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How to Start a Temporary Staffing Agency
by Randy Wilson
The temporary staffing industry continues to expand, with yearly double-digit growth being commonplace.
Companies find it convenient and cost-effective to work with a temporary staffing agency to fulfill
unforeseen demand, fill short-term vacancies, and assist with changing workloads due to restructuring
or mergers. Additionally, employers are enticed by the idea of "test driving" new employees to minimize
risk and ensure a good match for permanent positions.
Many a job seeker has reaped great rewards from temporary staffing. Skilled but yet-inexperienced
workers are able to get a foot in the door at prestigious companies, where a weak resume would have made
it very difficult to be considered. Similarly, "drifters" (those who tend to rapidly drift from job to
job) may be plagued by an overly-long resume. Temporary staffing services can be ideal for drifters, as
they have the opportunity to work on short-term projects and move on without the negative repercussions.
Retirees and college students are also very common candidates. A retired nurse may find enjoyment and
extra income from a temporary medical staffing firm. A computer science major can gain valuable
experience working with a technical agency.
Only a small number of personnel is required to handle recruiting and clientele. Even the largest
international firms tend to function with small, mostly-independent branch offices serving specific
regions. This modular structure means it is quite possible for a one-office temporary staffing agency to
compete effectively with established firms.
Overall, the triple-benefit to clients, associates, and entrepreneurs has contributed to the phenomenal
growth of the temporary staffing industry. Because of these advantages, it will remain an integral part
of the employment process through good times and bad.
Start Up Costs and Financing Sources: $5,000 to $25,000
The startup and operating costs of a temporary staffing agency are much lower than many other businesses.
The basic requirements are a small office with the typical supplies, a computer system with general
accounting software and database software for organizing contracts, and the people skills to work with
clientele and associates. It would not be impossible to start a temporary staffing agency on a shoestring
budget of a few thousand dollars.
The largest business expense is payroll. It is common for associates to be paid by the agency before the
agency is paid by the client. An account must be maintained with sufficient funds to cover payroll costs
until bills are paid by the clients.
It is difficult - but not impossible - to get help from venture capitalists in covering part of the
costs of setting up a temporary staffing agency. A well-researched, forward-looking business plan is essential.
Pricing Guidelines for Service
Associates are paid by the hour, and the agency covers its costs by charging a premium to the amount
billed to the client. The exact amount of the premium differs from case to case and can vary from 5% to
50% or more. Some associates are willing to work for less and some clients are willing to pay more,
which when properly matched can result in very decent profits for the temporary staffing agency. The
contract usually spells out a flat fee to be paid to the agency in the event that a client decides to
permanently hire an associate.
Advertising and Marketing
A competitive hurdle for small startups is that larger agencies already have established reputations and
brand recognition. This is actually a minor obstacle because of the localized nature of the business. It
is not necessary to wage a national marketing war to gain exposure for a new agency. An inexpensive and
well-directed marketing campaign can quickly build a valuable reputation within the local operating region
of the startup.
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