Are you a recruiter planning to start your own temp agency or someone who wants to tap into a profitable business opportunity?
Well, the $218 billion US staffing industry is predicted to experience significant growth over the years, presenting exciting opportunities to individuals who wish to venture on a path of entrepreneurship.
Now, building a successful staffing agency can be extremely profitable. However, before you start your own business, you need a thorough understanding of how much does it cost to start a staffing agency.
Well, let us help you find the most accurate answer with this article. It offers a systematic breakdown of costs and a detailed understanding of factors influencing your start-up costs.
So let’s get started.
What is the cost of starting a staffing agency?
The cost of starting a staffing agency in the US generally varies between $65,500-$158,400. These costs are significantly influenced by a variety of factors such as the location, size, and scope of your staffing agency.
In terms of profit margin, a staffing agency enjoys a healthy profit margin of 15-20%. Not only that, smaller agencies have reported an ROI of 30% or more. Overall, it can be gauged that the staffing industry is quite lucrative.
Average costs for starting a staffing agency
Before we dive into details, check out this staffing agency startup cost checklist. It will help you plan your startup budget and know how much financing you need to get started.
| Item | Average Cost |
|---|---|
| One-time Expenses | |
| Security deposits | $4,000-$15,000 |
| Leasehold improvements | $5,000-$25,000 |
| Furniture | $5,000-$10,000 |
| Office equipment | $5,000-$6,000 |
| Office inventory | $1,000-$1,500 |
| Training | $1,000-$5,000 |
| Recruitment cost | $8,000-$12,000 |
| Recruitment software | $5,000-$30,000 |
| Business plan | $100-$250 |
| CRM | $1,200-$4,000 |
| Business registration | $150-$500 |
| Legal Help | $1,500-$5,000 |
| Licenses and permits | $100-$500 |
| Insurance | $1,500-$6,000 |
| Website | $300-$2,000 |
| Marketing supplies | $1,000-$5,000 |
| Total One-Time Expenses | $40,000-$127,000 |
| Recurring Expenses (Per Month) | |
| Lease | $1,500-$6,000 |
| Payroll | $12,000-$15,000 |
| Accounting software | $100-$300 |
| Communication tools | $0-$100 |
| Marketing activities | $2,000-$10,000 |
| Total Recurring Expenses | $15,500- $31,400 |
| Total | $65,500- $158,400 |
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How to calculate the cost of starting a staffing agency business
You now have a list of potential expenses and a rough estimate of your startup costs. Let’s estimate your actual startup costs using these two proven methods.
The first, traditional method involves using a startup costs calculator to estimate the startup costs. However, the second, the Upmetrics method, is an innovative method that uses the Upmetrics financial forecasting tool.
Let’s understand both methods so that you can choose one that suits your requirements the best.
The traditional method—startup costs calculator
The calculator includes categories such as pre-trading, website setup, marketing, operations, and people. You can enter the estimated costs in each field and let the calculator estimate the costs for you.
Remember that many startup costs fall under recurring expenses, so cover those costs monthly, quarterly, or annually.
Calculate your startup costs using this calculator.
The Upmetrics method—financial forecasting tool
It is an intuitive and efficient method of calculating startup costs. Using Upmetrics will not just help you estimate startup costs but also help with financial forecasting.
All you need to do is enter your sales, costs, and other financial assumptions and let the tool calculate monthly/quarterly/ and yearly projections for you.
Pro-tip
Check out the financial forecasting tool for accurate financial forecasting. Once you have an accurate estimate of startup costs, you can easily identify funding requirements for your staffing agency.
Raising funds for a new startup is certainly a nerve-wracking and time-consuming process, but having a solid staffing agency business plan can make things a lot easier.
Let’s move ahead and discuss the factors that affect your staffing agency startup costs.
Factors that affect staffing agency startup costs
Let’s now understand the different factors that influence the start-up costs for your staffing agency.
1. Lease and Mortgage
For staffing agencies that plan on having a physical location, lease and mortgage expenses are going to add significantly to their start-up cost calculation.
Begin by choosing whether you want to lease or buy an office space. While buying requires intensive investment, leasing can get expensive in the long run.
After evaluating your choices, decide the location for your staffing firm. Considerably, a space in a prominent location is going to cost you a lot more than suburban commercial places.
For instance, the average commercial rent in New York is generally higher than $70 sq. ft., however in regular suburban areas spans between $4-$23.
Now, if you are looking to buy an office space, be prepared to pay $150,000-$600,000 on a downpayment, upfront. However, for lease, budget anywhere from $1,500-$6,000 every month.
While considering the costs, also make provision for lease/ security deposits that usually run equal to your 2-3 months of rent, i.e. $4,000-$15,000.
2. Leasehold Improvements
After buying space for your staffing business, consider getting it refurbished to make it a functional space.
If we are looking at overall renovations including HVAC, plumbing, flooring, finishes, and painting; the costs could span anywhere from a few thousand dollars to $250,000 and more.
Therefore, look for offices that require minimum modifications and refurbishing. However, be prepared to spend between $5,000 and $25,000.
Further, furniture like chairs, tables, storage cabinets, and desks would make the space functional and usable. Depending on the size of your office and the number of employees, the furnishing cost would span anywhere from $5,000-$10,000.
Plan the renovation budgets well in advance and strictly adhere to them to keep your start-up costs well within control.
3. Office Equipment and Supplies
At the basic, you would offer a desktop or a laptop to the employees at your staffing agency. The expenses for this can quickly add up to accommodate the needs of a large team.
The average cost of a desktop in the US is $529. Even if we consider a team of 5 members the expenses can span anywhere from $2,500-$4,000. Additionally, you will require a printer and a scanner, the costs for which would vary between $600-$1,500.
In this category, we will also calculate costs for mobile devices and telephones for employees that would add $2,000-$3,500 to your startup costs.
Apart from equipment, consider budgeting somewhere between $100 and $250 for office stationary and supplies every month.
4. Recruitment, training, and payroll
Hiring an employee is quite expensive. Considering the costs associated with sourcing, advertising, recruitment, and administrative expenses; the average cost of hiring an employee stands at $4,700. Well, these costs would flare quite high for top-level positions.
Additionally, a staffing company would also need to budget for training expenses. The cost for training and onboarding an employee generally spans between $1,000 and $2,500, however, sometimes it can be as high as $5,000.
While training is optional for admin staff, you need to plan development programs for your recruiters, headhunters, and sourcing specialists.
Lastly, calculate the average monthly payroll expenses for your team. To offer a perspective, the average salary of a recruiter in the US in 2024 is between $63,000 and $100,000.
Considering this, your average payroll expenses would vary between $12,000-$15,000 every month given that you hire a small team of 2 recruiters and 1 headhunter.
Ideally, you should have a provision of paying your team from your capital for the first 3 months at least.
5. Technology and Software
Investment in the right technologies and software is essential to stay competitive in the market.
However, how will you determine the essential technologies for your business? Well, depending on the size of your business, team strength, and the service offerings, you can choose to invest in some of these:
Recruitment Software
A robust recruitment software is feature-rich and helps with application tracking, recruitment marketing, CRM, reporting, and much more. Also, you can automate and streamline your end-to-end recruitment workflow by using AI Recruitment Software to improve the efficiency of your entire recruitment process.
Consider this as an investment that will power you to deliver competitive services in the market.
So before you choose a platform, analyze all the features and make a comparative study rather than focusing merely on price.
In terms of price, staffing firms can expect to spend anywhere from $5,000-$30,000 on a competitive recruitment system.
Customer Relationship Management
An investment in a robust CRM can help you track leads, follow follow-ups, and manage multiple client accounts at a time. The costs of CRM for a small company can span anywhere between $1,200-$4,000 annually.
Payroll and accounting software
This is specifically useful for staffing agencies that have a large team of people working at different positions and in different roles. Not only that, using this software is quite cheaper than hiring a bookkeeper or accountant for your firm. Expect to pay $100-$300 monthly on subscription fees.
Communication Tools
Invest in feature-rich communication tools if you are planning to build a remote team. The subscription costs for these would vary between $15-$200 monthly.
Now determine which of these tools can help you increase productivity, efficiency, or management and identify the suitable software for your staffing agency.
6. Business compliance and legal help
Lack of compliance can lead to heavy fines and sometimes the permanent closure of your staffing agency. To avoid such circumstances, ensure that you meet all the compliance needs.
Begin by registering your business as a legal business entity. The cost for registration generally varies between $150 and $500 and will get you a business license essential for conducting business in the States.
Further, apply for tax registration and get your State Tax Identification Number. Get your Employer Identification Number(EIN) and open your business bank account to keep the personal and professional finances separate.
In terms of licenses, you don’t need much apart from zoning and signage permits. The costs for these vary in different states, however, you can budget approximately $100-$500 for permits.
Acquiring legal help can be beneficial for staffing agencies. They would help you ensure compliance and in framing staffing contracts that are quintessential for your business. Legal help can be quite expensive costing you $1,500-$5,000 at a time.
7. Insurance
Risks are an inevitable part of any business. However, it is still possible to safeguard the agency against unforeseeable risks by getting insurance in essential areas.
To begin with, get general liability insurance. This is mandatory for businesses and offers coverage against general business risks. Depending on the scale of business, you can plan to spend $500-$2,000 on premiums every year.
Additionally, you would also require a workers’ compensation injury to offer coverage for employees suffering from sickness or injury. The costs for these vary significantly depending on the number of employees, however, you can budget an additional $1,000-$2,500 for it annually.
Many staffing agencies also get errors and omissions and professional liability insurance to protect themselves from certain legal claims. However, for firms that are just starting, the above two are sufficient.
All in all, you can budget $1,500-$6,000 for insurance payouts annually.
8. Marketing and Branding
Lastly, consider the costs for branding and marketing for your own staffing agency.
If you have already written your staffing agency business plan, you must have a clear understanding of the strategies you want to implement. However, even if you have yet to write your business plan, here are different costs associated with marketing and branding:
Website development
A robust website is especially important if you plan to deliver your staffing services through a website. Generally, the costs for web development vary anywhere from $300-$1,000 for a static informational website and $5,000-$15,000 for a complex functional website.
Print media and marketing supplies
Consider the costs for hoardings, banners, and signage boards to guide the customers to your doorstep. The costs for these would vary significantly between $1,000-$10,000.
Online Marketing
Digital marketing is extensive and quintessential for the growth of your staffing agency. This includes content marketing, SEO, social media marketing, Email, and paid ads. The budget for these varies depending on your strategies and willingness to spend.
Most companies in the staffing industry spend heavily on marketing activities, i.e. $2,000-$10,000 every month.
The above was the cost approximation of different factors influencing your staffing agency start-up costs. Now, before you calculate the costs for your agency, let’s see practical ways to bring down your initial expenses.
Tips for reducing staffing agency start-up costs
From starting a home office to building a remote team—here are a few practical ways to reduce your staffing agency start-up costs.
1. Start with a home office
Starting with a home office will save you tens and thousands of dollars every month on a lease. If your business is centered around services that can be offered virtually, there is no need to spend on extravagant office and plush decor. Instead, you could use the additional finance to invest in essential technologies and equipment for the business.
2. Hire freelancers
Initially, when the volume of projects is quite low, you can hire freelancers on a project basis. This will help you save thousands of dollars on recurring payroll business expenses every month.
3. Recruit through job boards
Recruiting through job boards is quite cost-effective. Rather than spending thousands on paid ads, you can cut down the recruitment costs by using a free job board.
4. Get used equipment and furniture
If you plan to start with a physical space, consider redecorating the office with used furniture and equipment. This will help you bring down your initial costs significantly.
Conclusion
And that’s a wrap. By now, you must have a clear understanding of how much it costs to start a staffing agency. So what’s next?
It is now time to calculate precise costs for your own staffing agency. While it may seem like an overwhelming task, you can easily calculate your costs using the Upmetrics financial forecasting tool.
So, let’s take the first step and evaluate your funding requirements to put together your staffing firm.
Use Upmetrics for Accurate Startup Cost Projections!
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