Starting Your Own Staffing Firm? Incorporate These 4 Best Practices
You’re probably familiar with the unsettling statistic that half of all startups don’t make it past 4-5 years, with 20% not making it past the first year.
Given most staffing-industry startups are founded by industry veterans with successful track records, the main reasons new businesses typically fail (incompetence and unbalanced experience) don’t really apply. However, to ensure you don’t fall victim to other common pitfalls such as cash flow issues, client concentration, or proper client selection, make sure to follow these four best practices when starting your own staffing or recruiting business:
Develop A Solid Business Plan
Before jumping head-first into your new business venture, it’s important to ensure you do your homework and develop a solid business plan to guide you along the way.
While there are several key items you’ll want to guarantee you cover, certain sections you should definitely include when starting a staffing or recruiting firm include:
Market Analysis: Use research and competitive analysis/intelligence to provide insight into the demand for the specific services you’re looking to offer, the size of the current market, strengths/weaknesses of competitors, any geographical demands/limitations, and how economically lucrative it can be. These insights not only serve to verify the necessity for your business but can be leveraged to gain investors as well.
Financial Forecasts: It’s vital to know how much money you’re going to need to start your business, and how much you can expect to make within the first few years. Include any operating costs your company is expected to incur, identified revenue streams, and any current loans. Also, don’t forget to account for any selling, general, and administrative expenses (office supplies, computers, building fees, etc.)—they might seem minimal, but they all impact your bottom line.
Partnerships/Customer Relationships: Staffing and recruiting are people-focused professions, so relationships are incredibly important. Note any other organizations or services you’ll work with to run your business, as well as any prior customer relationships that might positively or negatively impact your company.
Identify A Working Capital Solution
Did you know that 82 percent of businesses fail as a result of cash flow problems?
A growing company needs a reliable source of working capital—which usually equates to going beyond your personal means. Given independent staffing and recruiting firms notoriously underestimate working capital requirements, it’s important to address your needs early in your planning.
In most cases, equity is your safest source of capital; you can retain more earnings in the business to build a strong balance sheet and a solid capital base, and keep an eye on credit and collections to minimize capital needs as you grow.
However, it’s likely you’ll still require a credit facility or payroll financing. Given most new businesses experience a lull-time between starting business operations and money coming in from clients, as well as the inevitable that, at some point, a client will pay their bill late, a credit facility solution ensures you can pay your employees and temps to keep your business going.
In these instances, seek out a financing partner that understands and values your business. For best results, choose a partner that has the same characteristics your business requires for success: reliability, flexibility, fast response, scalability, and the capacity to support growth.
Capitalize On What You’re Good At
While it might feel counterintuitive to turn business away, the reality is you can’t be all things to all people. Without developing an identity and recognizing your strengths, how can you expect your potential clients to think of you first when they have a problem? Work on carving out your own little section of the market where you can excel by focusing on the following:
Niche Differentiation: You can’t expect to do an equally top-notch job of placing all types of workers (e.g. temporary light industrial workers, IT project contractors, and C-level financial professionals); it’s important to identify your niche focus so customers know when they should call you.
Expertise: Once you’ve identified your niche, focus on becoming an expert in that space; work on developing simple, unique programs/services to solve that particular industry’s/customer base’s biggest pain points. Furthermore, by serving as a true resource and trusted advisor to your clients, they’ll have confidence that the candidates you bring them are best suited for their organization.
Targeted Marketing: By developing a niche staffing or recruiting agency, you can create a more-effective, targeted marketing message centered around industry-specific challenges. Additionally, using content that is focused on a specified client-base, speaks their language, and demonstrates a clear specialization in their type of work, will likely result in a higher ROI.
Referrals: Once you have established yourself as an industry insider and built a track record of results, your customers will be more than happy to refer people to you.
Outsource What You’re Not
As alluded to previously, you can’t expect to operate at your most-effective level when you’re trying to be the best at everything. The same can be said for your business operations—you cannot focus on what you’re good at (selling, customer service, and placing top talent) if your attention is elsewhere.
By opting to outsource non-core functions that don’t directly increase revenue or attract new clients or candidates such as payroll processing, risk management, HR/legal, or compliance, you can concentrate on the key items of your business that will drive success.
Ultimately, choosing to outsource the back office of your business not only empowers you to increase focus on what you do best, but strengthens efficiency, lowers costs, provides better scalability, offers industry expertise, and reduces overall risk to your organization.
Starting a new business can be exciting and intimidating, but it’s important to know you don’t have to go at it alone! Learn more about how People 2.0, a trusted Bullhorn Marketplace partner, can help you grow your startup staffing or recruiting firm. Come meet People 2.0 in person at Engage Boston 2019!
Want more tips and guides for growing your business? Download the Toolkit: Resources to Grow Your Staffing Firm from the Ground Up for useful resources you can use to better your firm.