What is a Temp Agency?

Temporary staffing agencies, or temp agencies, recruit individuals for their clients’ work opportunities. A staffing service recruits for temporary employment (temp workers), direct hire, and temp-to-fill time. A staffing business has rapid growth potential when appropriately managed. There are many different parts to operating a staffing firm, and it’s important to cover them all to be profitable.

How to start a temporary staffing agency

1. Evaluate Your Skills

To be successful in the staffing industry, an agency requires you to find clients, find employees, match clients with employees, and manage the agency. A business owner must complete these skills themself or hire a professional for the small business to succeed.

2. Find Your Target Market

Once you’ve determined your skill sets, you need to find the right industry. It’s a good idea to examine different markets and see where your company can find success. Each industry’s supply and demand will differ, so it’s important to start a temp agency in the industry you understand the most.

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, the agency grows from there.

The best clients are those that are regularly hiring employees. Target potential clients that might not keep up with the hiring process themselves, whose business fluctuates daily and need temp workers on short notice, or ones that need a third-party opinion in hiring decisions.

3. Calculate Your Costs

When determining your business plan, you need to make sure you account for the financial costs involved in starting a temp agency. The two types of costs involved when starting a temp staffing company include:

  • Establishment Costs
  • Operation Costs

Establishment Costs

Establishment costs include one-time fixed costs to start a staffing agency. These costs include:

  • Setup costs for forming the business entity and contracts
  • Office automation – computers, printers, etc.
  • Software – payroll and HR software, account, training, job searches, job applications, etc.
  • Office space
  • Business insurance

Operational Costs

The next setup costs are your operations costs. If you target a higher-skilled market, your startup costs will be higher 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. Those costs include:

  • Clients
  • Advertising costs
  • The first month of salaries

It’s important to note that you need to pay your temp workers weekly or bi-weekly, but your clients will pay you monthly or bi-monthly. The delay in payment will interrupt your cash flow if you don’t plan properly. A common and very beneficial way of making sure you compensate your workers on time and your business doesn’t suffer is working with a payroll factoring company.

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

4. Find clients and employees

You won’t need many employees at first, but as your agency grows, you’ll need more help. Ensure that you have enough workforce to run smooth operations make placements and stay on top of payroll.

Finding clients to work with is extremely important to your success. You need to show them why your staffing company stands out from the others and why they should work with you. Develop creative ways and offer competitive value when targeting potential clients.

5. Form a Legal Entity

It is important to establish your new temp agency as a legal entity to protect you in the case where your company is sued. The most common types of business entities include:

  • Sole Proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation

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

Do you 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 stay on top of payroll, and grow your staffing agency, fill out this form and get a free consultation.