How to start a temporary staffing agency? [ONLY in 7 steps]

Thinking of starting your own temporary staffing agency? 

You’re in the right place! 

The whole idea of matching talent with opportunities and watching businesses grow is thrilling. 

But where would one even begin?

Don't worry—we've broken down the process into seven simple steps to guide you. 

From grasping the market to building healthy relationships with your clients, this blog will walk you through each step that makes achieving a successful vision much more straightforward. 

Let's get started!

Highlights

• Starting a temporary staffing agency requires clear market research, niche selection, and a solid business plan.
• Legal setup, compliance with labor laws, and proper licensing are essential to operate without risks.
• Building a reliable talent pool and strong client relationships drives long-term success.
• Scaling depends on efficient operations, the right technology, and continuous improvement.

What is a temporary staffing agency?

The agency handles everything, from finding and checking candidates to putting them in the right jobs. This makes the hiring process smoother, so companies can hit their staffing goals with less hassle. 

Opening up a staffing agency has many perks. The need for temporary services is constant and always in demand by companies. 

You can develop a network of qualified job-seekers, build good relationships with businesses, and focus on specific industries that interest you. 

If you like bringing people together and enjoy problem-solving, running a staffing agency can be rewarding and profitable.

7 simple steps to starting a staffing agency 

1. Understand the market

• Research industry trends:

The industry is always evolving, with shifts in demand, new technologies, and changing labor laws. If you keep an eye on the trends, you'll stay one step ahead.

• Identify your niche:

Whether in healthcare, IT, or warehouse staffing, the clearer the niche, the easier it becomes to market your services and stand out from the rest. 

Besides, clients appreciate experts who understand exactly what they need.

• Competitive analysis:

Which areas have they excelled at? In which ones are they falling short? Identifying those market loopholes should be the ace up your sleeve. 

Maybe there's a demand for temp workers in a sector that others haven't tapped into yet. Snatch such opportunities and turn them into yours.

2. Create a business plan

• Executive summary:

This is where you lay out your vision, mission, and the steps you will take to make your temp staffing agency a hit. 

You start with an executive summary, which quickly outlines your plan(opens in a new tab): your business goals, the services you will offer, and what sets you apart in the game. Using business plan examples(opens in a new tab) can make this process easier by organizing your ideas into a professional structure and ensuring you don’t miss any key details. 

Keep it basic and direct to the point so that someone can immediately get a good idea of your business.

• Financial projections:

Then, determine how you will price your services, estimating what to charge clients and what to pay for temporary help. Finally, try your hand at forecasting revenue in the first few years. 

This is your time to shine—prove how your agency will grow and generate income; be realistic yet optimistic.

• Marketing strategy:

First, you must establish your presence online, such as by having a website and being active on social media. But that's just the beginning. Networking is really important in this game. 

Go to industry events, reach out to potential clients on LinkedIn, and definitely get involved with local business groups. 

The idea is to ensure everyone knows and trusts your agency in the niche you picked.

3. Legal and compliance setup

• Business structure:

Opting for a Limited Liability Company (LLC) is often wise due to its ease of formation, personal asset protection, and significant benefits like tax deductions for LLC(opens in a new tab). Many new agency owners choose to register in states with lower fees and fewer administrative hurdles. Wyoming(opens in a new tab), for instance, is a popular option because it's both easy and affordable to set up an LLC there. You can also explore the various LLC filing fees by state to better understand the costs involved in setting up your business structure. For entrepreneurs in staffing, establishing an LLC(opens in a new tab) not only simplifies compliance but also gives the business a professional identity that clients and partners will trust.

But if you're looking to scale up and recruit investors, then a Corporation may do well. 

Each of these has advantages and disadvantages, so consider your long-term goals before choosing.

• Licenses and permits:

It will likely include a generic business license(opens in a new tab), employer identification number (EIN(opens in a new tab)), and industry-specific permits, where applicable. 

It is vital to investigate the requirements in your state or city because they vary.

• Compliance with labor laws:

Understand federal and state laws to keep yourself from legal hiccups. 

Continual compliance not only keeps you out of trouble but also builds up trust with clients and employees alike.

4. Building your talent pool

• Sourcing candidates:

Check the online job boards, social media, and niche sites where candidates are more likely to stay active. 

Oh, and don't forget referrals-get your current network working for you, too. Quite often, some of the best candidates can come through a personal recommendation.

• Screening and onboarding:

Develop a screening process that can zoom in on the right candidates with speed. 

Combine phone interviews, skill tests, and background checks to ensure they are the best fit. 

Once you have the right people, have an efficient onboarding process ready to slide them into their roles with ease and speed.

• Creating a talent database:

When you receive a last-minute call from a client, you can quickly create a list of qualified candidates and place them smoothly. Being organized really saves you time and keeps your clients happy.

5. Establish client relationships

• Targeting the right clients:

Do your homework to be able to speak on what they need, and pitch how your agency can take their staffing needs by the horns. 

Remember, it's not just about getting clients; it's about finding the right clients who would appreciate what you have to offer.

• Building trust:

When the clients know you understand their needs and top up with talent consistently, they keep coming back. 

It is not about filling positions; it is about being a reliable partner they can count on.

• Contract negotiation:

Be open about them, and do not hesitate to haggle until you find one that pleases both parties.

A well-negotiated contract means a smooth and long-lasting partnership.

6. Setting up operations

• Technology and tools:

Invest in some essential software like applicant tracking systems (ATS) to keep tabs on your talent pool and CRM tools to help you stay organized with client relationships.

Automating these tasks will give you more time to focus on growing your business.

One tool that stands out in the market is Recruit CRM, which was recently honored as the “Best Recruiting Software” by Tekpon, solidifying its place as a top choice for recruiters.

It’s an easy-to-use AI recruiting software combines the features of an ATS + CRM, making your hiring process a breeze.  

• Payroll and benefits:

Give your staff timely pay via dependable payroll software(opens in a new tab) like Gusto(opens in a new tab) or Zenefits(opens in a new tab) with the right deductions. 

Additionally, consider offering basic benefits, such as health coverage or paid time off. Even small advantages can make your agency appear more alluring to top talent.

• Performance tracking:

Set up a mechanism for measuring performance indicators, including customer satisfaction(opens in a new tab), candidate retention, and time-to-fill rates. 

Regularly obtain feedback from clients and temps alike to further fine-tune your processes and keep everyone happy.

7. Scaling your agency

• Expanding services:

For example, you can make temp-to-perm placements whereby clients try out temps and then hire them for good. 

Alternatively, you could investigate new industries where your staffing knowledge can be put to good use. More options will provide a better position in the market and more money.

• Franchising options:

Franchising allows others to copy what you have done in different places as you take over some of the profits. 

That's one way to scale your brand without bearing all the expansion costs yourself.

• Continuous improvement:

Regularly review your business practices to spot areas for improvement. 

Be that streamlining operations, enhancing client satisfaction, or fine-tuning your recruitment process, continuous improvement helps keep your agency competitive and positioned for growth.

Now that you have a step-by-step guide, it’s time to take the plunge and start your own temporary staffing agency. 

With thorough preparation and a clear market strategy, you'll be well-equipped to achieve lasting success.

Frequently asked questions

1. What are some common challenges in running a staffing agency?

Plus, keeping up with labor laws, managing payroll, and making sure clients are happy can be pretty tricky, too. 

Regularly updating your processes and staying in the loop about industry changes can really help tackle these challenges.

2. How much capital do I need to start a staffing agency?

In general, though, it's a good idea to plan on at least $50,000 to $100,000 in startup costs. 

These costs would cover office space, legal fees, payroll, and marketing campaigns. You can get a better idea if you have a more specific financial projection.

3. How do I guarantee the quality of the placed candidates? 

Have your screening methods upgraded periodically to meet the industry's latest developments and client requirements. 

In building relationships with candidates, they are also most likely to be open about their skills and career aspirations.

Blog summary

It then walks through creating a practical business plan that covers financial projections, marketing efforts, and growth goals, followed by setting up the appropriate legal structure and ensuring compliance with labor laws. 

The guide emphasizes building a strong talent pool through effective sourcing, screening, onboarding, and database management, while also focusing on establishing trust-based client relationships through consistent delivery and fair contracts. 

It further highlights the importance of setting up efficient operations using the right technology, payroll systems, and performance tracking. It concludes with ways to scale the agency through service expansion, franchising, and continuous process improvement.