To start a successful staffing agency, you need to know the market. In 2021, the industry brought in an evaluation of $90 billion, with an estimated compound annual growth rate (CAGR) of 9.06%. For those interested in getting started, now is the time to try.

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The keys to prosperity in this industry are adaptability and relationship building. Temp agencies need to understand both client and worker needs to make strong matches. They must also build trust and loyalty over time through reliable service.

This guide will walk you through how to start temp staffing agency. Topics include market research, competitive analysis, EIN registration, business insurance, marketing, and more. Here’s everything you need to join other staffing agencies in the hiring process market.

1. Conduct Temp Staffing Agency Market Research

Market research is essential in the staffing industry. It offers insight into finding potential clients, competition between other temporary staffing agencies, trends among services, and details on your target market.

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Several key factors are driving demand, including:

• Many companies now rely on temporary workers to staff up for peak seasons, fill gaps during hiring delays, or provide specialized skills for short-term projects.
• Using temporary staff gives employers workforce flexibility without high turnover costs.
• More temporary workers are choosing these roles intentionally for the variety, work-life balance, and experience offered.
• While large national chains control around 40% of the market share, regional and local agencies still claim a sizable portion.
• Smaller firms can capitalize on established local relationships and their ability to provide specialized industry expertise.
• Focusing on a niche area, like healthcare, technology, or accounting staff – also allows newer agencies to better compete with generalist national chains. For instance, virtual assistants are in high demand because they can be highly versatile when it comes to the job(s) they can do.
• Geography also plays a role in the best places to launch a start-up temp agency.
• States like California, New York, and Texas lead for number of staffing firms due to their dense corporate hubs.
• Up-and-coming cities like Austin, Charlotte, and Nashville are also primed for growth.
• Establishing relationships with talent sources like local colleges and trade schools provides a recruiting edge.

While launching a temp agency requires upfront effort, the over $150 billion industry size and ongoing growth trends create a compelling long-term opportunity. Specializing services and targeting the right geography at the outset can position a lean startup to claim its slice of this market.

2. Analyze the Competition

Thorough competitive analysis is key for any aspiring agency owner. This process reveals key strengths and vulnerabilities amongst established local and national players that can inform a competitive strategy.

The first step is identifying existing agencies operating in your target region. Search online directories, job boards, and Google Maps using keywords like “staffing agency [city]” to compile a list.

Next, assess the scale and services of competitors. Review websites and public business profiles to gauge years in business, areas of specialization, industries served, and number of workers placed annually. Take note of the largest generalist agencies as well as niche players in your planned focus area.

Evaluate online visibility. Search brand names on Google and examine first page results. Higher rankings, more listings, strong reviews, and ample profile information indicate robust SEO. A new agency must prioritize early digital marketing efforts to contest competitors here.

Check for specific certifications like membership in the American Staffing Association. Such credible affiliations build trust in B2B relationships. Seeking the same credentials can help level the playing field with established agencies.

Finally, make on-location visits whenever possible. Speaking to office staff offers qualitative insight into how smoothly operations run. Pristine facilities with many on-site workers may signify large infrastructure to emulate on a smaller scale.

Analyzing both the digital and brick-and-mortar competitor landscape provides critical visibility for new agencies. It helps reveal specialty areas lacking competition where a start-up could thrive. Compiling these findings also informs early networking, marketing, and service offering decisions needed to stand out.

3. Costs to Start a Temp Staffing Agency Business

When starting a temp agency, clearly mapping out costs well in advance is essential for proper budgeting and avoiding cash flow issues down the line. Let’s break down the startup and ongoing expenses you’ll encounter.

Start-Up Costs

• Based on historical small business expense data, a prudent estimate for solid temp agency startup costs falls between $50,000 to $100,000.
• Leasing appropriate commercial office space can cost from $15 to $30 per sq ft annually. Aim for at least 2,000 square feet to allow room for future growth at about $30,000 to $60,000 per year.
• Buildout and furnishing costs add another $5,000 to $10,000 depending on the customization.
• Essential electronics and equipment will tally another $10,000 between furnishings like desks and chairs, phones, computers, printers/copiers, and general supplies.
• Staffing software costs can also range widely, from $50 per month basic packages to more advanced CRM systems at $300+ per month.
• A starting budget of $15,000 per year allows ample room for printed materials, digital ads, sponsorships, and developing an eye-catching website.
• Professional branding work like logos and graphic design can add another $5,000.
• Incorporating the formal business entity, applying for tax IDs, and securing necessary licenses will run about $2,000 in total for filing and state registration fees.

Ongoing Costs

Staffing up administrative roles is another large monthly cost. Expect around $7,000 per month to cover:

• Recruiter(s) – $4,000
• Sales/Account Rep – $2,500
• Office Manager – $1,500
• Payroll/Bookkeeper (outsourced) – $800

These key hires allow the business founder to focus less on daily logistics and more on strategic priorities like business development, marketing, and networking.

Additional fixed monthly costs tally around $5,000 to cover:

• Rent & utilities: $3,000
• Software/tools – $500
• Insurance – $1,000
• Office admin (internet, phone, supplies) – $500

Variable costs tied directly to service delivery and the number of workers placed will also factor in. Payroll processing and compliance fees often amount to 2-5% of payroll value. Staff wages and employer taxes are added on top.

4. Form a Legal Business Entity

When establishing a temp agency, the legal structure chosen impacts everything from day-to-day operations to taxes and liability exposure. Weighing these key entity options along with their pros and cons helps make an informed decision:

Sole Proprietorship

A sole proprietorship represents the simplest and most common small business structure. Ownership responsibilities and profits flow directly to an individual owner who oversees operations.

• Pros: Easy and inexpensive to establish. The owner retains complete managerial control and benefits directly from profits. Few regulatory requirements are involved.
• Cons: The owner assumes “unlimited liability” for debts and legal liabilities tied directly to personal assets. Less credibility with B2B clients. Difficult to raise external funding for growth.

Partnership

A partnership involves two or more co-owners collaborating on a for-profit business venture and sharing resources, responsibilities, and profits. Partnership agreements outline the distribution of control.

• Pros: More funding and specialized skills amongst partners to draw from. Shared managerial duties.
• Cons: Partners also take on “unlimited liability” for collective business dealings, exposing personal assets. Disagreements between partners can derail operations. Profits are diluted across a larger owner pool. Achieving alignment is challenging.

Limited Liability Company (LLC)

LLCs represent the most flexible corporate structure pairing pass-through taxation benefits with built-in liability protections. An operating agreement outlines member percentages, voting rights, and profit distribution rules customized for owners.

• Pros: Personal assets shielded from business liabilities and debt exposure. Seen as more credible by B2B clients than sole proprietors. Additional funding can be more readily attained. The overall compliance burden is lighter than a corporation.
• Cons: Rules and regulations vary more by state compared to corporations. Member disagreements could still disrupt operations without clear governing agreements.

Corporation

Establishing a private corporation creates a separate legal entity from ownership. Corporations can sell stock and implement more complex ownership hierarchies. Significant record-keeping and reporting requirements are involved.

• Pros: Limited liability protection for shareholders. Perpetual existence beyond original owners. Credibility for securing business loans and major customers. Facilitates attracting outside investors through selling shares.
• Cons: The heaviest administrative lift of entity options, including documenting by-laws and regular shareholder meetings. Double taxation applies on both corporate and personal levels. Stock transfer restrictions can complicate ownership changes.

5. Register Your Business For Taxes

Before legally hiring employees or accepting payments, every temp agency must first obtain an Employer Identification Number (EIN) from the IRS.

An EIN serves as a unique tax ID tied specifically to your business entity. Even if operating as a sole proprietor using your Social Security Number for personal taxes, an EIN must be assigned to report payroll and other business-related tax obligations.

Registering for an EIN is free and can be completed entirely online via the IRS website. This simplified digital application process generally delivers your EIN within minutes after submitting basic information about your business structure and ownership details.

The step-by-step process involves:

1. Navigating to the EIN Assistant tool linked above
2. Selecting view application as the entity type you registered as (most commonly LLC or Corporation)
3. Providing legal business name and mailing address
4. Entering owner/responsible party info (name, SSN, DOB)
5. Confirming not to make federal tax payments
6. Providing principal business activity code (56132 for temporary staffing)
7. Submitting application

In addition to the federal EIN, temp agencies placing workers in specific states must also register with State Departments of Revenue to collect and remit state taxes. Nearly all states levy corporate income taxes requiring annual filings.

6. Setup Your Accounting

Running payroll while tracking margins across potentially hundreds of open client assignments makes accounting oversight vital for temp agencies. Proper financial processes safeguard compliance and provide visibility to guide profitable growth.

Accounting Software

Getting set up with small business accounting software like QuickBooks provides an accessible starting point. Packages tailored for staffing and recruitment needs automate tedious tasks like payroll calculation while integrating seamlessly with bank accounts. This automation acts as a system of record for all transactions, invoices, and tax liabilities.

Hire an Accountant

While handy, even user-friendly software has limitations in scenario planning or strategic decision-making without the seasoned perspective of a professional accountant or bookkeeper. Their expertise includes core services like:

• Accounts reconciliation
• Payroll processing
• Sales tax monitoring
• Financial reporting

Additional year-end support for tax preparation and filing typically costs extra, from $2,000 and up. But the compliance assurance and audit risk reduction make it a prudent investment.

Open a Business Bank Account

Establishing dedicated business banking and expense card accounts separate from personal finances also goes a long way in avoiding accounting issues. Keeping balances, transactions, payroll, and taxes completely separate simplifies record keeping and financial categorization – especially important for annual filings.

Apply for a Business Credit Card

Applying for a small business credit card only requires a few pieces of information:

• Your EIN
• Business legal name and address
• Estimated monthly card spend
• Your SSN as the owner

Make sure to also inquire about employee cards to empower recruiters and sales reps to responsibly incur necessary expenses without floating personal funds.

7. Obtain Licenses and Permits

Certain permits like a federal EIN and state sales tax registration apply broadly. Securing industry-specific licensing protects temp agencies from penalties. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.

Understanding precise credentialing requirements does vary by state. But generally, operating a temp agency necessitates formal registration as a Professional Employer Organization (PEO) alongside meeting surety bond minimums.

Formally registering as a Professional Employer Organization (PEO) makes your agency an IRS-recognized “Employer of Record” for tax and compliance purposes when taking over HR functions for client companies.

While almost always mandatory at the state level, fifteen states also currently participate in broader PEO licensing through the IRS Voluntary Classification Settlement Program (VCSP) for meeting federal payroll tax rules.

Beyond conferring legal authority, PEO licensing signals operational maturity and financial stability valued by prospective enterprise clients when selecting agencies.

Key steps in attaining PEO credentials involve submitting:

• Business entity documentation
• Staff biographies highlighting HR experience
• Two years of operating budgets
• W-2 records from other states (if applicable)
• Workers Compensation policies

Posting a surety bond protects clients should an agency fail to meet wage, tax, or other legal obligations tied to staff under management. Most states require minimum bonds starting around $100k in coverage.

Maintaining an active bond also lends credibility when bidding for big-ticket corporate roles or public sector contracts. Rating agencies can guide adequate coverage levels based on staff under management and client portfolio risk profiles.

8. Get Business Insurance

Given the unique risks and liabilities involved in staffing, securing adequate business insurance represents a prudent step before officially opening for business. Beyond protecting your agency itself, some states also require coverage minimums as a condition of licensing.

Being underinsured (or completely uninsured) leaves agency owners one lawsuit or serious accident away from complete financial ruin. Just a few scenarios highlighting personal risk include:

• A workplace injury lawsuit from a temp employee at a client site
• A large client taking legal action for contract breaches
• An office fire or burglary resulting in destroyed records and equipment

Carrying tailored insurance policies greatly mitigates these threats that could otherwise sink entire operations. Common staffing agency coverage options include:

Professional liability insurance also referred to as errors & omissions (E&O) insurance, protects against damages from mistakes, negligence, or failure to perform duties. Lawsuits from clients or placed talent would fall under this umbrella.

Commercial general liability insurance Covers legal judgments, medical expenses, attorney’s fees, and other costs tied to public liability, bodily injuries, personal injuries, and property damage. Physical office spaces need coverage.

To get quotes, plan to provide your business entity, ownership details, office location(s), projected payroll volumes, and client portfolio size. Costs vary based on revenue, locations, and staffing vertical but expect to budget around $2,000 annually for basic coverage at a minimum.

Comparing plans through an independent insurance broker nets better rates and terms than going directly through a single underwriter. Sites like CoverWallet and NextInsurance facilitate instant online quotes specifically tailored for staffing agencies across dozens of providers.

9. Create an Office Space

An office space represents the central hub where recruiters conduct candidate screenings, account managers meet with clients, and staff come together to strengthen company culture. For fledgling agencies, the workspace also makes vital early impressions on visitors.

Home Office

Launching from a spare bedroom or basement keeps costs low during precarious early stages. Dedicated business phone and internet upgrades add legitimacy to remote meetings. Minimal upgrades like wall dividers and office furniture polish DIY spaces.

Coworking Spaces

Shared workspaces like WeWork offer sleek, modern environs conducive to impression meetings without the overhead costs of long-term leases. They also foster networking with fellow entrepreneurs that can lead to vendor relationships or partnerships. Expect membership rates around $300 monthly.

Commercial Office

Investing in dedicated office space conveys operational maturity and dedication when prospecting major accounts with six-figure staffing needs. For less than Class A spaces in core urban zones, suburban offices near industrial parks put recruiters closer to light industrial and manufacturing talent crucial for trade roles.

10. Source Your Equipment

A temp agency’s essential equipment spans common office hardware along with specialized staffing management software. While significant upfront investments, the right tools empower lean teams to punch above their weight. Savvy buyers source them across new, used, and rental markets.

Buying New

Big box chains like Staples and Office Depot offer one-stop outfitting of basic needs like desks, chairs, phones, printers, internet routers, and various supplies typically for $5k to $10k. Invest upfront in warrantied multi-function printers with scanning abilities critical for digitizing personnel records.

Buying Used

In furnishing their own spaces, growing agencies can save tens of thousands by buying batches of open-box or refurbished workstations and matching conference room sets from used office suppliers. Commercial-grade metal storage solutions come similarly discounted from secondhand dealers.

Facebook Marketplace, Craigslist, and eBay routinely list heavy-duty copiers and printers at half-price retail. Just confirm the remaining toner cycles first.

Leasing and Renting

Hardware rental companies offer short-term operating leases for essential electronics like computers, printers/copiers, phones, etc to test options before big buys. Unlimited user plans provide full tech support and hardware refreshes every 2-3 years.

11. Establish Your Brand Assets

A compelling brand identity fuels recognition cultivates trust, and conveys professionalism – making it invaluable for fledgling temp agencies striving to attract top talent and major corporate customers. Investing in core assets fortifies market positioning.

Getting a Business Phone Number

Acquiring a unique business phone and fax number beyond personal mobiles reinforces legitimacy, especially when cold calling procurement managers at major corporations. Top providers like RingCentral offer vanity numbers to align with branding alongside call routing and tracking.

Creating a Logo and Brand Assets

A custom logo encapsulates brand personality while quality templates for letterheads, one pagers, and PowerPoints derived from the main logo and colors drive professionalism. Rather than complex bespoke designs, clean and minimal paired with a memorable name sticks best. User-friendly sites like Looka provide options.

Consider pairing abstract marks with your agency name itself. Consistent branding, from your website to company swag, gets your name circulating.

Business Cards and Signage

Well-designed Vistaprint business cards serve as vital relationship builders during in-person networking, trade conferences, and sales meetings – instances where grabbing attention quickly counts.

Durably printed cards also enable impromptu referrals, legitimize follow-ups, and reinforce connections made digitally. Custom office signage, displays, and brochures further underscore identity and professionalism for visiting prospects.

Purchasing a Domain Name

Secure the .com aligned to your temp agency’s name and brand using registrars like Namecheap. If taken, strategic alternatives like inserting the region you serve can work too, for example, beststaffchicago [dot] com.

Short, simple, and catchy beats long domains. Double-check spelling and consider abbreviations visitors will intuit. Install SSL encryption and enable email hosting from the start.

Building a Website

While Wix and competitors democratize DIY sites, developers on freelance networks like Fiverr better optimize pages for organic visibility and seamless user experience given technical complexities – well worth the investment.

12. Join Associations and Groups

Tapping into established local networks accelerates practical knowledge gain, relationship building, and lead sharing for new temp agency owners through venues like associations, meetups, and online groups.

Local Associations

Industry associations like the American Staffing Association and the National Association of Personnel Services provide research, talent resources, mentors, and brand visibility. Local chapters also exist across over three dozen metro regions.

Local Meetups

Attending monthly or quarterly meetups facilitates organic relationship-building with fellow agency owners and recruiters in your geography. Sites like Meetup index these events ranging from informal mixers to presentations from legal experts on industry trends.

Facebook Groups

Specialist groups like Staffing Agency Resources – Starting & growing your staffing business assemble thousands of recruiters in one searchable forum for posting job openings, sharing advice, discussing challenges, and brainstorming ideas. Participants operate agencies of all sizes nationwide.

13. How to Market a Temp Staffing Agency Business

Effective marketing fuels a steady stream of qualified leads and sales essential for temp agencies to thrive. While referrals from satisfied customers represent the most valuable channel long-term, agencies must deploy a mix of tactics to proactively drive early traction.

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Personal Networking

Leveraging Existing Networks Early on, tap into the founder’s professional network for introductions to key hiring decision-makers across target customer segments. Ask contacts working internally at major local employers to connect you with HR/procurement teams managing temp staffing contracts.

Offer discounts or guarantee first look at top talent as incentives for existing connections to refer your services. The positive buzz from clients seeing strong results facilitates organically spreading the word of your agency’s reliability.

Digital Marketing

• Launch Google Ads campaigns geo-targeting relevant keywords like “staffing agency Chicago” and “temp agency for warehouse workers” sending prospects to tailored landing pages on your site.
• Foster organic visibility by optimizing pages and profiles for search visibility and regularly publishing insightful blogs and videos.
• Run hyper-targeted Facebook and Instagram ads to engage both client decision-makers and temp talent prospects directly in their feeds.
• Start an email newsletter to engage subscribers with industry insights, new services, etc. Offer discounts for registering.
• Sponsor local job fairs, conferences, and networking events to get your brand seen while meeting prospects in person.

Traditional Marketing

• Print glossy brochures, postcards, and flyers to distribute at local networking events, community job centers, and industrial parks where target clients operate.
• Take out print, radio, or billboard ads in markets with heavier offline media consumption. Focus copy on prompt staffing solutions for specific roles.
• Mass mail branded direct mail flyers and postcards to hiring manager contacts purchased from list brokers. Target by zip codes or job titles.

14. Focus on the Customer

For temp agencies, delivering exceptional service represents the most vital driver of growth and sustainability long-term. How reliably your agency satisfies pressing talent needs and provides support ultimately determines client loyalty and referrals.

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Start by deeply understanding the unique pain points of customers across segments to provide suited solutions. Here are some ways to get connected with customers as a staffing agency:

• An agency catering primarily to warehousing and manufacturing roles must intimately grasp the flexibility needs and skill demands of those work environments.
• Maintaining consistent communication and responsiveness also matters, especially for major accounts.
• Slow or inadequate feedback risks losing large contracts to competitors promising more attentive partnerships.
• You want hiring managers to feel fully supported in finding and onboarding the right workers.
• Another component involves precisely tracking key metrics like time to fill roles, retention rate after 30 days, and absenteeism for placed talent.
• High standards and transparency on KPIs reassure customers around quality and enhance data-driven matching.

Delivering on these fronts facilitates strong word of mouth, as satisfied clients advocate for your agency internally and to industry peers. One good corporate partnership often then cascades into multiple new accounts within their orbit.