Cash Flow

Upfront Costs for Staffing Firms (And How Factoring Can Help!)

Posted by Factor Funding Co. on December 31, 2015

Upfront Costs for Staffing Firms

Starting up a staffing firm can be the dream of a lifetime. It is also the challenge of a lifetime. If you are seriously considering opening up a staffing agency, you need to be realistic about what it takes to do it. One of those realities is the amount of upfront costs involved with the process.

Do you have enough money to get your staffing agency off the ground?

The Cost Involved with Opening a Staffing Firm

The list of costs involved with opening any business is quite extensive. With a staffing agency, there are additional items on that list. Let's look at some of those costs. 

  • Incorporation and DBA filing. You need to establish the legal foundation of your company. Running a staffing agency as a sole proprietorship is not a good idea due to the potential liabilities. Incorporation will involve legal fees as well as fees for filing the papers. But, it is money well spent. 
  • Office space. Many staffing agencies start out in a spare bedroom or in the garage. However, if you want to establish your company as a professional entity, you will need an office space. You will need money to rent the space and to turn on the utilities.
  • Equipment and furniture. You will need basic furniture and equipment to get your business up and running. At the very least, you will need a computer, a desk, an office chair, and a chair or two for visitors. 
  • Basic software and supplies. Running a professional agency does require some basic software and supplies. You will need software to track expenses and invoices. You also need software to track employees and clients. Basic supplies would include paper, pens, paper clips, envelopes, and things like this.
  • Online presence. Today, having a website is a must for any business. It is a virtual business card and it is 24/7 advertising for your agency. You will need to develop a website and buy a domain. You will also need to set-up and manage social media accounts.
  • Start-up payroll costs. There is going to be a gap between when your staffing employees work and when the clients pay for that work. You are going to have to have the cash to cover the payroll in between. 
  • Advertising costs. You will need to advertise for both clients and staff. You will want to have both traditional and online advertising to have the most exposure and the best traction. 

The Pains of Start-up

Along with the costs of starting the staffing firm, there are the challenges of getting everything up and running.

  • You want to take on clients, but if you take on too many, your cash flows will get very tight, making it difficult to meet payroll and bills.
  • You want to bring on top talent, but you need to have clients ready to bring them on-board. If you don't that talent will go elsewhere.
  • You need to make sure your services are priced where the market will pay. Overpricing will kill your business. Underpricing will not let you meet your expenses while sustaining growth.
  • You need to establish yourself in a target niche, but not target too narrow a niche to kill your chances at growth. 

What Can Make Starting Up Easier

One thing that would make your start-up go a bit easier is a ready source of cash. Unless you have a rich relative ready to fund the agency, you likely only have a small amount at start-up. Factoring is one way you can get the cash you need to grow and sustain your business.

When you have an employee working at a client, all seems good. Until you need to meet payroll, that is. Then, you find that your cash flows are inadequate. You may be scrambling to find the cash to pay your employees. All of this is happening while you are waiting on your clients to pay for the work already done. 

With factoring, you can get up to 90 percent of the value of those invoices, weeks before the client pays them. You can use that cash for anything you need, like meeting payroll or paying the rent.

If you think factoring would be a good source of cash for your start-up, you need to find a factoring company to work with. You will need to go through an application process at first. This usually takes a few days. Once you are established, you can get access to the cash you need within 48 hours in most cases. 

Do you think factoring will help your start-up succeed? 

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