Do you want to know how much money staffing agencies make yearly? If YES, here are 4 factors that determine the income & profit margin for staffing agencies. Staffing agencies are known to work talent on behalf of their client employers. The terms “staffing services” and “staffing firm” are the most comprehensive terms used to describe the services offered by these businesses, since both include all three forms of possible worker recruitment:
- Temporary employment
- Direct hire
- Temp to full-time
This last area involves delivering workers on a temporary basis that might eventually be hired full – time by your client after a trial period. The ideal target market for staffing agencies are those who regularly hire for one reason or the other. In that circumstance, the client is likely to seek temp workers on a moment’s notice.
Another target market for staffing agencies include employers who don’t have the time or resources to go through resumes and job applications or feel that they need a third – party expert opinion on hiring decisions. This scenario is most common when employers are seeking highly compensated or niche talent, in which case the hiring might be a major investment.
This business is ideal for an individual who understands the human resource side of the business, especially since they will be dealing with common HR issues such as interviewing, hiring, firing, work disputes, and tax and other withholdings. You are also expected to have the sales ability and a knack for managing and motivating your employees, many of whom are likely to be on the sales side of the business.
Also note that sales abilities are very necessary because you may have a lot of competition, and all similar firms in your field have access to the same talent pool. It’s is important you devise a way to differentiate your firm from others, perhaps by your attentiveness, attention to detail or screening skills.
How Much Money Staffing Agencies Make Yearly
For the placement of temp employees, staffing agencies mostly take an hourly rate from the employer and pay the temp worker from that amount. Generally speaking, the owners of staffing agencies are known to make about $103,000 a year. The exact value varies by individual because of a few different factors.
Additionally, the salary of staffing agency owners tends to vary based on location. Typically, pay is higher in big city areas; the more people the agency matches up with work, the bigger the salary of employees of the agency. According to reports, agency owners in Washington, D.C. make about $122,000, which is 18% above the national average.
Although figures vary wildly in the staffing industry, experts analyze that those privately held companies probably average somewhere around $750,000 per year. However, the profit of staffing agencies is in the mark up the agencies add to the price of an employee’s labour.
But note that industry mark-ups according to recent reports, have slipped in recent years, mark – ups can remain high even in a slumping economy because there aren’t that many qualified applicants to work with. Additionally, today’s workplace requires more skills and therefore more training.
It’s very important to state that profit margins are exciting in the staffing services industry. Net profit margins in general staffing services can settle around 4 to 10 percent. And what if your company doesn’t do general staffing, but instead operates in one of the niche markets? Then you are in the next big thing: specialization.
However, staffing industry profit margins vary widely. According to reports, a profit margin of even 5 percent, especially in the first few years of operation, is respectable. But if you’re recruiting minimum wage factory or warehouse workers, expect to make significantly less per placement than if you represent engineers or physicians. However, you will also spend less time and energy on a lower – paying placement than when representing a professional.
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4 Factors that Affect Mark-up or the Profit Margin of Staffing Agencies
To accurately know the amount of mark up you can earn for a particular type of placement, you will have to consider the following factors:
If for instance you have very little competition in the type of staffing you do or the training you provide, you can get a generous mark up. If you have so many competitions, your mark up and your profit margin are more likely to be the average for your industry and your area.
2. Client relationship
Note that a client who gives you a lot of business is expected to get a more favourable billing rate, which means your mark up will be lower.
3. Industry sector
Note that some niche markets (e.g., IT) offer higher mark – ups than do traditional staffing markets (e.g., clerical).
4. Local standards
Also have it in mind that your service’s geographical location will also dictate what kind of mark up you can get. For instance, although mark – ups in the industrial sector range from 26 to 50 percent in the Indianapolis area, mark – ups in the same sector appear to be a little higher in Chicago.
In this business, your profit margin will greatly depend on your sales ability. If you mostly offer employers temporary workers, a challenging economy might be most beneficial to your profit margin. In a weak economy employers are quite reluctant to make significant long – term workforce investments when they’re unsure of their revenue stream.
Howbeit, during good economic times, clients might come to you for temp or full – time workers because their hiring needs are so great they can’t keep up on their own. Your growth will depend on how you can take advantage of local and national economic trends to provide the services needed.