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How to Start a Temporary Staffing Agency

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 who may only have a traditional or online high school diploma 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.

Essential Equipment:

An office (perhaps a home office) should be equipped with the standard office supplies and at least two telephone lines.

At least one computer system with accounting software and a database for keeping track of projects is mandatory. A printer is used for printing invoices and job listings, and a high-speed Internet connection connects the agency with online job search sites.

Many temporary staffing services have computers with tutorial software available to help associates to train their keyboarding and basic office software skills. These computers are also used to test the skills of applicants.

Income Potential:

Many billions of dollars are spent on temporary staffing services each year. A small, single-office agency can earn profits in the tens of thousands of dollars. The large, international firms rake in millions every year.

Target Market:

A temporary staffing agency is the middleman between two distinct markets: clients and associates.

It is usually not a difficult matter to reach hundreds of applicants with simple help wanted advertisements. More focus will probably be placed on connecting with client companies and convincing them that your services will help their businesses.

Certain industries seem more receptive to temporary staffing. Financial institutions and other office-centric companies are constantly seeking qualified office support staff. Factories frequently need labor for light industrial work, product assembly, and shipping and receiving tasks. Hospitals and clinics use temporary medical staffing to hire transcriptionists, certified nursing professionals, and other support staff. Increasingly, high-technology companies hire computer programmers, database specialists, and systems engineers on a temporary basis through agencies specializing in technical placements.

Tips for Success

1. Develop a niche!- In larger markets, providers of temporary staffing services have found it useful to branch into niches such as temporary medical staffing, legal, financial, or technical fields. The focused nature of these agencies allows recruiters to build a pool of highly-educated, trained, and experienced associates who are able to provide the best service to clients within a particular industry.

A hospital executive would feel more comfortable contracting nurses from an agency dedicated to temporary medical staffing than from a one-stop-shop that also places welders, janitors, and filing clerks. This confidence also helps associates to command better wages than they might otherwise receive through a general-service temporary staffing agency.

Automate!- Much of the work of running a temporary staffing agency can be automated by computer software. Well-designed database software can ease the process of matching qualified associates with appropriate job openings. Accounting operations can be very heavily automated (but working closely with a good accountant is still advised). With these tools in place, just two major tasks remain: finding clients and finding associates.

Use your own services!- As the business grows, it will become necessary to add staff to handle the recruitment and marketing. That should never be difficult, since typically dozens or hundreds of qualified candidates are already in contact with the agency!

Training, Skills or Experience Needed:

Recruiters are at an advantage with a background in human resources, business management, and marketing. A degree is not essential for starting the business, but the knowledge gained through a business management program is immensely helpful. People skills are important, and can be learned through experience and self study. Numerous books have been published, specifically addressing temporary staffing as a business opportunity.

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