The staffing industry is getting more and more crowded as the economy is showing signs of life. To make the most of the opportunities, many staffing agencies are focusing on one or two niches like construction, legal, information technology or medical care. A niche staffing agency has a deeper understanding of the particular industry, making them more attractive to companies within that niche. This helps build a pool of talented, reliable employees that can be trusted by both the agency and its clients.
Despite these advantages, there are certain challenges with niche staffing. Cash flow can become a real issue, especially when an agency is ready to grow. Keeping the cash flow smooth can free up funds for hiring more staff and taking on more clients.
Tips for Keeping the Cash Flow Going in Niche Staffing
- Keep your options open. Many staffing agencies make the mistake of making their niche too narrow. Offering staffing for the healthcare industry is a well-defined niche with plenty of room for growth. However, going too narrow can end up killing cash flows and, ultimately, the business. Too narrow a niche means there are fewer clients available, which limits the amount of staff the agency can hire and use. Having more than one niche or widening a niche is a better option.
- Go with your niche's expected payment terms. For example, most staffing agencies have a standard 30-day invoice payment term. But, in the medical field, that can stretch out to 60-days. If you try to impose a 30-day payment term in the medical niche, you may find your agency on the outs with clients. And once you get an unfavorable reputation within a niche market, you may never recover.
- Establish a good working relationship with a factoring company that works in your staffing niche. Factoring is an easy way to free up the cash you have tied up in open invoices. If factoring is something you want to use to improve your agency's cash flows, you need to find a factor that works in your target industry. That will give you someone that understands the way cash flows and payment terms work within the niche, making it easier for you to factor.
- Look for seasonal staffing opportunities. Many industries have certain times of the year when things get busy. Retail has the Holiday Season. Accountants have Tax Season. Those are the times when temporary staffing demands can also go up. If your niche has a prime season, make sure you are prepared. Have staff available and let your clients know you are ready to meet their needs. An inflow of clients will bring in more cash you can use for growth in the long run.
- Stay on top of your cash flows. Don't let yourself get into the position of not being able to meet payroll or cover your rent. Trying to raise funds on short notice is almost impossible. If you know that you are not going to have the cash flows to cover a critical bill, you need to have time to work with a factor to get cash or to tap into a line of credit you might have.
- Don't grow beyond your cash capacity. Staffing agencies have 30 to 60 days between the time they issue an invoice and the time the client pays it. However, before the client pays the invoice, the agency is going to need to pay staff for the work done. Don't take on a big new contract unless you have the cash flow to meet the increased cash flow.
Factoring is a solid choice for staffing agencies of all sizes and sorts. But, it is particularly helpful for small niche staffing agencies trying to grow. How can you use factoring to improve cash flows in your niche staffing agency?