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How to Start a Staffing Agency

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Published on May 26, 2022

Updated on September 16, 2022

How to Start a Staffing Agency

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How to Start a Staffing Agency

A company with an open, high-level position generally hopes to find the perfect applicant. But many organizations struggle to find a good match, and turn to experienced staffing agencies for help. Right now, demand for recruitment services is at an all-time high, which is why the US employment and staffing industry is worth almost $24 billion and set for steady growth in the coming years. 

Staffing firms do all the heavy lifting in terms of sourcing candidates, setting up interviews, and extending job offers. But before you start flipping through that virtual rolodex, it’s important to understand the fundamentals of starting and running a business. 

Lucky for you, this step-by-step guide has all the information and insight you need to put you on the road to staffing success.

Fast Facts

Investment range

$4,600-$10,350

Time to build

0-3 months

Industry trend

growing

Revenue potential

$120,000-$240,000 p.a.

Profit potential

$108,000-$156,000 p.a.

Commitment

flexible

Step 1: Decide if the Business Is Right for You

businesswoman wearing sunglasses thinking new ideas

Pros and cons

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

Pros

  • Flexibility – Set your own hours and work from anywhere
  • Low Overhead – Low startup costs and ongoing expenses
  • Rewarding – Help people find their dream jobs!

Cons

  • Extensive Networking – It takes time to build a network of candidates and clients
  • Tough Customers – Clients can be picky when hiring for open positions

Staffing Agency industry trends

Industry size and growth

  • Industry size and past growth – In 2022, the U.S. employment and recruiting agency market is worth $23.2 billion after 2.3% annual growth since 2017.[1]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.[2]https://www.verifiedmarketresearch.com/product/recruitment-staffing-market/
  • Number of businesses – There are 10,950 employment and recruiting agencies in the U.S. as of 2022.[3]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.[4]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. 

If you’re interested in obtaining certification, the American Staffing Association offers several programs. You can even get certified to staff positions specifically in the technology and healthcare sectors, which would be appealing to potential clients in those fields. 

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

  • Computer
  • Website
  • Staffing Agency Software
  • Logo and branding
Start-up CostsBallpark RangeAverage
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

Now that you know what’s involved in starting a staffing agency, it’s a good idea to hone your concept in preparation to enter a competitive market.

Why? Identify an opportunity

Research staffing agencies in your area to examine their services, price points, and client bases. You’re looking for a market gap to fill. For instance, maybe the local market is missing a staffing agency that specializes in filling temporary positions.  

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as staffing IT or creative professionals. This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or 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.

How much should you charge for staffing services?

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. 

Once you know your costs, you can use this Step By Step 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

Your target customers will be companies that need assistance filling their open positions. Advertising your staffing agency on LinkedIn will help you build your network of potential clients and job seekers. You could also spread the word about your recruitment services on social media platforms like Facebook, Instagram, and TikTok.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed
Should you start a staffing agency

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

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: “Jim’s Bakery” over “Jim’s Cookies”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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 Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your offerings in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

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

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running. 

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 ZenBusiness’s 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.

The IRS website also offers a tax-payers checklist, and taxes can be filed online. 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 Licenses/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.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. 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.

businesswoman smiling while looking at the document paper

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.

Marketing

Some of your business will come from your existing network or word of mouth, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Book a Consultation”. This can sharply increase business.
  • Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include: 

  • Flyering – Distribute flyers in your neighborhood and at industry events 
  • Post a video – Post a video about your staffing agency. Use humor and maybe it will go viral!
  • Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
  • Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
  • Seek out referrals – Offer incentives to generate customer referrals to new clients. 
  • Make a podcast – This allows you to make a personal connection with your customers
  • Do a webinar – Share your staffing expertise online with a video seminar
  • Offer a free download – Offer something of value to download from your website to capture emails.
  • Testimonials – Share customer testimonials about how your staffing agency helped them

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your 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: 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. 

Staffing Agency FAQs

How much does it cost to start a staffing company?

You could start a staffing company for around $5,000. Your main costs will be related to advertising your business and posting on job boards.

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.

Do I need a license to start my staffing agency?

You may be required to obtain specific licenses to run your staffing business. Check with your state and local government and visit MyCorporation’s Business License Compliance page.