Can Factoring Help with Advertising Costs at my Staffing Agency?

Posted by Factor Funding Co. on January 19, 2016

 

Let's be honest. You know what makes your staffing agency different from the competition. It may be the staffing niche you cater to. It may be the quality of workers you provide. However, from an outsider's perspective, it can be difficult to know the differences between agencies. This is true for both perspective clients and potential staff members. 

Advertising and the Staffing World

Advertising is one way you can inform those parties of what makes your company unique. Experts recommend most businesses spend between 8 to 10 percent of revenue on marketing. However, staffing agencies seem to be the exception to this rule. Quite often agencies spend less than 1 percent of revenue on marketing. Is that enough?

The staffing world generally runs on smaller margins than many other businesses. If your gross margin is around 15 to 20 percent of revenue, there is no way you can spend 8 to 10 percent of revenue on marketing. You would wipe out a good deal of your margin. 

So, spending less than 1 percent of revenue on marketing actually makes sense for a staffing agency. If you are just establishing your agency, of course, you would spend more to gain a starting customer base and to get your starting staff. If you want to grow your agency, you would spend more for a given period of time. 

The Importance of Marketing

Running on slim margins is the name of the game in the staffing industry. You cannot overprice your staff's services or your clients will go elsewhere. Yet, you are still competing with half-a-dozen other agencies in the same market, providing similar staff, all to the same client base. 

There are only a couple of ways you can differentiate your agency from all the other agencies in the same market. The first is with your brand. The second is with your employees. 

  • Brand. Agencies with the big names have name brand recognition built in. Smaller, local agencies don't have that same name brand recognition. That is why marketing and branding is so important for smaller agencies. It is important to gain brand recognition, even if it is only in the local area. That requires putting money into targeted marketing to get your brand established and keep it fresh.
  • Employees. Over time, many companies recognize which agencies provide the highest quality staff members. It starts with having a good pool of candidates from which to pull talent. And that happens only if you have the brand recognition and the marketing budget to make it happen. 

So, the bottom line? You need the marketing budget to establish and expand your brand. You need the marketing budget to build a deep talent pool. 

How Can You Afford to Increase Your Marketing?

You are ready to take your marketing to the next level. But, you don't have the ready cash to increase your budget. What do you do? 

Actually, factoring is a sensible solution for this kind of dilemma. Most staffing agencies have thousands of dollars tied up in unpaid invoices. They typically wait 30 to 90 days to get paid. That limits the amount of money available to use for marketing. With factoring, you can free up a good portion of that cash to spend on your marketing project. The factor can advance up to 90 percent of the value of those open invoices to you. And you can spend that money on anything you want, including increasing your advertising budget. 

The process of factoring is easy to understand. You go through an initial application process where the factor will review your customer to ensure they are creditworthy. They don't want to advance money against invoices that might not get paid in a timely manner. This initial application process usually takes three to five business days. 

Once you are approved as a client, you can submit your invoices for factoring. The factor will review the invoices, and then forward you a percentage of the total amount of the accepted invoices. This amount is typically between 70 and 90 percent of the invoices value, depending on the factoring agency and the amount of invoices you are factoring. 

If you are ready to take your staffing agency to the next level, take a good look at factoring. It may just be the funding source you are looking for. 

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