How to Start a Temp Agency in 10 Easy Steps

What Is a Temp Agency?

Temporary staffing agencies, or temp agencies, recruit people for their clients’ short-term, direct hire and temp-to-full-time work opportunities. A staffing business has rapid business growth potential when appropriately managed. There are many different components to operating a staffing firm, and you must cover them all to be profitable.

How to Start a Temporary Staffing Agency

Let’s walk you through the 10 easy steps for how to open a staffing agency. From understanding legal requirements to recruiting clients and financing, we’ll provide valuable insights and tips to help you succeed in this dynamic industry.

1. Evaluate Your Skills

To be successful in the staffing industry, an agency requires you to find clients, find employees, match clients with workers and manage the agency. A business owner must have these skills or hire someone who does for the small business to succeed.

2. Find Your Target Market

Next, analyze different markets to determine where your company can succeed. Each industry’s supply and demand will differ, so it’s critical to start a staffing agency in the field you’re most familiar with.

The three segments of the staffing industry are office or clerical, industrial and professional or technical. The target market you choose will be a niche within an industry segment. Once you select a particular group, you can grow your agency from there.

The best clients consistently hire employees. Target potential clients who need help keeping up with the hiring process themselves, whose business fluctuates daily and who need temp workers on short notice or who need a third-party opinion in hiring decisions.

3. Develop a Business Plan

A business plan showcases your company’s strategy to begin operations in a particular market, create a legal business and develop profitable operations. Your business plan should build upon the research you have already done to start running. Some factors your plan should address include the following.

• Your business name: Your agency’s name is how clients recognize you. Choose something memorable and informative.
• Business address: Depending on local and federal regulations, you may be able to operate your temp agency from your home. Before establishing your business’ address, check the tax and government regulations to ensure your location is acceptable to host your temp agency office.
• Market niche: When deciding your business’ specialty, choose a market that will provide the most profit. Your specialty should depend on your expertise and unfulfilled market demands.
• Marketing plans: Establishing a business plan also guides your future marketing techniques to notify potential clients about your service offerings.
• Financial strategy: Staffing agency financing is a crucial aspect to address. A successful financial plan relies on creating a realistic prediction for how much business you plan on conducting at the start. When creating your financial strategy, account for all necessary costs related to daily operations.
• Business goals: Establishing short- and long-term goals is essential for financial success. Base your targets on the volume of work you plan on completing when you start your business and after a few weeks or months of operation.

4. Form a Legal Entity

If an employee or another business takes legal action against your new temp agency, you’ll need liability protection. The most common types of business entities include the following:

• Sole proprietorship
• Partnership
• Limited liability company
• Corporation

Once you have set up your business entity, secured sufficient insurance coverage, found employees and clients and secured a payroll service to stay on top of your business’ cash flow, you are ready to start placing temp workers in jobs.

5. Get Insurance to Protect Your Temp Staffing Agency

In addition to licenses and permits, you will need to invest in insurance for safe and lawful operation. Business insurance protects your company’s financial well-being if a covered loss occurs.

The type of insurance policy you purchase will depend on which risks you think require coverage. If you are unsure what kind of risks your temp agency may face, general liability insurance is an excellent starting point for most small businesses.

Another beneficial policy is workers’ compensation insurance. If you are planning to hire employees, workers’ compensation coverage might be a requirement by your state. Some other popular insurance policies that can protect you, your agency and your employees include the following:

• Business owners policy
• Employee theft and crime
• Umbrella policies
• Property coverage
• Employment practices liability insurance
• Health insurance
• Commercial property insurance

6. Calculate Your Costs

When determining your business plan, you need to account for the two types of costs involved with starting a temp staffing company.

• Establishment costs: These expenses include one-time fixed costs to start a staffing agency, such as those for forming the business entity and contracts, business insurance, office space, hardware like computers and printers and software for payroll, HR and training.
• Operational costs: The next setup costs concern operations. If you target a higher-skilled market, you will pay more in startup fees because salaries will be higher, there will be more intense training and you’ll need to present your business with a professional look and feel. Operational costs can include clients, advertising and the first month of salaries.

Though you need to pay your temp workers weekly or biweekly, your clients will pay you monthly or bimonthly. This payment delay will interrupt your cash flow if you don’t plan properly. Working with a payroll factoring company is a beneficial way to compensate your workers on time and ensure your business doesn’t suffer.

A payroll factoring company will pay you within 24 hours on your clients’ invoices. You get access to capital to pay your employees and temp workers without interrupting cash flow. If you don’t budget your business’ cash flow properly, you’ll struggle to meet payroll, underpay employees and ultimately fail.

7. Find Employees For Your Temp Agency

As your agency grows, you’ll need more help with daily operations, placing temps and staying on top of payroll.

When opening a staffing agency, it’s crucial to establish a robust recruitment process to find talented, motivated and reliable staff members. Conduct thorough interviews, background checks and reference verifications to build a trustworthy team.

8. Recruit Clientele

Finding clients to work with is vital to your success. You need to show them why your staffing company stands out from the others and why they should work with you. Showcase your expertise, industry knowledge and ability to provide exceptional temporary staffing solutions. Develop creative ways and offer competitive value when targeting potential clients to establish long-lasting partnerships.

9. Determine the Legal Requirements

When opening a temp staffing agency, it’s essential to understand the legal obligations and requirements to ensure compliance and avoid potential legal issues. Research and familiarize yourself with the legal framework governing staffing agencies in your jurisdiction, including obtaining the necessary licenses, permits and registrations.

Consult with an attorney specializing in employment law to ensure your business operations, contracts and hiring practices align with the legal standards. Complying with legal requirements from the outset will help you establish a solid foundation and build a reputable and legally sound temp agency.

10. Define Your Temp Agency’s Brand

Defining your temp agency’s brand is a crucial step in establishing a strong presence in the market. Craft a compelling brand identity that reflects your agency’s values, mission and unique selling proposition. Develop a professional website that showcases your services, testimonials and success stories.

Pay attention to the design, user experience and search engine optimization to attract potential clients and job seekers. Consistency across your branding elements, such as logo, colors and messaging, will help create brand recognition and trust. Invest time and effort into building a reputable brand that resonates with your target audience and sets you apart from the competition.

What to Expect When Running a Temp Agency

Running a temp agency can be a rewarding venture, but you must have a realistic understanding of what to expect. Here are some factors to consider when opening a staffing agency.

• Dynamic and fast-paced environment: In a typical day, you’ll handle various responsibilities such as client acquisition, candidate screening, job placements and managing administrative tasks. Expect a lively and ever-evolving work environment that requires multitasking and effective time management.
• Client and candidate management: Your success hinges on building strong relationships with clients and candidates. You’ll spend time understanding client needs, matching candidates to suitable positions and ensuring smooth communication among all parties.
• Constant recruitment efforts: Recruitment is an ongoing process. You’ll need to continuously attract, interview and screen potential candidates to maintain a diverse talent pool. Effective marketing strategies, networking and using online job boards can help you reach a wider pool of candidates.
• Managing challenges: Typical challenges include fluctuating client demands, competition and maintaining a steady cash flow. It’s vital to stay adaptable, proactive and responsive to market changes. Developing strong client relationships, delivering exceptional service and differentiating your agency from competitors can help overcome these obstacles.
• Providing excellent service: Your reputation hinges on the quality of service you provide. Strive to understand client needs and match them with reliable, skilled candidates. Timely communication, professionalism and responsiveness are vital to maintaining strong client relationships.

Does Your Temp Staffing Agency Need Help With Payroll Factoring?

Porter Capital is a leading provider of payroll funding for staffing agencies. For more information on how we can help you grow your staffing agency and stay on top of payroll, fill out this form and get a free consultation.