Starting a Temp agency can be incredibly rewarding. As an owner, you’ll get the satisfaction of helping people find work while also reaping the financial rewards of running your own business.
But it comes with some risks.
Plenty of entrepreneurs commit one of dozen or so common mistakes when starting a Temp agency. It costs time, money, and agony if these traps aren’t avoided.
In this article, we’ll go over 12 of these challenges to starting an agency. With this knowledge on your side, you’ll know what to avoid and how to succeed.
Table of Contents
1. No business plan in hand
Any solid business venture starts with a plan. A business plan will map out your goals and direct your efforts, ensuring wiser decision-making and avoiding costly mistakes. With no plan, you might find yourself stuck losing time and money on activities that don’t pay off. Especially at the start, your business needs results.
In addition, potential investors and lenders will want to know whether your Temp agency has a clear direction before they finance anything. Any business needs a detailed plan at launch, but this is especially true for high-intensity, fast-paced Temp agencies.
Learn more: Business Development in Recruitment: Top Tips & Key Metrics
2. A missing USP
Without a clearly defined USP (Unique Selling Proposition), it can be difficult to differentiate yourself from other competing agencies and find your niche. An ineffective or missing USP makes it hard for potential clients to understand what value your business offers, making them less likely to choose your agency.
Without a clear message about who you are and why customers should choose you over other options, it will also be harder to create effective marketing campaigns. With less marketing, you’ll have fewer chances to enaging potential clients, which ultimately drives business. Get clear at the start what sets your agency apart.
Learn more: How to Get Even More Clients for Your Recruitment Agency
3. Bad financial planning
Starting a Temp agency without a financial plan can be disastrous. Proper planning and budgeting will balance out resources and keep the business running. Poor planning can make it hard to fund operations or offer new services – which Temp agencies need for long-term success.
A bad financial situation can also put a strain on relationships with clients and vendors. When cash flow problems get out of hand, it can sink the business altogether. Get right on finances at the start to have the best chance of success.
4. Zero insurance
Nobody loves doing paperwork, but you won’t love missing insurance when you need it either.
Starting a temp agency without insurance coverage can be extremely risky - and it could lead to serious financial consequences. Without the right policies, your business could be exposed to costly liabilities. An onsite injury, lawsuits from disgruntled clients, or other major events could wipe out your agency.
Long story short: crises can put your business at risk. Getting insurance coverage sorted at the start is a safety net for any agency.
5. Hiring too much, too fast
Many new Temp agencies are tempted into overhiring. It’s understandable to want the right team at your side. But when hiring plans go awry, payroll costs can be a massive strain. If consultants aren’t winning enough business yet, paying those wages will deplete the agency’s budget.
Besides that, a large team without enough oversight might produce low-quality work. Owners or managers won’t have the time to check everything, which leads to slipping standards. That’s why it’s important to be careful about hiring both consultants and for leadership roles.
Start by evaluating your hiring needs carefully. When there’s a mismatch between the number of employees and workload, it leads to inefficiency and waste.
6. Limiting your database and professional network
Having a strong professional network and database is essential when starting a Temp agency. Having access to reliable industry contacts will help you quickly develop relationships with clients and vendors.
And on the in-house side, a comprehensive database of potential candidates keeps your team independent of external job boards. The faster they can find the right talent, the more clients will appreciate your agency’s work.
For both of these reasons, we recommend investing early in the right CRM / ATS platform. Having these lists at your fingertips makes business more efficient.
Learn more: Data-Driven Recruitment: Secrets and Strategies
7. Neglecting your brand identity
Establish a clear brand identity as soon as you open your doors. Branding helps associate your agency with quality services (and it sticks in clients’ minds so they’ll remember you).
Effective brand identity includes a distinct logo, taglines, and a website that shows how your business stands out from the competition. Also, a consistent brand message across all social media channels lets potential clients form an impression of your Temp agency and how it can meet their needs.
Investing in your brand’s image will ensure that people remember your agency when they need temporary staffing solutions. When it’s done right, it can also instill confidence in your agency’s quality of service. A brand identity helps answer that client's question: “Why should we work with you?”
8. Setting prices too high at the start
Good first impressions count. Offering high prices right out of the gate might seem like a reasonable way to maximize profits (especially when you’re trying to build up a cash runway). But in reality, it’s a costly mistake.
There are many potential clients looking for cost-effective solutions, and they won’t want to work with you. If overpricing is taken too far, it might make your business seem out of touch - like you don’t know how to or don’t want to offer a fair trade.
Also, you’ll be facing down competitors who offer lower pricing. Guess who’ll end up with an advantage in securing those same contracts?
Pricing should be set according to market conditions and what the client is willing to pay rather than trying to squeeze as much profit as possible from each job.
9. Failing on compliance
Legal and compliance issues loom large for anyone starting a Temp agency. Failing to consider these can leave the business vulnerable to serious consequences down the line. Taking proactive steps toward ensuring regulatory compliance will ensure that your Temp agency is secure in the long run.
Any new Temp agency should conduct extensive research into local and federal laws, as well as seek professional legal advice. Once you’re running the business, consultants should be trained in handling sensitive data to minimize the risk of compliance issues.
10. Wasting time
Losing time on unnecessary back-office tasks can hurt a new Temp agency. Every minute spent on admin work detracts from more productive activities like networking, developing client relationships, and sourcing qualified candidates.
It can also lead to missed opportunities and hurt your bottom line due to inefficient use of resources. But unnecessary back office work can be kept to a minimum with the right systems in place.
Payroll, timesheet processing, and invoicing are a few examples of these potential timewaster tasks. There are plenty of companies that you can use to outsource these kinds of services. Another solution is to invest in the right solutions, like a Temp and Contract management tech stack.
11. Ignoring marketing and promotion
Getting new business first requires getting your name out there. Investing in marketing campaigns can help to build brand awareness, establish trust with customers, increase visibility, and drive sales. Ignoring these benefits could mean missing out on potential clients and opportunities for growth.
Using promotional tactics like targeted offers can be effective at generating leads and driving conversions. Investing in marketing will pay off by helping your Temp agency reach its goals faster - versus if you were to ignore promo altogether.
Learn more: How to Market Your Recruitment Business
12. Missing out on the right technology
It’s a common misconception that tech and automation are just for big well-established businesses, not new Temp agencies. But the reality is embracing the latest tools and technologies can be an incredibly powerful way to streamline processes, reduce costs, improve customer service, and drive growth.
Automation can eliminate time lost to tedious tasks like invoicing or data entry. And by leveraging the power of analytics and algorithms, agencies can gain insights into their operations that would otherwise be unknown. Investing in the right technology solutions at the start can position a Temp agency for long-term success.
Starting up a temp agency usually takes a set of essential tools. These include customer relationship management (CRM) software, applicant tracking systems (ATS), accounting and payroll software, timesheet systems, invoicing solutions, and data analytics solutions for predictive insights.
Learn more: Recruiting Automation: 5 Ways AI Will Power Your Business
Final thoughts
Starting a temp agency is an exciting venture that requires careful planning and preparation. It can be fast-paced but doesn’t always have to be high-risk.
With some of the mistakes outlined above in mind, you should be able to work around these common pitfalls and set up your Temp agency for the greatest chances of success.