Starting a Staffing Business–What to Think About

A staffing business - be it for IT professionals, nurse practitioners, in-home health care workers, administrative assistants, accountants or other industry - is unique as it has two sets of customers. The first set of customers is the organizations that have need for temporary workers and have the ability to pay for them. The other set of customers is the temporary workers who have the appropriate skills that are needed. Each set has its own market place dynamics and challenges, and your business plan needs to address how you are going to attract and acquire both sets of customers—what are the two value propositions, competitive advantages, go-to market strategies and tactics, your own staffing plans, etc.

Your own experiences combined with market research are important to determine what type of staffing business you will have. Will it staff all positions in all industries, maybe certain positions like IT or accounting for all industries, or maybe all positions for a certain industry like health care or construction? Will you focus on seniors or college students for your temp workers? Research will show you the demand for temp services and the supply of qualified temp workers, so you can make an informed decision.

To start the business, you will likely begin as a solopreneur with some connections you have made. As you grow or if you plan to start in a bigger position, consider that the skills required to find customers who need temps are different than the skills required to find, on-board and manage a temp worker team. I know of two SCORE clients that successfully started a staffing business.  They had both been in the temp service business for several years. They decided to team and form their own company; Mr. Outside focused on identifying and securing the paying customers. Mr. Inside focused on identifying, vetting, securing, on boarding, scheduling and paying the temps. It was a great combination.

Specific items to consider in securing organizations that need temps:

  1.  Term of the assignment and fees; a contract
  2.  Description of the assignment, so you are in a position to match it with the right temp
  3.  Ability and implications of the customer not accepting your temporary worker and/or conducting their own interview
  4.  Not being able to hire away temps without paying you some fee
  5.  Who has responsibility for work errors and general liabilities

Specific items to consider in securing temps:

  1. As temps do not receive benefits from the companies to which they are assigned, staffing companies, as either a competitive advantage or as a competitive necessary, are making them employees of the firm and thus providing benefits. You will need to arrange and pay for these.
  2. Since you are responsible for matching temps with the assignments, you will need a vetting process to determine that the temp's skills and experiences are appropriate.
  3. As temps will come from many different experiences and will spend limited time in your office, you will need to find a way to develop and communicate a company culture. You will need both communications vehicles and an employee handbook.
  4. Consider using an outsourced payroll service
  5. For many temporary workers, these assignments are temporary until they can find a full-time position paying benefits. You will both want to encourage this—good competitive advantage—and protect yourself.
  6. You will want a location that facilitates temps coming to your office for interviews and training, so find quarters that are accessible by public transportation or have easy car access and parking.

Items related to both parts of the business:

  1. You will need several operating and financial systems to track each assignment and hours worked, to bill customers and to pay temps.
  2. You will need several types of insurances as a temp’s errors on an assignment often become your errors. They may also suffer injuries on assignment.

In addition to the operational metrics, most small businesses need to keep a sharp eye on managing their cash flow. This is really important in the staffing business, as many customer contracts call for monthly billing. This means you might receive the cash 60+ days after an assignment begins. On the other hand, most temp employees expect to get paid weekly. Therefore, you will need cash upfront to be able to pay employees before you are paid. The financial section of your business plan will help you figure out how much this might be.

Keep in mind that even with today’s ability to post jobs and review resumes on the web, HR departments are still utilizing staffing companies. Why is this? Mostly it is for the niche staffing companies might have developed, convenience and speed of getting a temp on the job. So as you put together your company start-up plans, make sure you can deliver on these factors.

Finally as you consider this business opportunity remember that it may be cyclical depending upon the economy. In robust economic times, individuals may be looking for full time jobs, not temp positions, while companies maybe hiring more full-time employees. In depressed times, there may be a greater supply of temp workers while companies might not be hiring at all. 

Hal Shelton
<p> <span style="line-height: 1.385em;">Hal is a SCORE mentor who is passionate about helping small businesses start and grow. He has been a CFO and board member for NYSE/NASDAQ publicly traded companies and nonprofits. He is currently an active investor in early-stage technology companies and is the Amazon bestselling author of </span><a href="" style="line-height: 1.385em;" target="_blank" title="Secret to Business Plans">The Secrets to Writing a Successful Business Plan</a><span style="line-height: 1.385em;">.</span><br /> <a href="" target="_blank"></a>​ | <a href="" target="_blank">Washington D.C. SCORE</a> | <a href=""><span style="line-height: 1.385em;">More From Hal</span></a></p>


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