Startup cost
$25k–$250k
TRUiC Business Ideas
How to Start a Staffing Company
Decision Snapshot
Staffing Company
Idea Score
59
Profit margin
25%
Break-even
4 mo–12 mo
Time to launch
12 wk–36 wk
Demand trend
Stable
5-yr failure rate
—
Capital intensity
Very high
Time commitment
Flexible
Part 1 - How to start a Staffing Company business - Background
Oftentimes, finding the right employee to fill a job vacancy or looking for a job is complicated. Online job platforms are complicated and slow. Employers and job seekers become discouraged, leading to a low success rate of just 2% to 5%.
Fortunately, there are other avenues to explore. A staffing company, also known as a recruiting firm, helps speed up the hiring process. Acting as business matchmakers, they sift through job sites and local advertisements with the goal of connecting job candidates with hiring organizations.
Our guide is in 3 parts:
- Part 1 - How to start a Staffing Company business - Background
- Part 2 - Our planner tool to see if this idea is the right fit for you
- Part 3 - Action plan to get started
What are the costs involved in opening a staffing company?
Launching a staffing company takes time and capital. Many new entrepreneurs start out as the sole employee, working out of a home office. This helps conserve the business’s cash flow, eliminating the need for an expensive office space. When mapping out your business plan, include the following items in your budget:
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Computer(s)
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High-speed internet
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Website and marketing strategy
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Dedicated telephone line
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Insurance and permits
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Tool for payment processing
While not a requirement for setting up your business, you will want to consider investing in the following business tools prior to opening your agency:
- Customer Relationship Management System (CRM) — Enhances collaboration, communication, and the sharing of information with clients.
Applicant Tracking System (ATS) — Automates business procedures, assists in screening applicants, and keeps records organized.
Social Collaboration Tools — Integrates with existing social media procedures and ensures you remain up-to-date on critical information regarding job openings, candidates, and hiring companies.
When launching your staffing company, it is critical that you plan for all cash flow needs. Many fail to realize that they are responsible for workers’ compensation insurance and paying employees they have placed with a client. Since it can take four to six weeks for a client to settle any debts with you, you will need to plan for your future cash flow needs. Industry leaders recommend adding another layer of protection by partnering with a reputable payroll service before placing your first employee.
What are the ongoing expenses for a staffing company?
In addition to the standard overhead costs of rent, utilities, insurance, website management/hosting, and marketing, you will need to maintain a steady cash flow to cover payroll. This includes both your agency’s employees and the people you have placed for your clients. You should plan to maintain a minimum of three months’ worth of expenses to ensure payroll is met and bills are paid in a timely manner.
Who is the target market?
Unlike most businesses, your target market is twofold — you will need to attract the attention of both clients and potential job candidates in order to collect any placement fees.
How does a staffing company make money?
A staffing company makes money by charging hiring companies a fee for services provided, including recruiting, vetting, testing, and placing new hires. Many agencies also take on the responsibility of performing human resources and/or administrative duties. In most situations, the new hire is considered an employee of the agency for a specified period of time. They are responsible for handling the new hire’s payroll until the end of the contract, at which time the employer has the option of placing the employee in a full-time position or letting them go.
Staffing companies often collect a portion of the worker’s hourly wage as part of their fee. For example, the staffing company might charge their client $15 an hour, with the worker earning $12 an hour and the staffing company keeping the $3 difference as a fee.
How much can you charge customers?
Fees vary depending on a variety of factors. Staffing companies charge anywhere from 25% to 100% of the newly hired employee’s wages. For example, if you’ve agreed to a markup of 50% and the employee earns an hourly wage of $15, you will earn $22.50 per hour for your work. This article by Advent Talent Group offers valuable insight into pricing for maximized profit.
How much profit can a staffing company make?
Total annual profits vary based on the size of the company, number of clients, number of employees, and markup fees. Experts estimate, however, that the average profit for a staffing agency is approximately $750,000 annually.
How can you make your business more profitable?
Business owners looking to maximize profits must consistently work to ensure they provide every client with top-notch service. This means keeping candidate data up-to-date and maintaining a steady stream of quality talent. Industry leaders recommend choosing orders carefully. Focus on high-margin, long-term contracts and turn down the jobs that will not prove profitable. Lastly, invest in your own talent — a highly-skilled recruiter will help ensure your business and profits grow exponentially.
Day-to-Day and Growth
What happens during a typical day at a staffing company?
Your job as a recruiter is to serve the needs of two parties — the hiring organization and individuals seeking new job opportunities. The bulk of your day will be spent building and maintaining strong professional relationships. This means answering phone calls and emails, addressing client questions and concerns, collaborating with hiring companies to identify their unique needs, and sifting through ads and online job platforms for job candidates.
Once you feel you have a viable list of candidates, you’ll conduct interviews and supervise any tests required by the hiring company. This vetting process helps weed out the weak links, hopefully leaving you with several candidates to move on to the next phase of the hiring process. Your client’s hiring manager typically takes over at this point, setting up interviews and making a final decision regarding each applicant. If they choose to hire one of the individuals you suggest, it may be necessary for you to negotiate employee salaries. You will also need to fill out new hire paperwork. If the hiring manager chooses not to hire the candidates you’ve presented, it’s back to the drawing board to look for another round of potential new hires.
What are some skills and experiences that will help you build a successful staffing company?
To realize long-term success in this industry, you must be customer service oriented and possess the ability to communicate with people from all backgrounds. Your clients count on you to listen to their job fulfillment needs and locate the best candidate for the job. Therefore, it is critical that you have exceptional listening skills and be a skilled researcher. Most entrepreneurs launching their own staffing company have at least four years of industry experience and understand what it takes to manage every aspect of a business. Human resources experience will also help set you apart from the competition.
Since each of these skills are important, individuals considering embarking on this business endeavor are encouraged to examine their skill set and identify any gaps. Experienced professionals should then be hired to ensure a well-rounded and strong agency.
What is the growth potential for a staffing company?
According to the American Staffing Association, staffing agencies hire approximately 16 million contract and temporary employees each year, bringing in over $126 billion in revenue. These numbers are expected to rise over the next few years, offering plenty of opportunities for startups to realize significant growth and profits.
What are some insider tips for jump starting a staffing company?
Industry leaders recommend focusing on servicing one specific industry at first. Tracking the latest trends and following industry-related news will give you a clear picture of what your clients are looking for in a candidate. Once you have a firm understanding of the nuances of that sector, you can start to service other industries.
Once you have filled a position, ask both parties for feedback. This will help you and your team understand which processes are working, where you are lacking, and which processes should be modified.
A recent CareerBuilder survey revealed that 73% of job candidates abandon a site if it isn’t mobile-friendly, and 57% of corporate leaders consider going elsewhere if a staffing firm’s site isn’t optimized for mobile. Don’t lose out on potential business — make sure your site builder creates a website that is optimized for all devices.
How and when to build a team
True leaders recognize that they are great at many things but not everything. Examine your strengths and weaknesses, and build a team that fills in any gaps. Since your business is built on the idea that you are adept at recruiting, carefully screen every team member you bring on. Remember, they represent your organization in everything they do.
Part 2 - Is a Staffing Company business the right fit for you?
Business Evaluation & Strategy Tool
We'll walk you through the four pillars every business needs: Points of Leverage, Marketing Strategy, Financial Model, and Personal Compatibility. At the end you'll see a personalized report and your action plan below will be tailored to your answers.
Step 1 of 4 — Points of Leverage
Every viable business has natural advantages. Below are common leverage points across four categories. Pick the ones that apply to your Staffing Company business. We've pre-suggested a few based on your idea — review and adjust.
Step 2 of 4 — Marketing Strategy
Without a way to connect with customers, even great businesses fail. Pick the channels you plan to use to reach your customers.
Step 3 of 4 — Financial Model
Enter your monthly baseline costs — the minimum overhead to keep the business running. Then we'll calculate how many sales per month you need to break even.
Step 4 of 4 — Personal Compatibility
A business that doesn't fit your life will fail no matter how good the numbers look. Tell us how this business fits you.
Your Staffing Company Evaluation Report
Complete the four pillars and your personalized summary will appear here.
Points of Leverage
Marketing Strategy
Financial Model
Personal Compatibility
Part 3 - Action plan to launch your Staffing Company business in 90 days
Nine concrete steps to take you from idea to open business, grouped into 30-day phases. Complete the planner above and we'll highlight what's most important for your situation.
First 30 days — Foundation
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Form your legal entity
An LLC keeps your personal assets separate from business debts and lawsuits — the most common reason small business owners choose this structure. Sole proprietorships and partnerships do not provide this protection.
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Get an EIN and register for taxes
Apply for your free Employer Identification Number through the IRS, then register for any state or local taxes that apply to your business (sales tax, franchise tax).
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Open a business bank account and credit card
A dedicated business account is required to maintain personal asset protection. Mixing personal and business finances ('piercing the corporate veil') can void your LLC's liability shield.
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Set up business accounting
Recording expenses and income from day one makes tax filing easier and lets you see when the business is actually profitable. Use software (QuickBooks, Wave) or a part-time bookkeeper.
Days 30–60 — Compliance & Risk
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Get permits and licenses
State and local requirements vary widely. Brick-and-mortar businesses typically need a Certificate of Occupancy; service businesses may need specific professional licensing; food businesses need health permits.
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Get business insurance
General Liability Insurance is the most common starting point. If you'll have employees, most states require Workers' Compensation. Specific industries need additional coverage (product liability, professional liability, etc.).
Days 60–90 — Launch
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Define your brand
Your brand is how customers perceive and remember you. A clear name, logo, and visual identity make every later marketing decision easier and protect you legally as you grow.
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Create your business website
Every legitimate business needs a website. Social media pages are not a substitute — you don't own the platform. Modern website builders mean you can launch a clean site in a weekend without a developer.
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Set up your business phone system
A dedicated business number keeps your personal life private, makes the business look legitimate, and lets you route calls professionally. Cloud phone services start under $20/month.