A staffing firm is different from a placement agency. A placement firm helps a client recruit a full-time employee by sourcing candidates and doing the initial screening processes. The employee joins the payrolls of the client company and the placement firm collects a fee. A staffing firm, on the other hand, has employees that they hire out to a client company as temporary staff. Sometimes, these employees can be on long term work but it is the staffing firm that is responsible for the employment taxes as well as employee benefits. The agency gets paid the hourly rates that they negotiate with the client company.

Staffing firms who use our recruiting solutions, have given us a deeper insight into the common recruiting mistakes that they encounter and how to avoid it.

7 Recruiting Mistakes New Staffing Firms Should Avoid

Below market rates

Start-up staffing agencies are trying to attract new clients and offering low rates is one way to do that. The problem is that it will be hard to raise your rates later and your profit margins will never be enough to be sustainable. You don’t want to build a market reputation of being a cheap agency. Instead, try to create a differentiator that is not low pricing. Hone in on what your staffing firm can do more efficiently in solving client problems and make that your USP.

Not identifying your industry niche

This is one pitfall that many new staffing firms make when they start out. Rather than identifying their industry niche and becoming the go-to specialists, they spread themselves thin not wanting to lose out on any opportunity. For staffing agencies, having an industry focus whether it is in IT, manufacturing or marketing can make them more process oriented. Concentrating on specific industries, helps them to build a strong client base. The advantage is that when you are seen as specialists, you can charge more on your contracts compared to a general need agency.

Lack of temporary staff

Client companies turn to staffing firms since for them it is a fast way to get temporary staff that has already been vetted. The skill of your temporary workers is what you are selling so you need to make sure that you are constantly recruiting to meet demand. And off course you must meet payroll every month, even if client payments are delayed. Else you will see your employee base dwindling.

Inadequate interview process

When a client places an order, racing to fill it becomes the staffing firm’s priority. An experienced staffing agency will not hurry up on the interviewing process. Even if the temporary staff you are providing is low-skill or entry level make sure that the employees you send are reliable. Take adequate time to do background checks and have a good interview screening process. Your staffing firm’s reputation is built on the quality of talent you send. Unqualified or unprofessional employees can hurt your bottom line. Don’t’ waste time interviewing the wrong people, so make sure the job descriptions you send out has clear information.

Not having good legal advice

 The contracts you draw up between the staffing firm and the client company as well as the contract between the employee and staffing firm must be sound. It will determine the profits you make as well as how long you can ensure the employee remains contracted. Staffing firms who are just starting out try to cut costs in the legal area. Contracts that are written well will avoid problems in the long run.

Inadequate working capital

Temp agencies need sufficient initial capital to keep their business rolling. If you do not have the finance to fall back on then you might find yourself having to let go good opportunities since it can take months to get the cash flows consistently rolling in. There are many ways to get this financial cushion in place and one of these is payroll funding. This generally means selling your open receivables to a payroll funding company in exchange for immediate cash.

Thinking your client partnership is sacrosanct

Many staffing agencies grow complacent with time. Contracts can always run out and not be renewed. The client might be working with you but that does not mean he won’t work with others. There will always be other alternatives at a similar price and a client might consider them. Never therefore put all your eggs into one big contract. Continuously explore other options.

These are few of the main bumps on the road you might encounter as you start out. Reaching the next fiscal year will need recruiting firms to take cognizance of these hurdles and put an effective plan in place.

Resumemantra is a recruiting software provider to staffing firms.