to success. What customers will you serve? Will it be in a specific industry? A big part of a successful strategy is also to determine what you are not going to do. To succeed, it is critical to say no to business that does not align with your goals.
While there is no one answer to what your company culture should be, the most successful firms have pervasive cultures that are driven from the top, aligned with strategy, and consistent in all things big and small. Culture is not just your mission statement. It’s much more about how you create and motivate your team – who you fire, who you hire, and who you promote. Actions speak louder than words when it comes to embodying the culture you develop.
Finding good people is critical in staffing, and that goes for both your internal team and your temporary employees. Talent development goes beyond just hiring though. It includes the training, development, and motivation of your recruiters and others in your company.
Finally, we come to the last key discipline: execution. Some firms want to jump right to execution, but it’s important to have the other disciplines in place first. Execution is all about identifying essential practices, scaling key processes, and then replicating results over multiple organizations. Easy to say – and very hard to do. Executing from a standard operating system and practices makes opening up new business units or training new leadership easier than “winging it.” Successful staffing firms follow a playbook, and that makes it easier to grow.
If growing your staffing firm were easy, everyone would do it. Growing your firm requires commitment, sacrifice, and tackling the challenges that arise. Here are a few common challenges that we see staffing firms face, and how to overcome them.
As of August 2018, the US had 6.9 million job openings and 6.2 million unemployed people. With numbers like these, you’d think finding a suitable person for every job would be a snap. Said no staffing agency ever. The skills gap – the gap between the specialized skills that jobs need vs the available talent, makes for an increasing talent shortage in the US and that can encumber your growth as a staffing firm.
While there is no easy solution for this issue, some things you can do are to encourage candidates to train for highly sought after skills, narrow your scope and focus on areas you know you can win, and be creative when sourcing candidates.
If your firm is growing, you may be receiving payment on invoices for 10 temporary workers, but now you have 20 of them that need to be paid. The more you grow, the bigger that gap becomes, thus, the larger your need for working capital. Not to mention, you’re looking at payment 40 to 45 days after invoicing, and we are even seeing that stretch out.
You can cover your working capital needs by selffinancing through your savings or credit cards, you can go the traditional route of financing through a bank, or you can explore alternative financing options such as payroll funding.
Traditional sources of working capital typically don’t understand the staffing industry well and are not comfortable lending money to a company that doesn’t have hard assets like inventory or real estate. The main asset a staffing firm has is its accounts receivable, and that tends to fluctuate based on vertical or seasonal needs. There isn’t always the consistency that a bank is going to want to see.
Access to working capital doesn’t have to be a limiting factor, and the right working capital program can help staffing firms grow. Work with a vendor who understands the industry and can provide a flexible growth solution.
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