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Written by: Natalie Fell
Natalie is a business writer with experience in operations, HR, and training & development within the software, healthcare, and financial services sectors.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on May 26, 2022
Updated on March 13, 2024
Investment range
$4,600-$10,350
Revenue potential
$120,000-$240,000 p.a.
Time to build
0-3 months
Profit potential
$108,000-$156,000 p.a.
Industry trend
Growing
Commitment
Flexible
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.
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Before starting a staffing agency, it’s important to weigh the pros and cons.
Trends within the staffing industry include:
Challenges within the staffing industry include:
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:
| 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 |
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.
There are a few barriers to entry for a staffing agency. Your biggest hurdles will be:
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.
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.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as staffing IT or creative professionals.
Also, analyze what existing staffing agencies are doing and look for opportunities they might be missing.
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.
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.
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.
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.
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:
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.
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:
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.
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!
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.
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:
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.
Choose Your State
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.
Securing financing is your next step and there are plenty of ways to raise capital:
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.
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.
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.
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:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
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.
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.
Here are some powerful marketing strategies for your future business:
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:
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.
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:
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.
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.
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.
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.
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.
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.
Ensuring the quality and suitability of candidates you provide to clients requires implementing thorough screening and vetting processes. This can include conducting comprehensive interviews, reference checks, and skills assessments. Take the time to 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.
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