Why Start A Staffing Agency Today? Short Answer…
Staffing is a business those idea has been tried and proven many time over the last 30 years. The business is a service provider that enables business to cut down on the time it takes them to build a qualified pipeline of employee and contract candidates. The value added of such a staffing agency is that it reduces the cost for the company to acquire new labor by eliminating sourcing costs, benefits and on boarding procedures, and the need to hire costly internal recruiters. The model also allows client companies to tap into pools of labor that would otherwise be off limits to them.
The staffing models work on two main premises contingency and retained. Contingency is often used for contract and perm recruiting of low to senior level employees while retained search is often used for C level employees. Contingency assumes that the agency will search for the candidate and produce a hirable employee before any payment is made. This is attractive to the company because it loses nothing if the search is not successful but maximizes its own chances of seeing a good candidate. Retained search requires a company to take a certain percentage of the fee upfront.
The scope of this company will be to search for low to high level employees on a contingency basis. This is the model employed by many staffing agencies and is risk free to the client which eliminates certain barriers to entry.
A contingency based staffing company makes money by charging its clients fees for producing successful candidates. For permanent placement the agency charges a percentage of the salary, usually 20-25% of the final negotiated salary. If placing contractors, the client agrees to pay a certain amount per hour for the contractor and the agency takes the difference between the contractors’ hourly rate and the amount the client agrees to pay.
The market environment at the beginning of 2010 is perfect for the establishment of a staffing agency for several reasons:
- Many small staffing companies and a large number of recruiters, anecdotally nearly 50% have left the business during the previous two years. Those companies that survived had to make large cuts in staff and consolidate resources to stay viable. Those that did not lost money or closed
- Information Technology is one of the largest growth sectors that will make it the avant-garde of the recovery. Everyone needs IT without which business cannot grow.
- The Recovery will come in the next 6 to 18 months. We have already seen a technical recovery in the growth of the GDP. Staffing companies have begun to hire recruiters and sales people to take advantage of the opportunities that will open in the next 6 to 18 months.
- Right now is the best time to start because the new agency can begin to build a foundation of client contacts and be in position to exploit these contacts when companies begin to grow.
- The start-up costs and cash flow requirements to keep a small staffing operation going are extremely low. Back office functions such as accounting, pay roll, and employer of record are outsourced and staffing and recruiting functions are given priority and all effort goes to developing new and existing client relationships.
The staffing company will target clients who are least likely to be able to staff operations efficiently on their own. This means that company’s between $5 and $100 million dollars including startup that can explode into lucrative accounts and established companies that have unpredictable IT development needs and may need to augment their staff with contract or permanent employees. Client companies will be dynamic companies that are seeking to take advantage of efficiency brought by an experienced staffing company.
Right now is a unique opportunity to get into the $100 billion dollar recruiting market. Having the right tools in the right hands can mean the difference between a lucrative fall out and a missed opportunity. Given the right tools this agency will deliver a success full outcome through tenacity, experience, and passion.
