How to Start a Staffing Agency

Today’s job market is dynamic and evolving. Shifting skill requirements and industry demands have led to the need for staffing agencies. There’s a need for employers to find a quick, efficient route to potential employees.

A recent survey has found that 79% of American businesses find these agencies essential. A staffing agency supplies a scalable, flexible workforce for small businesses. Here’s everything you need to know to start one of these enterprises. 

The Staffing Industry

Here’s a high-level overview of the current industry.

  • The COVID-19 pandemic disrupted the global job market. Staffing agencies were instrumental in assisting the recovery.
  •   Advanced technologies have created a digital transformation in the sector. Data analytics and AI have changed how candidates get sourced, screened and matched.
  • The overall business climate, regulatory changes and global events influence the growth rate in the industry.

For an in-depth understanding of starting a business in this evolving market, one could explore how to start a business for comprehensive guidance.

Why Start Your Own Staffing Agency?

There are some excellent reasons to start your staffing agency, which include:

  • The fact that businesses are constantly seeking skilled and qualified professionals. The demand covers different Industries and job roles.
  • Agencies can also supply career guidance and support for candidates seeking opportunities.
  •  Owning your own business allows you to make strategic decisions and build a company that has entrepreneurial Independence.

how to start a staffing agency

Different Types of Staffing Agencies

Starting a business means choosing between several different kinds of staffing businesses.

  1. Temporary agencies include short-term employment to meet a business’s immediate needs.
  2.  Permanent staffing focuses on full-time, long-term positions.
  3.  Executive search deals with high-level executives and leadership positions.
  4.  Specialized staffing focuses on specific skill sets in targeted Industries like IT and  Healthcare.

Each one of these addresses different hiring challenges and requirements

how to start a staffing agency

The Fundamentals of a Successful Staffing Business

Legal Knowledge and Compliance

It’s crucial to stay on top of legal requirements. Those should include laws and regulations as well as standards. 

 Industry Expertise

  A thriving business can focus on a niche. A good agency has deep knowledge of trends within a sector.

 Proactive Talent Sourcing

Your business should use networking events and social media to build a talent pool.

 Technological Integration

 A successful company will have advanced recruitment technologies like AI, data analytics and applicant tracking systems.

 Measurable KPIs

These should include essential metrics like candidate retention rates.

how to start a staffing agency

Skills and Background

Having a background in HR provides valuable skills like understanding human resource practices. Good knowledge of employment regulations and laws is also a good idea. Practical communication skills and experience in candidate assessments are also must-haves.

Networking and Industry Relations

Fostering a solid network by establishing ties with potential clients, previous employers, and industry players is critical. It builds a foundation for collaboration and success.

how to start a staffing agency

Capital Requirements, Startup Costs, Business Bank Account and Funding

There’s an investment needed to start a staffing agency. The amount of money you’ll need to put in depends on the scale of the business.

  • For smaller companies, you must invest in leasing an office space or working from the house. The investment also needs to include money for computers and an internet connection.
  • A medium-scale company must include cash for enhanced technology like upgraded hardware and software. You’ll also need money for employee benefits, training, and liability insurance.
  • You’ll need investment cash for a large-scale company to establish offices in different locations. You’ll also need to put some money aside to hire specialized teams in other industries.

Setting Up a Legal Business Entity

There are legal requirements for starting a staffing agency, like business registration. You need to be aware of the employment labor laws in your area. Make sure to see if the company needs any permits, licenses, and insurance. 

You must choose a business structure, including a sole proprietorship or a partnership. You can choose a limited liability company or corporation if your company is bigger. Understanding common business structures is also critical in this regard. Recognize the importance of branding. A distinctive business name and a professionally designed logo are critical.

 Your brand needs a solid online presence with a professionally built website and engaging social media profiles.

StepDescriptionResources NeededKey Considerations
Market ResearchUnderstand the staffing needs in your target industries.Market analysis tools, industry reports.Identify sectors with high demand for staffing services.
Business PlanDevelop a detailed business plan outlining strategy and finances.Business plan templates, financial software.Include projections for growth, expenses, and revenue.
Legal SetupRegister your business and obtain necessary licenses.Legal counsel, business registration services.Ensure compliance with employment laws and regulations.
Niche SelectionChoose a specific niche or industry to focus on.Industry insights, market trends.Specializing can set you apart from general staffing agencies.
Candidate SourcingDevelop strategies to find and attract candidates.Job boards, social media, networking events.Building a large candidate pool is crucial for success.
Client AcquisitionPlan how to attract and retain client companies.CRM software, marketing strategy.Strong client relationships are the backbone of the business.
Recruitment ProcessEstablish a thorough recruitment and vetting process.Applicant tracking system (ATS), interview guides.Efficient processes ensure quality placements.
Pricing ModelDecide on your pricing structure for clients.Competitive analysis, cost-based pricing models.Pricing should be competitive yet profitable.
Marketing and BrandingCreate a strong brand and marketing plan.Branding services, digital marketing tools.Effective marketing is key to standing out in the market.
Compliance and EthicsAdhere to ethical standards and legal requirements.Legal advisories, HR policies.Maintaining high ethical standards is crucial in the staffing industry.

how to start a staffing agency

How to Start a Staffing Agency: Step by Step

Here are the steps to follow to build a successful staffing agency.

Identifying Your Staffing Agency Niche

There are several sectors where you can find opportunities for your staffing agency. Specializing will allow your company to develop a deep understanding of a specific niche and its trends and challenges.

 Some of the more popular niches include:


 There’s a continual demand as the industry faces a shortage of professionals.

 Information Technology

Specialized needs here include candidates for cybersecurity, data science and software development.

 Logistics and Transportation

 This industry constantly looks for qualified warehouse staff, logistics managers, and drivers.

how to start a staffing agency

Crafting Your Staffing Firm Business Plan

A well-crafted business plan is essential to a successful business. It should contain thorough research highlighting the challenges and demands in your chosen niche. Make sure to identify the pain points companies in the sector face. For more detailed strategies, consider exploring business startup checklist.

Office Space: Establishing Your Physical Presence

Choosing between a physical office and a virtual one is another big decision. There are pros and cons for each. For those starting out, a website startup guide can be invaluable in establishing an online presence.

Virtual Office 


This choice can reduce overhead costs. You won’t be paying for utilities and rent. Operating a digital space gives you access to a global talent pool.


A virtual team can have communication issues like time zone differences. A virtual office can also pose a security risk if information is stored and shared online. What’s more, it takes work to build a strong company culture in a digital environment. 

A Physical Office 


It’s easier for employees to work together in a physical office and bond. A brick-and-mortar space provides a professional image that makes it more trustworthy and credible. Physical offices provide more structured work environments for temporary staffing agencies.


 A brick-and-mortar office costs more to maintain, which can include money for rent and utilities. There’s even a potential for productivity losses if employees need to commute. Physical businesses can have restricted talent pools to choose from. 

how to start a staffing agency

Marketing and Branding Your Staffing Agency

Getting the word out on your staffing agency is essential. Here are a few tips for effective marketing and branding.

Once you’ve defined your target audience, a multi-channel approach is an excellent way to establish a positive presence. Use content marketing, email marketing, social media, and networking to reach your audience.


 Remember to explore partnerships with organizations, businesses, and influencers.

 Consistency is the key when you’re establishing a brand. That should include the same tone across all platforms with messaging and visuals.

Collecting authentic testimonials and adding videos and images alongside them make them genuine. Encourage satisfied clients to leave good reviews on platforms like Yelp and Google. 

how to start a staffing agency

Building a Robust Candidate Pool

Good strategies will help you build a candidate pool to make your staffing company successful with a good cash flow.

You can identify potential candidates using platforms like LinkedIn and the advanced search features. Filters can include skills, industry and location to help you narrow a search.

Successful Staffing Firms and Good Resources

Job boards are another excellent resource. It’s crucial to write job descriptions that outline qualifications, responsibilities, and company culture.

Active participation in industry events can also help you build a talent pool. Express genuine interest and engage in conversations to make good connections. You can even consider hosting a company-specific event. Invite other staffing companies. For insights into hiring for your staffing agency, refer to how to hire for a small business.

how to start a staffing agency

Client Acquisition and Retention

A successful company exceeds expectations, communicates transparently and always delivers exceptional value. Looking for feedback from your clients can help.

Leveraging Technology in Staffing

If you’re looking to streamline operations, consider Bullhorn. It has a  cloud-based applicant tracking system and CRM. It offers client management as well as automation features.

Regulatory Compliance and Ethics

Adhering to industry standards, staying updated with labor laws, and implementing ethical considerations are essential.

  • Subscribing to legal professionals’ and labor law agencies’ publications can help you stay current.
  •  Fostering a culture of integrity means encouraging transparent and open communication.
  •  Regular audits can help you adhere to industry standards.

Pricing and Revenue Models

There are different revenue models that you can use, including contingency fees. These fees are contingent on candidates accepting job offers.

The retained search model has a client paying a retainer to secure the services of a specific staffing agency. The advantage here is the agency commits substantial resources to the client.

As the name suggests, an hourly markup involves charging each client based on the number of hours spent on a project. An agency can add a profit margin. The advantage here is clients understand the cost breakdown.

how to start a staffing agency

Scaling and Expanding Your Staffing Firm

You can diversify your services to scale up your business. That can mean offering other features like HR consulting and specialized training. Understanding the essential building blocks for new businesses to succeed is crucial in this expansion phase.


If your staffing agency becomes successful, franchising is a good way to expand. It’s an excellent way to grow on a proven business model.


Getting involved with industry-specific associations can help you scale your business up. The same is true for attending networking events and trade shows.

You can also diversify your client base. For example, a staffing agency might start focusing on IT placements but gradually move into other verticals like Finance and Healthcare.

Diversifying Your Service Offerings

Other areas you can consider diversifying into include HR services like compliance assistance. You can also scale up by developing training programs and consulting options.

how to start a staffing agency

FAQs: How to Start a Staffing Agency

What makes a staffing agency different from typical HR departments?

Staffing outfits usually focus on providing temporary and permanent employees. HR departments typically manage policies, employee relations, and employee development within the company.

How does a staffing agency ensure the quality of candidates?

They use several different assessments, including behavioral interviews and skill tests.

What are the common challenges faced by new staffing agencies?

Budgeting and establishing a quality talent pool are the one and two number challenges.

Is the staffing industry recession-proof?

Like many other businesses, this industry is subject to economic downturns. However, its flexibility in providing temporary contract solutions makes it resilient.

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Rob Starr Rob Starr is a staff writer for Small Business Trends and has been a member of the team for 7 years. He is a graduate of Ryerson University in Toronto with a Bachelor of Journalism degree. His print credentials include employment with various Toronto area newspapers and three works of fiction: The Apple Lady (2004), Creekwater (2006) and Sophistry By Degrees (2008) published by Stonegarden Press In California.