Author: Barbara Hammerberg, CCWP. Director, Client Development at Advance Partners
Starting a staffing company can be very profitable business if you take the right steps to ensure your success. However, we often see staffing startups making the same mistakes that can derail their business before it has a chance to grow. Here are some common pitfalls for startup staffing companies and recruiters:
- Focusing on a particular niche without assessing the marketplace. The Chamber of Commerce and the Bureau of Labor Statistics are great resources for understanding the opportunity in your chosen market and/or skillset. Candidate pools and job orders are rarely evenly balanced but a major imbalance can mean few successes.
- Offering the lowest rates. Coming out of the gate with below market rates to attract business is a tricky strategy. It is very hard to raise your rates later. This is not just a problem for those early clients, but buyers talk to each other and you quickly get known as someone willing to discount and your profit margins disappear.
- Ignoring your business plan. Good news, you created a business plan. Bad news, it is gathering dust in your desk drawer. Read your plan at least monthly, revise it, confirm it, act on it but don’t ignore it.
- Not trusting your partner. If you have partner(s) you won’t always agree on everything. Trust me. Give each partner the authority over what they know best. This keeps everyone motivated and your business moving forward.
- Over/under investing in internal staff. Unless they are directly bringing in business, you can’t afford to have people waiting for business to come in. At the same time, if you are great at sales and have recruiting covered, don’t take yourself away from what you do best. Outsource tasks that aren’t your core competency like payroll, bookkeeping, and marketing.
- Not knowing your competition. I don’t believe in selling against the competition but I do believe you should know who they are, their strengths and weaknesses, and have a strategy around what unique brand promise(s) you are offering.
- Thinking you cannot afford (time or money) to be active in the community. Giving to your community increases your visibility in ways paid marketing cannot. It also builds morale for a small and often overworked team.
- Thinking “How hard can it be?” Opening a staffing company with no experience in staffing is risky. Your perception of what is needed to be successful may not be accurate. Are your skills in line with successful people in the industry? My observation shows experience in the industry is the number one factor for success. If you don’t have it, hire someone fairly senior from the staffing industry to help you lift the business off the ground.
- Worrying about working capital later. Being under-capitalized can lead to walking away from good opportunities. The business won’t always feed itself especially in a rapid growth mode. Develop a relationship with a working capital or payroll funding source early so it is available when you need it.
Advance Partners is the #1 provider of financial, operational and strategic support to independent staffing firms. Advance Partners serves as a business partner with a simple mission: To help staffing firms grow. For more resources on starting up a staffing agency, visit the Startup Resources section of our website.
