So you have laid the groundwork for starting up a temporary staffing or consulting company based on your prior knowledge of the industry. Perhaps you have been a regional manager or recruitment officer of a company, have grown the business for someone else, and have decided to move out on your own to start to begin your adventure in the staffing world. So what are the fixed and variable costs associated with starting your business?

There are certain costs that are a given when running a staffing company. The main costs associated with the business relate to payroll/employee costs and insurance. Of course, as with any other business, you will incur variable costs including a corporate lease, capital/office equipment, telephone service, advertising costs, employee benefits (if you choose to make them available), and other general overhead costs.

Regarding payroll expenses: the business represents the ultimate Catch 22 situation; the more business you produce (i.e. the more job orders you fill for your clients), the more weekly payrolling costs that are involved in running the company. This can create an immediate cash flow crunch because your temp employees/consultants generally want to be paid on a weekly basis, yet your client invoices may not get paid for 30 - 60+ days. Your total payroll burden/costs can vary, which makes it necessary to price your services accordingly. Depending on the type of employees you are sending out, your gross markup should range from 40 - 65% in order to have enough profits to pay your employees, pay your overhead, and have enough left over for yourself.

Then comes the insurance burden. If you plan to have W2 employees, you must have Worker’s Compensation insurance, along with general liability, and most likely professional insurance coverages. Again, depending on the type of employees you will be sending out on assignment, your costs will vary. Admin/Clerical and IT costs for Workers Comp will be much less expensive than the cost for Light Industrial or Industrial employees. Also, depending on the state in which you do business, the costs will vary.

It is important to note that the staffing business can be a very lucrative business, but should not be taken lightly. Unless you have prior staffing industry experience, it can be a tough business to break into. You have to constantly work to secure new clients, and have a backlog of candidates to place with your clients. Many clients will require that you have sufficient insurance in place before you can send your employees to work at their site. It is important to find an insurance company that specializes in the staffing industry to obtain the proper insurances, along with the right amount of coverages for your particular business.

As long as you have the proper background in the staffing industry, along with the desire to work very diligently to make the business successful, your business should prosper. Knowing the costs involved in running the business up front will ensure a successful venture into the staffing world.

If you would like to discuss your situation, please contact Dale Busbee, Business Development Executive, Sterling Resource Funding Corp @ (985) 641-8817 dbusbee@sterlingresourcefunding.com.