13 Essential Steps to Start a Staffing Agency

These are the critical aspects you should evaluate when launching your staffing agency:

1. Define your services — Decide on the types of staffing services you will offer, such as temporary staffing, permanent placements, executive search, or industry-specific staffing (e.g., healthcare, IT, finance).
2. Recruitment software — Invest in recruitment software or applicant tracking systems (ATS) to manage candidate databases, job postings, and application processes.
3. Sourcing candidates — Use various channels to source candidates, such as job boards, social media, networking events, and partnerships with educational institutions.
4. Candidate screening — Implement a thorough screening process that includes interviews, background checks, and skills assessments to ensure quality placements.
5. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
6. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
7. Partnerships — Build relationships with local businesses, educational institutions, and community organizations to generate referrals and collaborate on promotional activities.
8. Employment laws — Stay informed about employment laws and regulations, including labor standards, equal opportunity, and data protection.
9. Learn from real entrepreneurs who run a successful business:

The Founders of Houston & Ko on Changing the Freelance Landscape

Step 1: Decide if the Business Is Right for You

Pros and cons

Before starting a staffing agency, it’s important to weigh the pros and cons.

Staffing Agency industry trends

Industry size and growth

• Industry size and past growth – In 2022, the US employment and recruiting agency market is worth $23.2 billion after 2.3% annual growth since 2017.((https://www.ibisworld.com/industry-statistics/market-size/juice-smoothie-bars-united-states/))
• Growth forecast – The global recruitment and staffing industry is expected to grow about 2% per year through 2028.((https://www.verifiedmarketresearch.com/product/recruitment-staffing-market/))
• Number of businesses – There are 10,950 employment and recruiting agencies in the US as of 2022.((https://www.ibisworld.com/industry-statistics/number-of-businesses/employment-recruiting-agencies-united-states/))

Trends and challenges

Trends within the staffing industry include:

• New developments in artificial intelligence are changing the way staffing agencies operate. AI enhancements are automating key parts of the recruitment process, like candidate sourcing, reviewing resumes, and scheduling interviews. 
• Employers are making huge commitments to diversity and inclusion. Staffing agencies are also making it a priority to recruit talent of all cultures, genders, and professional backgrounds. 

Challenges within the staffing industry include:

• The recent pandemic has resulted in a shortage of customer-facing workers, especially in the retail, healthcare, and hospitality industries. Jobs in these areas have been tough for companies and staffing agencies to fill.
• Remote work is becoming the norm and many candidates are making it a requirement when looking for a new job. Companies that don’t offer remote work may have trouble attracting talent, making it harder for recruiters.

What kind of people work in staffing and recruiting?

• Gender – 59.9% of all recruiters are women, while 40.1% are men.((https://www.zippia.com/recruiter-jobs/demographics/))
• Average level of education – 69% of recruiters have a bachelor’s degree.
• Average age – The average recruiter in the United States is 40 years old.

How much does it cost to start a staffing agency?

Costs to start a staffing agency range from $4,600 to $10,400. Your costs will greatly depend on how much you spend on advertising your services and posting your client’s positions on job boards.

You’ll need a handful of items to successfully launch your staffing agency, including: 

• Computer
• Website
• Staffing Agency Software
• Logo and branding

Start-up Costs	Ballpark Range	Average
Licenses and permits	$100-$300	$200
Insurance	$100-$300	$200
Marketing and advertising	$2,000-$5,000	$3,500
Website	$1,000-$2,000	$1,500
Software	$100-$250	$175
Office Equipment	$1,000-$2,000	$1,500
Miscellaneous	$300-$500	$400
Total	$4,600-$10,350	$7,475

How much can you earn from a staffing agency?

The average rate charged by permanent staffing agencies is 20% of the hired individual’s first-year salary. You’ll have very few ongoing expenses, aside from advertising and posting jobs. Expect a profit margin of around 90%. 

In your first year or two, you could run your business from home and fill one position every two months. Assuming each job paid a yearly salary of $100,000 and your commission is 20%, you’d bring in annual revenue of $120,000. Assuming that 90% margin, you’d make a profit of $108,000. As your business grows, you might hire additional staff and rent an office, reducing your profit margin to 65%. If you doubled annual revenue to $240,000, you’d make an impressive profit of $156,000. 

What barriers to entry are there?

There are a few barriers to entry for a staffing agency. Your biggest hurdles will be:

• Financing (time + money) the build-out of a strong network 
• Drawing clients away from established recruiting firms

Step 2: Hone Your Idea

Starting a staffing agency requires a good understanding of the job market, strong networking skills, and the ability to quickly adapt to changing client needs. Tailor your services to fill market gaps, and focus on building long-term relationships with both clients and candidates.

Why? Identify an opportunity

To start a staffing agency, first conduct thorough market research to understand the current labor market trends and identify sectors with high demand, like healthcare or IT. Consider specializing in a niche where you have expertise or see a market gap, as this can differentiate your agency from competitors.

Also, analyze what existing staffing agencies are doing and look for opportunities they might be missing.

What? Determine your services

You’ll be providing recruitment and staffing services for companies with open jobs to fill. Many agencies specialize in a specific industry, which helps narrow down viable candidates and customers. Some staffing agencies may also focus specifically on temporary or seasonal workers.

Consider offering specialized services like background checks, skill testing, or training programs, which can add value for your clients. Be adaptable and ready to modify your services based on client feedback and market demands.

How much should you charge for staffing services?

Research the market rates to understand what competitors are charging, which can be either per hour or a percentage of the employee’s annual salary. Conduct a cost analysis to ensure your pricing covers operational expenses and allows for a profit margin.

When recruiting full-time employees, staffing firms usually charge 10-35% of the employee’s annual salary. Rates depend on the agency’s reputation and the positon being filled. Offer different pricing models to accommodate diverse client needs and be transparent about your fees to build trust.

Once you know your costs, you can use our profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Identify potential clients who would benefit most from your services, such as businesses in rapidly growing industries or those with seasonal staffing needs. Use networking, both in-person and through platforms like LinkedIn, to connect with potential clients. Develop a marketing strategy targeting your identified client base through appropriate channels, including industry publications and local business events.

Where? Choose your business premises

Consider a location that’s easily accessible and close to business districts or industrial areas. Decide whether to start with a physical office or operate remotely to reduce initial costs. Choose a space that allows for growth; if starting small, co-working spaces or small offices with no long-term commitments can be ideal.

Step 3: Brainstorm a Staffing Agency Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “staffing agency” or “staffing firm”, boosts SEO
• Name should allow for expansion, for ex: “ProHire Solutions” over “TechTalent Connect”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Staffing Agency Business Plan

Here are the key components of a business plan:

• Executive Summary: Summarize your staffing agency’s aim to connect qualified candidates with businesses, highlighting your expertise in specific industries or job types.
• Business Overview: Describe the focus of your staffing agency on providing recruitment and placement services for temporary, permanent, and contract positions.
• Product and Services: Detail the services offered, including candidate sourcing, screening, interviewing, and placement for various industries.
• Market Analysis: Assess the demand for staffing services, identifying target industries and employment trends in your operating region.
• Competitive Analysis: Compare your agency to other staffing firms, emphasizing your unique strengths like specialized industry focus or a superior candidate vetting process.
• Sales and Marketing: Outline your strategy to attract both clients and job seekers, through methods like networking, digital marketing, and participating in industry events.
• Management Team: Highlight the expertise and experience of your team in recruitment, human resources, and industry-specific knowledge.
• Operations Plan: Describe the process of matching candidates with employers, from initial consultation to placement and follow-up.
• Financial Plan: Provide an overview of start-up costs, revenue streams from placement fees, and operational costs.
• Appendix: Include supplementary materials such as detailed market research, client testimonials, or recruitment strategies to support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to staffing agencies. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your staffing agency will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a staffing company. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Staffing Agency Business Licenses and Permits

Starting a staffing agency requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your staffing agency as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Bullhorn, Recruiterflow, or Harver, to track candidates, schedule interviews, and post jobs. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Developing a website is crucial for your staffing agency, as it serves as the digital storefront of your business, providing a first impression to potential clients and candidates. Utilizing website builders like Wix or Squarespace is a cost-effective and user-friendly option, especially if you’re starting with a tight budget or prefer a hands-on approach. Alternatively, hiring a professional web designer can provide a more customized and polished look.

Your website should be optimized for search engines (SEO) to increase visibility, incorporating relevant keywords related to staffing and your specific niche. Importantly, include strategic call-to-action (CTA) buttons, such as “Contact Us,” “Submit Resume,” or “Request Staff,” prompting visitors to engage directly and helping convert website traffic into tangible business leads.

Marketing

Here are some powerful marketing strategies for your future business:

• Build a Strong Online Presence: Regularly update your site with industry-relevant content, like blog posts and case studies, to boost your visibility online.
• Leverage Social Media: Utilize platforms like LinkedIn, Twitter, and Facebook to network with potential clients and candidates. Share industry insights, job postings, and success stories to engage your audience.
• Email Marketing: Develop an email marketing campaign to regularly engage with your contacts. Share updates about your services, new job openings, and market trends. Personalize your emails to increase engagement.
• Networking and Partnerships: Attend industry events, job fairs, and seminars. Building relationships in person can be incredibly effective. Partner with local businesses, educational institutions, and professional associations to widen your reach.
• Referral Programs: Implement a referral program to encourage current clients and candidates to refer others to your agency. This can be a cost-effective way to generate new business.
• Targeted Advertising: Use targeted online advertising to reach specific demographics. Platforms like LinkedIn and Google Ads can help you target businesses and job seekers in your chosen industry or location.
• Content Marketing: Create valuable content like how-to guides, industry reports, and infographics. This establishes your agency as a thought leader and helps attract organic traffic to your website.
• Client and Candidate Testimonials: Showcase positive testimonials from clients and placed candidates. Real success stories can significantly enhance your credibility.
• Local SEO: If you’re focusing on a specific geographic area, optimize your online presence for local search. This includes having your agency listed in local business directories and Google My Business.
• Follow-Up Strategies: Develop a system for following up with both clients and candidates post-placement. This helps in building long-term relationships and encourages repeat business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your staffing agency meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your staffing agency could be:

• Hit your hiring goals with Five-Star Staffing
• Recruiting solutions for growing businesses
• Nobody finds top talent faster!

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a staffing agency, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in staffing for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in recruiting. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a staffing agency include:

• Recruiters – Source qualified candidates, manage client relationships
• Office Manager – Bookkeeping, schedule meetings
• Marketing Lead – Manage social media accounts, generate new business

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Staffing Agency – Start Making Money!

With your own staffing agency you can build long-lasting relationships, help companies find the talent they need and help people carve out fulfilling careers. Staffing can be rewarding work, and you’ll make great money along the way!

After reading this guide you’ve got the requisite business know-how. It’s time to start your entrepreneurial future and launch the staffing agency of your dreams. 

Help Section

Is a staffing agency a profitable business?

Yes, a staffing agency can be highly profitable. Make sure you charge competitive rates for your services and spend time building up your network of candidates and clients.

Are there certifications available for staffing professionals?

While obtaining certification isn’t mandatory, there are several certifications available for those looking to elevate their staffing skills. Check out the American Staffing Association for more information.

How can I attract clients and job seekers to utilize my staffing services?

Firstly, create a strong online presence through a professional website and active social media accounts. Utilize digital marketing techniques, such as search engine optimization (SEO) and targeted advertising, to increase visibility and reach your target audience. Additionally, actively engage with job seekers by attending job fairs, hosting networking events, and partnering with educational institutions or professional organizations.

How can I differentiate my staffing agency from competitors in the market?

Develop expertise in specific industries or niches to become a go-to resource for specialized talent. Offer additional value-added services such as skills assessments, training programs, or career coaching. Build strong relationships with both clients and job seekers by understanding their unique needs and providing customized solutions.

How can I ensure the quality and suitability of candidates I provide to clients?

Ensure the quality and suitability of candidates by conducting thorough interviews, reference checks, and skills assessments. Understand the specific requirements and culture of each client organization to ensure a good fit. Implement background checks and verification procedures, such as verifying education and work experience, to ensure the accuracy of candidate information.