Growth is a good thing for just about any business. But, too much growth in too short a time can spell trouble for a staffing agency. It puts them into a cash crunch with the need to meet a larger payroll before the additional revenues flow in from new clients. This cash flow dilemma has been the end of many agencies.
Sustainability is the kind of growth a staffing agency needs. That means growing when cash flows can handle increases in payroll when taking on new clients. It means being smart about growth and looking to the long term instead of the short term.
How can your staffing agency grow in a sustainable fashion?
All industries go through ups and downs. Staffing agencies, serving those industries, need to have the flexibility to weather those fluctuations alongside their clients. They need the depth of staff to meet seasonal highs with the cash reserves to meet payroll needs when things are not so busy.
How does your agency remain flexible?
- Build a deep pool of talented people that meet or exceed your client needs and expectations. You need to know what your clients are looking for. And you need to use that information to recruit the best candidates possible.
- Never stop recruiting talent or new clients. Clients will come and go. So will the people you send out on jobs. There should never be a time when you are not looking for new clients or new talent.
- Choose technologies which make your job easier. Are their new software solutions available that would make managing your clients and/or employees easier? Can you streamline your payroll processing with electronic time sheets?
- Build a cash reserve to weather the worst. This is probably the hardest one for a staffing agency to do. But, having at least a month's worth of expenses in a savings account could be just enough to save the agency from going under if the economy tanks.
Building long-term sustainable client partnerships
The most successful staffing agencies started out small at one point in time. If you look back at their success stories, you will find a common theme. They built long-term sustainable partnerships with their clients.
How do you build these kinds of long-term client relations?
- Develop a relationship with key people at the client company. You want to be more than just a voice at the end on the other end of the phone. Take time to meet with your client contact. See if you can schedule a visit to tour their operations. This will give you an opportunity to identify any areas where you might be able to further assist the client.
- Build a talent pool that meets your clients' specifications. You may have clients who need seasoned accounting professionals who can fill in during the height of tax season. Filling your staff ranks with recent college graduates that just got their CPA certification won't fit their needs.
- Consider expanding the services you offer to your clients. Many agencies offer other services besides staffing such as payroll processing, human resources, and talent recruitment for permanent hires. Building off of what you already do will offer more for your clients to love.
Manage cash flows closely
Staffing agency growth and the free flow of cash through the agency's bank accounts go hand in hand. To take on new clients, the agency needs the cash reserves to pay the increased payroll weeks before the new clients start paying invoices. If margins are low and there is not enough cash flow, the agency cannot take on new clients. But, without new clients, the agency cannot grow. A Catch-22.
How can your agency manage cash flows?
- Don't take on too many new clients at once. You go to a trade show and you get 20 new clients knocking your door for new talent. Before you start signing them all up, you need to consider if you have the cash flow necessary to meet payroll while fulfilling their talent needs.
- Take on creditworthy clients. Many small staffing agencies take on any client that comes to their door. But, that can be a mistake if that company is slow to pay bills. You want to work with clients who are as serious about paying their vendors as they are at getting talent from your staffing agency.
- Consider factoring. You probably have a lot of cash tied up in unpaid invoices. And that is cash you could use for other things, like paying employees or keeping the lights turned on. Factoring your unpaid invoices can free up to 90 percent of that trapped cash.
You can grow your staffing agency. It just take a bit of work and sustainable growth. What have you done lately to grow your agency?