Starting a staffing firm may be relatively simple, but keeping one going is anything but. According to Forbes, 8 out of 10 entrepreneurs who start a business fail within the first 18 months. Competition is fierce within the staffing industry, and your competitors are always ready to pounce at a sign of weakness.
If you are one of the 20% who made it through the first 18 months, congratulations. As a supplier to the staffing industry for the past two decades, we at Advance Partners® have been uniquely positioned to see many startups succeed. We have noticed many qualities that these firm share, and based on that we are offering practical tips to help you turn your growing startup into a bona fide success.
Build your leadership pipeline
Strong leadership is an extremely important quality that successful staffing firms share. But to build on success and replicate it across franchises, it’s not enough to rely on the strength of personality of one figure – especially if that figure is you! Firms that have successfully crossed the second office barrier and beyond typically have a trusted key right hand person or team. That key person does not necessarily have to run the office, instead it could be someone who handles sales, HR, or any other aspect of the business. If you can identify your #2 person, you can start to divide and conquer.Opening a second location is not just about scaling business, it is also about scaling culture. To that end, if you are entering a new city and market, instead of finding a new person to fit that role and going in cold, consider either developing that position within your company or having a new person work in the original office to learn the company culture.
SECURE ENOUGH WORKING CAPITAL
You know what they say – it takes money to make money. Although staffing can be a low overhead business to enter, you still have significant and immediate cash flow needs once you have staff to pay. Making payroll for your contingent workers is a weekly responsibility, while customers can take anywhere from 30-90 days to pay you for services rendered. This creates a cash flow gap, and a lack of cash flow can stunt your growth.
In growth mode, you do not want to say “no” to good opportunities because you are under-capitalized. Luckily, there are many options when it comes to securing working capital, each with pros and cons. Bank financing is one option, and it is an attractive option because the rates are typically low. On the con side, strict credit limits and additional scrutiny apply. One form of working capital financing is where you sell your outstanding invoices to a third party for immediate cash. While the rates are higher than a bank, the application process is less rigid and depends on the creditworthiness of your customers rather than your personal score. The working capital you receive is based on your sales, so you will never run in to credit limits.
INVEST IN PEOPLE
Your staffing business is not your brick and mortar location. Your business is your people, both internal staff and the ones you send out on assignment. Having the right amount of staff is critical to growing your business, and it can be a tricky balance to maintain. You need enough employees to grow, but starting out, it can be hard to justify any positions other than the ones directly bringing business in. That means that back office tasks like payroll, bookkeeping and marketing are left in your hands, or outsourced at a cost.
Investing in your people is one of the smartest things you can do as a business owner. Get great internal people in the door, and create a working environment so good that they wouldn’t want to work anywhere else. With such high competition in the industry, it is important to recognize and reward your star recruiters.
Your temporary workers are also your employees, and you need to treat them accordingly. Hiring great people is more than just finding the right education or experience. It is a combination of personality, attitude, willingness to learn, and so much more. Your temporary workers reflect your business to your client companies, so treat them with respect. In the age of the internet, even one negative interaction or experience can hurt your business. Plus, your largest applicant source will most likely always be candidate referrals. If people do not like the way they’ve been treated, they won’t send friends and family your way.
KEEP YOUR EYES ON THE PRIZE
At the end of the day, staffing firm growth is a conscious choice that requires buy in from your whole team. You will likely experience growing pains. We understand this well, as Advance Partners started as an entrepreneurial venture with a few dedicated people and has grown to a 160+ employee company owned by Fortune 1000 payroll and HR services company Paychex®, Inc. Here are some lessons we learned along the way:
- Be forward thinking. When it seems like you’ve got more job orders than qualified candidates to fill them, you might become complacent on the sales side. But things can change quickly in this industry, so it’s important to always be chasing that next new account.
- Find your niche. Focus on what your firm does best. There are many opportunities in fast growing fields like IT or healthcare staffing. Even if you are a general staffing company, you can still focus on an aspect of your business like customer service.
- Keep networking. Sometimes it is who you know rather than what you know. Build your personal network early, and never stop. The network you build will likely open doors to your company’s growth and development. Staffing Industry Analysts (SIA) and the American Staffing Association (ASA) are also two staffing organizations that can help you meet people in the industry.
These are just a few tips to help your staffing firm take it to the next level. If you have any questions about how to grow your staffing firm, contact us by filling out the form below. We have helped many startups grow to successful firms. Start the conversation today to see how we can help you as well.