The Complete Guide to Starting Your Own Staffing Agency

The staffing industry has been growing steadily for years, and most agency owners expect this growth pattern to continue. In this promising climate, starting your own staffing agency may seem like a prime opportunity.

Any new business venture can also be an enormous challenge. Around 50 percent of new businesses don’t reach their fifth anniversary. The path to entrepreneurial success in almost any industry is an uphill one, and the staffing industry is no exception to the rule.

The fact of the matter is starting and growing a staffing agency isn’t easy. Without the proper help and an understanding of the challenges startups face, many new staffing businesses fail. New startup owners often overlook the amount of work and planning that goes into breaking into the industry and the expertise they need to run operations behind the scenes. For a startup to be successful, owners need to understand their strengths and where they need assistance.

Download the PDF

$13.4 billion: Revenues generated by the Canadian staffing industry in 2016.

(Statistics Canada)

The staffing industry has been growing steadily by 3% each year.

(Staffing Industry Analysts)

50% of new businesses fail within 5 years.

(Fundera)

1. Why Get Started in the Staffing Industry?

why-get-startedBefore you decide to start a new staffing agency, you should take a look at the health of the industry. This will answer the question of whether now is a good time to get involved.

The industry outlook for staffing firms in Canada has been good for the past few years. Business owners have experienced approximately three percent growth, a trend that’s expected to continue. Overall, the staffing industry generated $13.4 billion in 2016, the latest year data is available. 

Trends in the Canadian Staffing Industry

Revenue information doesn’t tell the whole story of the Canadian staffing industry. While it’s clear the industry contributes significantly to the Canadian economy, those looking to start their own agencies are likely interested in more granular information.

This kind of information can help you determine how your new staffing agency may fit into the picture. Canadian trends may not span the entire country, with different provinces and even regions having different experiences. You might want to use this information to determine where to locate your agency, which services to offer, and even what to expect in terms of revenue.

The staffing industry is concentrated in three provinces.

Uneven Growth across Provinces: According to Statistics Canada, the staffing industry is concentrated in three provinces. Ontario has the largest share, accounting for nearly 60 percent of revenue, while Quebec and Alberta represented approximately 13 and 16 percent, respectively.

The growth story varies among provinces. Firms located in Quebec and Ontario both saw growth, with the average for each province hovering around six percent. For Alberta, the story was a decline of nearly 20 percent across all firms operating there.

Declining Profit Margins: According to Statistics Canada, the general operating profit margin of staffing firms decreased slightly to 3.6 percent. This was in spite of a slight decrease in operational expenses.

In 2018, provinces like Alberta and Ontario introduced new minimum wages, which increase operational costs. Other provinces introduced other legislation, which could squeeze staffing industry margins even more.

Contract staffing services and permanent placements … now make up just over 40 percent of total sales.

Contract Staffing Services Gaining on Temporary Staffing: The Statistics Canada report also found that contract staffing services and permanent placements have been increasing. They now make up just over 40 percent of total sales. Temporary staffing is still in the lead at just over 50 percent of revenue, but it’s clear staffing agency clients are demanding a wider variety of services.

A 50/50 Split: The experts at ACSESS estimated that the split between types of workers in 2015 was around 50/50, meaning there were equal numbers of blue-collar workers and white-collar workers. Strong growth in the manufacturing sector over the last few years has led to a talent shortage, which has increased the need for industrial workers.

Professional worker segments have also been plagued by shortages. The IT industry, for example, is set to see a shortage of 220,000 workers by 2020. Temporary employment, contract staffing, and even permanent staffing services for this type of professional may be more in demand over the next few years.

Where Is the Industry Going from Here?

It’s important to note the trends in the Canadian staffing industry over the last few years because it offers a better idea of where the industry as a whole is going in the future. Right now, the staffing industry is projected to continue to see steady growth.

The Thriving Gig Economy: One of the biggest factors in staffing industry growth is the growing gig economy. Both workers and employers are looking at more flexible working arrangements to better suit their needs.

The Bank of Montreal released a report indicating more than 2 million Canadians now take part in some sort of temporary work. This number has grown steadily since 2008, and it should continue to climb. Professional workers, such as IT professionals, are likely to work as contractors, opening up opportunities for staffing agencies specializing in this area.

More than 2 million Canadians now take part in some sort of temporary work.

Responding to Operational Pressures: Many provinces in Canada have been attempting to adjust to the rise of the gig economy and the new world of work with reformed labour laws. Ontario and Alberta, for instance, both made changes to their minimum wages. Quebec introduced several key changes to its labour law with Bill 176.

Many of these changes put increasing pressure on staffing agencies large and small. It will be more important than ever for agency owners to respond to legislative changes in ways that ensure the firm’s profitability. Higher minimum wages and more paid personal leave will raise expenses.

Increasing Competition: The move towards temporary workforces, along with the steady growth the staffing industry has seen over the last few years, has opened the gates of opportunity for aspiring staffing agency owners like yourself.

Of course, you’re not the only person who’s thought to open a staffing agency in the last few years. The market is becoming increasingly crowded as more firms aim to get a slice of the action. New staffing firms will need to compete with more established agencies, international enterprises, and even other new firms.

Opportunity Beyond the Centre: It shouldn’t be a surprise that Ontario, Quebec, Alberta, and BC lead Canada in terms of the volume of staffing industry revenue generated. Toronto, Vancouver, and Montreal are Canada’s largest job markets. Alberta’s oil and gas sector accounts for its large share of staffing industry revenue.

Staffing agency owners are looking beyond these centres, however, at other major areas of growth in the country. A great example might be Moncton, New Brunswick, which experienced the highest job growth rate in the country in 2017. Although these emerging markets may be smaller, they’re also less competitive and underserved.

The numbers paint a portrait of an industry undergoing change, but one that can still be counted on to produce solid economic results, while underserved yet growing job markets present unique opportunities.

Everything You Need to Know about Starting a Successful Staffing Firm

2. A Day in the Life of a Staffing Agency Owner

a-day-in-the-lifeYou’ve now reviewed the state of the Canadian staffing industry, and you’re convinced this is the right time to start your own staffing agency. Before you dive in, you should take stock of your own commitment to the job.

Running a staffing agency is full of challenges, and the demands faced by a startup staffing agency owner are many. Here’s what a typical day in the life of an agency owner might look like for you.

Reviewing Expenditures and Paying Bills

A staffing firm in its first year often doesn’t have the budget to hire a team of accountants, which means these tasks will likely end up on your desk. You’ll be responsible for reviewing the business’s expenses and making sure the bills get paid.

You may also be involved in bookkeeping, which dovetails with the accounts payable process. Finally, you’ll want to keep a close eye on budgets, reviewing expenses against what was earmarked for them.

Signing Service Agreements and Making Purchases

As the owner, you’ll also be in charge of making purchases for the firm. This includes equipment, such as computers or printers. You’ll also be involved in the purchase of any benefits and insurance provided to your staff and the software you’ll use in your firm.

You’ll also oversee the request-for-quote process, as well as review and sign service agreements with vendors and providers.

Making Marketing Decisions

If you’re getting the impression that staffing agency owners wear many hats, you’re right. You might act as the head of HR, the chief intelligence officer, and the payroll administrator for your business.

You might also be the VP of marketing for your new agency. Whether your team works in house or you outsource the service, you’ll likely need to sign off on final marketing decisions. After all, you want to be sure anyone working on your latest ad campaign is actively reflecting your business brand and identity.

It’s very easy to spend a marketing budget ineffectively.

Another reason you might want to make the marketing decisions is that it’s very easy to spend a marketing budget ineffectively. Since there’s a financial component, you’ll want to keep an eye on it.

Compliance and Policy Implementation

Keeping track of new legislation affecting your firm and revising your policies to reflect it is a full-time job. As the business owner, it’s your responsibility to ensure everything that happens in your business is in line with the letter of the law.

You’ll likely be involved in the initial drafting of policies for your new staffing firm. As new legislation is introduced, you’ll need to review those policies and revise them.

Business owners often obtain legal advice through a third-party vendor when it comes to monitoring their compliance with new regulations.

Networking with New Clients

Another major responsibility for staffing agency owners is networking. You’ll want to build a robust network of loyal, repeat customers and potential new clients. While marketing efforts can help with this, a business that’s just starting out will need to be connected to the right people.

During the first year of operations, you’ll likely be the central hub through which new clients discover the business. Your networking efforts will be key.

Hiring New Employees

Finally, you’ll also be involved in at least some of the hiring decisions for your new staffing agency. You may not be involved in interviewing or hiring every candidate you place, but you will most definitely be involved in any internal hiring you need to do.

If that seems like a lot of responsibility, it’s because it is. Starting a new staffing agency is not a task for those who are looking for an easy way to make money. It requires careful thought, attention to detail, and effective decision making to succeed in this industry.

Starting a Staffing Agency

3. 5 Crucial Details to Tackle Before Launching a Startup Agency

5-crucial-detailsNow you understand the task you’re taking on. Rather than feeling nervous, you’re energized. You’re ready to take on the challenge of launching your startup agency.

Before you get your new agency off the ground, however, there are a few key details you should attend to. Strategizing about these aspects of your startup in a business plan before you open your doors will help you get started on the right foot.

1. Find Your Specialty

The staffing industry is growing, and as a result, the marketplace has become more crowded. There are many different firms looking to get a slice of the industry pie.

There are also many different employers out there, all of them with unique needs. There are a number of different services you could choose to offer to these clients. You might decide to specialize in contract staffing services, since this area has been growing. If you’re familiar with a particular industry, you might choose to offer a wider variety of services to employers within this sector.

In short, you’re going to find your specialty. What are you good at, and how do you turn that into a marketable service for your clients? Selecting a specialty now can help you direct the firm’s marketing strategy, budgeting, and even your growth efforts in the coming years.

2. Figure out Financing

How are you going to pay the bills in your startup staffing agency? Finances are one of the most challenging aspects of a staffing firm at any stage of its life.

Operating expenses are mostly devoted to the payment of payroll and labour costs, including the price of subcontracting and other types of employment. Liquidity is incredibly important in this environment, since you may need to pay the job candidates you place, vendors who deliver services, and other expenses on a regular basis, even if your clients haven’t paid you for your services yet.

There are many different financing options available to startup staffing agencies. Having some liquid funds before you begin operations will help you remain solvent through the first few months of operations. Keep in mind that a bank loan isn’t necessarily your only or best option. Consider payroll funding instead to ensure you can always meet your financial obligations.

3. Develop a Marketing Strategy

You need to get the word out about your startup staffing agency. How will you build buzz and find prospective new clients and candidates?

It all comes down to your marketing strategy. At this stage, you’ll want to look at high-level considerations. Answer questions about your audience and what they’re looking for. Think about your brand. What do you do differently, and why should clients partner with you over your competition? In short, ask yourself what message you want to put out there about your business.

Ask yourself what message you want to put out there about your business.

Once you’ve answered these questions, you can begin to look at the fundamentals of marketing. Which channels will you use to broadcast your message? How will you reach potential clients and candidates?

These sorts of decisions can be left to campaign development, but an overall strategy will guide your branding and your message.

4. Consider Your Pricing Structure

The counterpart to financing is pricing. You need funding to start your operations, but you’ll also need to be paid for your services. Your pricing structure can make or break your new staffing firm.

Selecting the right pricing structure is crucial for a few reasons. Price yourself too high, and it will be difficult to find clients who will want to work with you. Set your prices too low, however, and you may ward off clients who think you can’t provide the level of service they need.

5. Learn the Regulations

Staffing agency owners need to be keenly aware of the different legal requirements surrounding the staffing industry. The rules around temporary work, employment contracts, and even how to hire are different among provinces.

Many of these regulations are also under review by provincial and territorial governments. The result is a changing regulatory environment for staffing firms. As governments do more to protect workers, staffing agencies will need to change policies to ensure they’re acting in line with the law.

For a new agency owner, it’s important to become familiar with the regulations. Check out news stories about new labour legislation introduced in your provincial parliament. Visit the websites of law offices to get expert insight into what these new laws and updated rules could mean for your new firm.

Doing this will help you build better policies right from the get-go.

Why should you look after these details before you put your agency plans into action? In a way, they form the foundation of your agency. Your marketing builds your brand, which gives you a vision for the company and its future. Setting up policies in line with the law will help you avoid penalties. In short, they help you run your business more effectively from the very beginning, enabling you to avoid common challenges and pitfalls.

how-a-complete-back-end-solution-helped-a-staffing-agency-get-started

4. 6 Challenges Your Startup Agency Will Face in Its First Year

No business is without its challenges. In fact, if there were no challenges, then more startup businesses would survive their first year. The five-year mark wouldn’t see such a high rate of failure.

Statistically, about 20 percent of business failures happen in the first year.

The first year is often the most challenging for businesses. Statistically, about 20 percent of business failures happen in the first year.

Knowing the challenges that lie ahead for your startup agency will help you prepare to face them. Here are a few of the most common challenges facing staffing agencies during the first 12 months of operations.

1. Finding New Clients

You made the decision to leave your job at another staffing firm. You wrote a business plan, and you secured financing. You sent out emails to all of your contacts and updated your LinkedIn. Some of your colleagues and client contacts expressed interest in working with you.

Once you finally open your doors, you may find you have relatively little business. The first and often largest struggle for any new staffing firm is finding a sufficient number of clients. A few people will follow you from your network outreach, but it often won’t be enough.6-challenges

You need to drum up new clients, especially if you want to sustain growth for your company. New staffing agency owners know this, but they often feel at a loss about how to do it.

Consider some of the following techniques.

  • Network, network, network: It isn’t enough to send one email or post one LinkedIn update. You must be networking constantly to find new clients.
  • Make sure you’re marketing: Did you build a marketing strategy before you opened your doors? Marketing is how you get the word out to new clients.
  • Don’t be afraid to ask: Talk to colleagues, friends, and mutual contacts. Ask current clients to make referrals.
  • Team up: Look for partnership opportunities. Is there a business in your local area that offers a complementary service? Talk to them and see if you can form a package deal for clients.

These are just some ideas to get you started. Finding new clients is an ongoing challenge, and there are many creative ways to do it.

2. Neglecting Sales and Marketing

You created a marketing strategy before you declared yourself open for business. You also indicated marketing is one of the most important strategic factors to finding new clients and growing the business.

So why aren’t you putting the marketing plan in place? Sales are equally important. If you don’t follow up with prospective clients, you probably won’t win them over.

For many startup staffing agencies, sales and marketing go by the wayside during the first year. You may be too busy to keep up with social media marketing. Another common problem is budgeting. Around 30 percent of marketing professionals report they have difficulty securing the funds they need to run effective campaigns.

Sales and marketing are key to growing your business. Without them, new clients will never learn about your business, and you won’t close deals. Put some money and time into these two aspects of the business and watch your startup grow.

3. Your Processes Aren’t Clear

In a busy and short-staffed first-year staffing agency, you might think process isn’t quite so important. It doesn’t matter how a task is completed, so long as it is completed.

You don’t just want the task done, you want it done right.

This can cause huge headaches later on. If everyone manages accounting or payroll differently, for example, you’re going to have trouble reconciling the books later on. If you aren’t clear on how to conduct an interview, you may find yourself being investigated by a human rights tribunal or facing a lawsuit. The Canadian Human Rights Commission receives more than 1,000 complaints annually.

Clear-cut processes help all employees perform their jobs more efficiently. If you haven’t done so already, sit down and hammer out your processes for payroll, accounting, hiring, interviewing, and more. Create written documents so everyone can refer to them.

You don’t just want the task done, you want it done right.

4. Time Management

First-year staffing firms can be very busy, especially as they start to grow. You may be responsible for many different tasks. Even a manageable workload can quickly become out of hand as you add more clients to your roster.

Time management is everything, and it’s also one of the biggest challenges you’ll face in your business.

Learning to manage your time well in your first year will support you as your business continues to grow. It’s likely to be one of those challenges that come up again and again through the years, so plan to master the skill now.

Set yourself time limits for every task, but be sure to take breaks. Keep track of how much time you spend on a job. Always look for ways you can be more efficient. Finally, don’t be afraid to admit you need help. Help could be a new employee, a vendor, or even a new piece of technology.

5. Scaling up as the Business Grows

When you’re starting your own staffing agency, growth isn’t typically the first thing that comes to mind as a challenge. After all, you’re often just getting your operations off the ground.

Successful staffing firms do grow, even in their first year. Many business owners expect to exceed 10 percent annual growth in their first few years of operation. One of the smartest things you can do is to plan for it.

Put a plan in place to manage growth through your first year and beyond. Set benchmarks and targets. How many clients do you want to have by six months of operation? How many should you have at the end of the first year?

Think about revenue and how you manage continued growth into Year Two and beyond. As mentioned, successful firms often grow exponentially in their first year. Managing growth properly now and planning ahead can help prevent the “growing pains” associated with scaling up your operations later on.

6. Not Having Proper Administrative Support

Many of these challenges have their root cause in another challenge. Most startup staffing agencies don’t have the right administrative support for their operations.

In many cases, a first-year staffing firm has only a handful of employees to take care of everything. It may be you and two or three other people. You may even be the only employee for a little while.

This means you’re responsible for every aspect of the business. Ask yourself: How much experience do you have administering payroll? How familiar are you with employment legislation in your province? Do you have any experience in marketing?

Chances are you and any employees you have will quickly find you’re out of your depth in at least a few areas. Payroll might take up a huge amount of your week, and even then, it’s still administered incorrectly. You’ll then end up paying fines to the Canada Revenue Agency.

Having the right administrative support can help you tackle almost all of these challenges.

Top 10 Things You Need to Know When Starting a Temp Staffing Agency

5. How to Compete with the Top Staffing Agencies

You know you’re not entering an empty landscape. Many of your clients will have worked with different staffing agencies, and they have many different options to turn to.

Even in underserved markets, you may find there’s still a good level of competition. Some staffing agencies operate countrywide and have already earned their reputations. Local operations in smaller markets may be trusted by local employers. A new entrant to the market may be met with disinterest or even distrust.

How can a small, first-year operation possibly hope to compete?

No matter where you open up shop in Canada, you’ll be entering into competition with the top staffing agencies in the country. The question you have now is how can a small, first-year operation possibly hope to compete?

These tips and ideas can help put you on more solid ground as you go toe-to-toe with these firms. Smaller businesses often have many advantages over their larger counterparts. You just need to know how to leverage those advantages correctly.

Focus on Customer Service

One of the best reasons to work with a smaller business in any industry is the level of service. In most cases, small businesses simply offer better, more personal service to their clients. This often comes from the size of the business. There may be fewer accounts to manage, or there may be more flexibility in building custom solutions.

Many of the top agencies in Canada have good customer service, so you might find it difficult to compete. Strive to offer great customer service. Think about how you can go above and beyond for every client.how-to-compete-wth-the-top-staffing-agencies

Find Your Niche

You’ve already read about specialization above. Here’s another reason to discover your niche early on in your staffing agency startup journey: It can help you compete more effectively against top agencies.

Many of the large agencies in Canada tend to be generalists. They can fill jobs in IT, but they may not know the ins and outs of the industry like you do. This plays to your advantage as you offer your customers more personalized services and greater expertise.

Tempt Clients with More Value

As discussed, your pricing structure can make or break your new staffing agency. Price yourself too low and you can’t turn a profit. Set your fees too high and you’ll price yourself out of the market. Finding a sweet spot can be difficult.

Build your services around value.

If your competition is high priced, see if you can find a way to create more affordable packages for your clients. If your competition wins accounts based on legendarily low pricing, don’t try to outprice them. Instead, build your services around value. Tell your customers what you offer for this price, and how much more it will give them versus what your competition can.

Since your firm is smaller, you can often afford to be more flexible with your pricing structure. Winning an account means adding to revenue and growing the business.

Get Clever with Marketing

Make your new agency stand out from your competition with a clever branding campaign. If your competition is a bland, large agency, try to communicate your business’s personality instead.

One of the best things you can do is be personable and authentic. Connect with clients on social media sites. Don’t send them messages clearly fishing for business. Instead, genuinely ask them about their business and their challenges. Respond to their questions, and don’t be afraid to send a friendly message just to say hi.

Make Clients Central to the Brand

As you wonder how to compete with top-rated agencies, don’t neglect the clients you already have. Remember to show your appreciation of their business. In turn, they might just become some of your best brand ambassadors.

Ask clients to refer you to other businesses, or ask them to leave you a review. In short, make your clients central to building your reputation. You’re a new agency. You don’t have a reputation to live up to already, and a potential client who has had a bad experience with another agency might just be willing to take a gamble on a firm whose customers give rave reviews.

how-small-firms-can-compete-with-the-top-staffing-agencies

6. 7 Areas Startups Can Outsource to Save Time and Cut Costs

By now, an idea of what your first year at the helm of your own staffing agency might look like is forming in your head. You can clearly see the opportunities, but the challenges have also revealed themselves.

Whether your business is in its first year or its fifth, outsourcing might be the solution to some of the challenges you’re facing.

Whether your business is in its first year or its fifth, outsourcing might be the solution to some of the challenges you’re facing. Depending on your area of expertise, you might be able to save both time and money by sending any number of tasks into the capable hands of the experts.

As a first-year staffing agency owner, you might wonder which tasks you can outsource. These seven processes are some of the leading candidates. You may not be able to outsource all of them, but even sending one or two out of house could save you exponentially.

1. Financing

You spend time drawing up invoices, chasing delinquent accounts, and even performing credit checks. On top of that, you might need to manage the books. Finally, there’s the issue of ensuring you’re paying your own bills on time and securing the capital you need to keep operations running smoothly.

Unless you’re a certified professional accountant, it’s often best to turn these tasks over to the experts. They have processes in place to perform credit checks quickly and easily. They might also employ accountants and bookkeepers, so you can take advantage of their know-how to get your finances taken care of correctly in record time.

2. Payroll

Payroll could be lumped in with financing, but it has its own special considerations. It also eats up a good amount of time and energy in almost any staffing firm. If you’re not a payroll professional by trade, you could be causing yourself more headaches than necessary by handling it yourself.

Turn it over to the professionals. With their expertise, you can make sure payroll is finished correctly and on time every pay period. Your candidates will definitely be happy about that, and payroll financing can help you keep the cash flowing even when times are tight.

3. Compliance

Compliance has turned into a full-time job for most staffing agencies these days. As the turbulent legislative environment of recent years has proven, you need to keep a careful eye on the laws governing the staffing industry.

As the legislative environment has become more complex, compliance monitoring has become more important.

As the legislative environment has become more complex, compliance monitoring has become more important. As a busy staffing agency owner, however, you probably don’t have the time to spend monitoring your compliance.

Again, this task is one that’s best left to the professionals. They have the technology and expertise needed to make monitoring compliance easier and less time intensive than it would be if you were to do it on your own.

4. HR Administration

Another popular area for outsourcing in recent years has been the administration of HR. This can include everything from training and onboarding to the administration of employee benefits.

HR administration can go hand in hand with compliance monitoring as well. HR tasks often include filling in forms, creating contracts, and filing paperwork. HR service vendors employ the latest technology and experienced HR professionals to ensure you get the services you need.

5. Marketing

Unless you have experience in marketing, you may want to consider hiring a vendor with a background in this area. Since marketing directly affects your brand reputation, it’s best left to the professionals.

Marketing also takes time, which is another reason it’s a good choice for outsourcing. As a busy staffing agency owner, you may not have time to attend to social media or write content for your blog. Working with a vendor can help you get good-quality marketing materials when you need them.7-areas-startups-can-outsource

6. IT

Chances are you know your way around a smartphone or a computer as well as anyone, but how much do you really know about your business’s IT needs? Designing a website and programming it to allow candidates to manage a profile or clients to manage their accounts calls for some more expertise.

You may even find you need a helping hand with networks, helpdesks, and hardware. Security needs to be a top priority for any business today. Finally, you can’t underestimate the importance of using the right software, such as an applicant tracking system or staffing agency software.

7. Legal

You might think of getting legal advice as part of your compliance activities. Legal expertise can also be important to you in the drafting of contracts and service agreements. Changing the structure of the business might be another concern.

Legal advice can serve you well when you want to expand into another province or country. It can also help if you want to acquire another company. Almost every aspect of your business is governed by law in some way, so retaining a lawyer is never a bad idea.

Other vendors may be able to provide you with some legal services as well. Talk to them and see if you can get a package deal on all of the services you need for your firm.

Outsourcing even one of these different functions can save you time and money. In turn, you can get back to doing the work you love.

Starting a staffing agency is no simple task, but with the right knowledge, perseverance, and great partners, you will be able to overcome common challenges and succeed in the industry.

running-a-staffing-agency-the-who-what-when-why-and-how

Request More Information

Leave the tough work to The Staffing Edge, so you can get back to the work you love.