How to Start a Temp Agency: A Step-by-Step Guide to Running Your Staffing Business

In markets such as hospitality or event organizing, demand for temporary staff is often high and constantly changes in terms of quality and quantity requirements. Searching for such employees can cost organizations a lot of time and money, not to mention the efforts of maintaining relationships with potential candidates. This has prompted organizations to outsource their recruiting activity to temporary recruitment agencies.

In the article below, we discuss what it takes to start a temp agency - along with the 7 steps necessary to sustainably growing your staffing business for long-term success.

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1. What is a temp agency?

A temporary (temp) recruitment agency is a business specialized in finding contract workers or temporary employees based on the clients' requirements. These organizations can help find the most suitable candidates in the shortest time, usually at a much lower cost.

As a temp recruiter, your day-to-day operations include creating job postings, screening resumes, connecting potential candidates with clients, and working closely with the clients to ensure their requirements are satisfied.

2. What do temp agencies offer?

If you harbor plans to start a staffing agency, knowing what your business brings to the table is the first thing you need to define. Here are some common benefits that temp agencies offer:

Less administration: Recruitment agencies help with sourcing, interviewing, and training potential candidates to reduce workloads and save time and money.
Flexibility: As long as clients' requirements are communicated clearly, recruitment agencies can assist them in finding the correct number of qualified candidates.
Expertise: Established temp agencies have experience and networks that enable them to thrive at recruiting top talent. They are more likely to identify the ideal staff than the client.

3. Should I start a temp agency?

Before starting a temp staffing agency, there are some factors that you need to take into consideration. Do you or your team have knowledge relating to human resources? It might seem obvious, but recruitment firms often overlook this point.

Another prerequisite for starting a staffing agency is mastering dealing with recruitment issues, such as finding and screening candidates, interviewing, and working with tax affairs. And alongside the headhunter team, your sales team is also at the core of your business. It's their job to find and attract potential clients who use your temporary staffing services.

4. How do I make money as a staffing agency?

There are plenty of ways to make a profit from temporary staffing services. The most popular practice is to charge your client a fee based on the salary of the employee, usually 10 to 30% of their starting annual salary.

Other organizations take hourly rates and pay the employees from that amount. For example, if a recruitment agency takes $10 an hour, they’ll pay the temporary worker $8, with $2 assigned to operations and profit. There may be other additional fees to charge your client if needed.

In addition to providing temporary staffing services, recruitment agencies can also offer consulting services related to personnel and training processes. This type of service can be charged with a fixed fee or hourly rate. You can choose the most suitable and profitable method depending on your business.

5. What are the requirements to open a staffing agency?

Starting a staffing agency? Make sure you go through this checklist before implementing your plan:

Long term and short term goals: The clearer the goals, the better the execution of your plan.
The team: Determine the personnel and personalities you need to make things work.
Build your business plan: Take the time to nail the details and stick to it.
Potential clients: Don’t wait until the last minute. Establishing relationships as soon as possible is a smart move.
Candidate pools: How can a staffing agency operate without a talent pool? Know where your candidates are and build strong connections with them.

6. Seven steps to starting & growing a temp agency

6.1 Research your target market

The first step in starting a staffing agency is to study the target market. You need to look for information about your potential clients and available candidate pools that can meet your clients' needs.

The type of target clients and their fields depends on your geographical location and specialty. If you are familiar with finding and training event personnel, you might want to start from there first.

On the other hand, you might also want to look at other agency models. Learn what they offer and what they don't. Check how they treat their clients and if there is any cultural aspect involved.

6.2 Who's on your team?

Team building is at the heart of any business's operations. For a temp recruiting agency, you'll need to develop two core teams: recruitment and sales. These two groups must collaborate closely to establish connections between clients and potential prospects.

On top of that, you'll also need to get counsel to handle your legal questions.

6.3 Develop a business plan

Your business plan reflects your approach to entering the market - and how your organization operates in the future. Making the right business plan can increase your chances of success.

Here are some things that should be included in your business plan:

Your business name: Finding a name that is easy to recognize and fully expresses your organization's spirit is not an easy task. Your name must show who you are and what you can offer.
Your market niche: Based on your expertise, determine the target market from which you can draw the most profit. Those usually are markets with high demand but a shortage in supply.
An effective marketing plan: You need to find potential customers before launching your business and think about how to market your services to them.
Financial strategy: Any organization needs to have a realistic financial plan six months before actual operation. It would help if you predicted how many clients you could find at the early stage of your business and build a backup plan to keep your business going if things do not go as planned.
Your goal for the first month: Goal-making is an essential part of business planning. However, many businesses' goals are too broad and ambiguous. A good practice is to divide your goals into smaller milestones and set more specific KPIs to keep track of and manage business activity easier.

6.4 Register your business

Depending on your model, there are a variety of legal business entities to choose from when it comes to registering a business, including limited liability, sole proprietorships, and trusts.

Once you have the most suitable option, the next step is trademarking, which protects your brand's name. It can also help your business stand out from competitors and increase trust among clients.

6.5 Plan ahead for your finances

Before the launch, several financial components must be planned for smoother operation:

Banking and credit for businesses: Consider opening a bank account purely for your business transactions and making reporting more straightforward.
Accounting: Pay close attention to all of your business transactions. Consider having accounting personnel help you with this. This is essential in tracking your business performance and filing taxes easier.
Payroll: Staff payment requires accurate working records and tax compliance.

6.6 Forming a client network

Establishing a client profile is a vital task for a temp recruitment agency. Since your organization is new to the market, build a website that shows your abilities and distinct features.

You can also find potential clients through advertisements, email marketing, social media, and professional networks. Once you are familiar with the market, consider forming your own network, which is easier to manage and maintain over time.

6.7 Where to find candidates

Finding sources of temporary workers is a critical task to complete before starting a temp agency. Channels to consider include, but are not limited to: recruiting networks (e.g: LinkedIn), social media, referrals, personal networks, etc.

Establishing a candidate database is just the first step. You also need to build and maintain close relationships with them, so that there are always a few high-quality profiles ready when a client contacts you.

7. How much does it cost to start a temp agency?

Your scope and specialty might be varied, but these are fundamental cost breakdowns that every temp recruitment agency needs to know:

Offices: You’ll need a physical office for your temp recruitment team. Remote working might be an option, but you’ll need to observe and evaluate your personnel's performance most of the time. Moreover, sometimes your clients will want to have an offline meeting to discuss requirements and deliverables carefully. Consider another amount for office facilities.
Recruitment automation: Purchasing recruiting software can assist your business in many ways. You can use temporary staffing software to find, source, and interview potential candidates in a much shorter time - as well as to handle monthly reports, payrolls, and billing.
Temporary staff wages: This expense depends on your business model. If you receive money from clients to pay the employees, you also need to consider this. If your job is to introduce potential candidates to clients, you don’t have to worry about this.
Salary for employees: This is an ongoing expense and needs to be counted.
Advertising: You’ll need to invest a lot in advertising to market your service to potential customers at the early stage of your business. Once the business operation is stable, you can reduce these costs and keep them at a stable level.

8. Transform your staffing business with Vincere’s recruitment agency software

Given the current recruitment landscape, digitization is a key consideration factor when starting a temp agency. With the assistance of technology, your recruitment process can be much more efficient.

Vincere’s recruitment agency software offers many features that can meet your needs:

Applicant Sourcing & Interviews: You’ll need to contact and evaluate your candidates effectively at the setup phase. These two features make it easier for temporary recruiters to complete the task.
Pre-built Analytics and Custom Dashboards: Your business needs to communicate with clients closely and clearly to stand out from competitors. Our recruitment dashboard helps you inform your clients about the latest performance with custom working boards that are familiar to them and more convenient for receiving feedback from clients.
TimeTemp: Vincere can keep track of employee clock-ins and produce invoices automatically for you to send to other departments.

If you're ready to explore Vincere's features, you can request a demo now.

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