The Top 7 Reasons Your Staffing Firm Is Unable to Scale

As with any other business, you want your staffing firm to scale significantly over time. Onboarding new clients and retaining existing clients provide essential growth opportunities that drive revenue and exposure for your firm.

Unfortunately, many staffing firms find themselves held back by one or several issues that keep them from scaling successfully. In extreme cases, attempting to scale before overcoming these hurdles could put your firm in dire financial straits. Seventy percent of startup failures are linked to scaling attempts — and staffing agencies aren’t immune.

Addressing the reasons why your firm is unable to scale is key to future results.

  1. Cashflow Limitations

Twenty-nine percent of startup failures are linked to simply running out of money. Managing cash flow is a challenge for even the biggest of staffing companies. Proper management and reinvestment of cash are crucial for taking a firm to the next level. Quite often, staffing companies must find out how to allocate funds for a significant, large-headcount project before receiving the first paid invoice for the project.

If you don’t have enough cash on hand to make the initial investment needed for the project, you won’t deliver the results your client needs. You may even have to refuse the project entirely. Such setbacks will severely hinder growth efforts while also harming your reputation in the industry.

  1. Lack of Recruiting Support

Quality recruiting support is the lifeblood of any staffing agency. Quality recruiters can fill roles as clients submit requests, often providing instantly available candidates. In the highly competitive staffing world, your team’s ability to quickly fill positions can make all the difference in winning bids over a competitor.

Of course, this calls for a team of experienced recruiters who understand the talent at their disposal and the needs of your clients. Quite often, smaller staffing firms don’t have a skilled enough — or large enough — team to provide this high level of recruiting support. Grow-ing your team is a vital first step for scaling.

  1. Strict Vendor Requirements

Vendor setup typically requires significant oversight from the client and critical investments on the part of your staffing firm. Finalizing service-level agreements (SLAs) and determining insurance and benefits payouts, payment terms, and more can cause significant delays in becoming an approved vendor for a client.

Typically, the larger the client, the more extensive these requirements will be.

Going through these requirements can be quite time-consuming, requiring that your team spend more time on tasks that don’t grow the bottom line. Vendor management tools can go a long way in streamlining this work so you can focus on landing new clients.

  1. Rigorous Compliance

The world of employment is more diverse and complicated than ever before. This has made navigating compliance issues trickier than ever, particularly regarding employee classifications, insurance requirements, distribution of benefits, and paid time off. Staffing companies must remain compliant with all these areas, as the employer has a significant assumed liability.

To alleviate this, staffing firms should consider working with an employer of record (EOR). An EOR assumes responsibility for taxes, insurance, paid time off, and other compliance costs. By outsourcing these liabilities and obligations, a staffing firm is better positioned for rapid, risk-free growth.

  1. Business Development

Many independent (and incredibly newly independent) recruiters face significant business development challenges limiting them to exclusively engaging with new clients.

For example, non-compete language from a former employer may prevent them from working with clients with whom they had formed relationships at a previous firm. Alternatively, others who are new to this side of the business may need additional guidance on targeting clients, as their efforts repeatedly fall short of the mark.

Such challenges can prolong growth potential. If a staffing firm is essentially limited to cold calling leads, it will be some time before it can grow many repeat clients.

  1. Inconsistent Revenue Streams

Direct hire firms and independent recruiters often experience significant cash flow fluctuations. While the business may achieve large payouts, there can also be extended periods where no money is coming in at all. This lack of stability makes it near-impossible to scale successfully.

Staffing agencies facing this challenge must find ways to generate a more consistent flow of income. Such stability is necessary for onboarding new recruiting talent and making the investments needed for large-scale projects.

  1. Nonexistent Candidate Redeployment Strategy

Many staffing firms will identify candidates for a job opening, present them to a client, and call it a day. Unfortunately, many of the roles filled in such circumstances are temporary, only lasting six months or so. Some staffing agencies don’t have any strategy in place for what to do after a candidate has been released from a temporary position — or what to do with the other qualified candidates who weren’t hired.

This results in much work to fill each contract position. A thriving thought-out redeployment strategy includes a detailed plan that keeps prior job candidates in the talent network. This ensures that your recruiters have qualified candidates ready to go when a new client submits a project request.

Rather than needing to go through the entire finding and placing candidates from scratch, much of the work has already been completed. Faster fulfillment results in happier clients and increases your team’s capabilities to take on more projects.

Make Needed Changes to Scale Successfully

Resolving these common staffing firm challenges will be vital in helping your company gain new clients while also maintaining the infrastructure needed to provide the results that will keep them loyal to you in the future. This creates an ongoing loop that enables you to enjoy steady income to continue scaling operations while delivering quality outcomes.

If you need help dealing with these and other common staffing challenges, myBasePay can help. Corporate talent acquisition solutions assist with many tasks, from outsourcing liability and compliance to building a talent network platform that improves recruiter, candidate, and client engagement.

By using these resources to streamline your operations, you can scale with confidence.


Author: Cesar Romero
Cesar is the Head of Marketing at myBasePay, where he’s responsible for overseeing the company’s content marketing, community, and partnerships strategy. He also co-hosts The Ivy Podcast where he interviews executives from Fortune 500 companies on executive leadership. When he’s not helping startups with marketing and community strategy, you can find him paying it forward by serving as a mentor for leading organizations like StartingBloc, Hive, and Global Citizen Year.

Similar Posts