A staggering 45% of service companies like staffing agencies go under by year four (Statistic Brain, 2017); primarily due to insufficient capital.

That said, a medium-scale staffing business with three members or more in Canada can cost around $250,000 to start up. It’s quite a heavy financial pill to swallow – especially in the beginning stage where working capital is an issue.

Setting Your Canadian Staffing Agency in Motion: A Breakdown of Costs

A staffing agency owner will need to budget for the following necessary items:

  • For Canadian federal incorporation of the business.
  • Legal costs for obtaining licenses and permits, including accounting services like CRM and Payroll software, P.O.S machines and more.
  • Business consultant help.
  • Insurance coverage (general, health, liability, workers’ compensation, overhead expense disability, and business owner’s policy group insurance).
  • Cost for leasing an office in a centralized business district.
  • Cost to remodel the office space.
  • Costs to furnish and build office (tables and chairs, fax and photocopy machine, printers, telephone, computers, filing cabinet, etc.)..
  • Operational costs for the first 3 months (employee salaries, bill payments, etc.)..
  • Other startup costs like stationery, phone…etc.
  • Startup inventory costs like writing materials, notice board, files and folders, printing ink.
  • Costs for store equipment costs like cash register, ventilation, security, etc.
  • Cost of CCTVs purchase and installation..
  • Opening party cost.
  • Website design and setup
  • Company branding
  • Marketing and advertising

On the other hand, according to Profitable Venture, starting up a small-scale but standard staffing firm (from home, a shared office location or virtual office space – less than 3 employees) in Canada can cost around $5,000 to $15,000. While this is a substantially smaller budget compared to a medium-scale startup with an independent office location, it is still paramount that the right financial moves are made in the beginning stages so that you’re prepared for every stage of growth that follows.

The Financial Options Your Staffing Firm Should Think Twice About

In order to successfully manage and grow your company, you need to be making the right financial choices. That said; there are certainly financial options that are more suitable for a growing staffing agency than others.

Let us start by breaking down the least ideal financing options for startup and growing staffing agencies:

1. Getting a bank loan.

While a bank loan may seem like the most appealing option to many due to its reputational perks and attractive interest rates, it comes with many disadvantages. With customer credit as a substantial deciding factor for bank loan eligibility, startup staffing companies who turn to their bank for financing often face much difficulty even qualifying in the first place. Then of course, there’s your personal equity and credit score that’s considered (most lenders prefer a score in the 700-800 range).

In an article from LinkedIn, executive VP of Access Capital, Paul Mehring, explains that “a bank loan can be the cheapest source of capital, especially for a more established staffing agency that isn’t experiencing much growth. However, regulated institutions are challenged to support growing staffing firms”.

The bottom line is, with bank loans, there’s limited capital and opportunity for growth, and your credit line will be increasingly difficult to attain over time. Banking professionals are also inexperienced and out of the loop with regards to the staffing industry – and when you consider that there are organizations that specialize in helping growing staffing agencies thrive with financial support – the bank loan begins to look like a much less feasible option.

2. Using friends or family for financial help.

A lot of startup staffing agency owners turn to their friends or family members for money to fuel their business – but many don’t realize that this can be a very destructive route to take (despite how appealing a break from interest fees may sound). Relying on friends and family members for finances is a risky move; as you risk ultimately running out of funds and compromising their financial wellness, as well as risking your relationships with the people who are closest to you.

3. Getting a credit card loan.

While a credit card may be an easy thing to acquire, it isn’t the smartest decision out there when it comes to financing a startup staffing business. Interest rates are incredibly high, and your expenses will be too high to gamble with missing payments – and with your personal credit at risk, your staffing agency will be placed in jeopardy.

4. Invoice Factoring.

When you choose to get your funding from a factoring company, you’ll receive a cash advance of around 80-90% of the value of your invoice – then once your client makes the payment directly to the factoring company, you will receive the remaining percentage.

Keep in mind, the amount you’ll be receiving back will be minus the company’s factoring fees, which can range anywhere from .5 to 5% of the value of the invoice per month. These fees can seriously add up, and to qualify for invoice factoring, clients must be able to pay your factoring company within 90 days.

The Most Ideal Financial Move For Your Canadian Staffing Business: Outsourcing Payroll Funding.

Staffing agency owners MUST be able to make payroll every week – there is no room for error in this department. Recruitment companies that do not make payroll simply do not stay in business. Then consider that staffing firms can go without receiving payment from clients for months – so making payroll is a particularly challenging obstacle for those in this field.

Thankfully, The Agency Support Partners solves this problem by supplying staffing agencies with the necessary funds to help their agency soar. Hiring a payroll funding and management is different from dealing with factoring companies that charge hefty fees on your invoices (costing you far more than you may have anticipated). At The Agency, the more financing you use with us, the lower your fees will be. We also handle everything from sending your customers weekly reports and paycheques, to sending out invoices and issuing payroll to your employees - so it’s truly an all-around smarter option.

Unlike factoring companies that keep a high percentage of your invoices (costing you far more than you may have anticipated), the more financing you use with us, the lower your fees. We also handle everything from sending your customers weekly reports and paychecks, to sending out invoices and issuing payroll to your employees - so it’s truly an all-around smarter option.

And if you’re starting out with a less-than-perfect credit score, or no credit at all – outsourcing funding can actually provide you with the financial stability that is necessary to get your credit score to where you need to be.

You Can Trust the Agency to Take Your New Staffing Firm to Greater Heights.

By choosing our payroll and back office solutions to support your startup or growing Canadian staffing agency, you’ll be choosing a partner that truly understands the industry you’re in – and will always be prepared to help you with your financial needs. This is crucial for your success and growth.

Other Back Office Operations and Support Services that The Agency offers include:

Payroll Processing and Timekeeping

Our team of trained experts can help you process your payroll while managing your timekeeping processes for your growing staffing business.

Payroll Tax Administration

Our team handles your payroll tax administration and puts together deposit statements, T4s, ROEs and government remittances.

Invoicing

The Agency professionally prepares your invoices, sends them to your clients and collects their payments – one fewer thing for you to worry about.

Credit Research

We’ll protect you from bad debts by performing credit checks on your clients. We also provide A/R Insurance as an additional means of protection against bad debts.

Strategic Services

Our industry vets will help you to plan the best course of action – helping with accounting and financial planning, sales and marketing, and whatever else you need.

Startup Resources

Our team will help you register your Ontario staffing agency and provide assistance using a sophisticated Applicant Tracking System and staffing specific templates.

Funding With Full Service

With this full package option, our experts will fund your payroll and provide complete outsourced back office support for your Canadian staffing firm.

Funding With Full Service

With this full package option, our experts will fund your payroll and provide complete outsourced back office support for your Canadian staffing firm.