Staffing companies, particularly those with a strategic niche such as IT, medical, industrial or warehouse staffing, are positioned to thrive in the current business environment, which supports outsourcing employees rather than bringing full-time employees on board.
As I work with a variety of small and midmarket businesses, including staffing companies, one question I often hear is how business owners can successfully manage and finance growth. Here are four insights to help your staffing company thrive.
1. Planning ahead
The business plan you used to launch your staffing company may not be right for you now. Evolving market conditions require business owners to revisit and update business plans regularly. As your staffing company grows, your strategy needs to evolve to accommodate your new circumstances. Case in point: as your business matures, you will likely shift your focus from winning new customers to maximizing growth organically with existing customers.
2. Leveraging new tools and technology
Staffing companies use a variety of tools and technology to streamline communications, improve productivity, and search for job candidates and clients. By replacing cumbersome spreadsheets and paper resumes to communicate more efficiently with candidates, business owners can ensure more effective client relationships. Most high-growth companies use a customer relationship management (CRM) system. If you're not familiar with CRM, this tool can help you regulate how everyone at your staffing firm communicates with candidates and clients, which helps foster relationships and ultimately increase sales.
3. Managing cash flow and payroll
Staffing companies are all too familiar with the pressures of cash flow, particularly as business owners pay employees while waiting extended periods for clients to pay on contracts. Finding the right financial partner will be key to survival, especially when you want to take advantage of a growth opportunity. To ensure you can manage cash flow and payroll, let's consider three options:
- Traditional commercial banks can be a source of funding, but business owners must be prepared for the rules that go with those loans. Banks tend to be stringent in looking for good credit scores, dependable cash flow and collateral that might include personal guarantees. A great banking relationship is important, but there are alternatives if you are not finding a partner that can help in the short term.
- Community banks and credit unions are another option. These institutions may be more flexible, because the lenders are more likely to know business owners ahead of time. The track record and character issues have already been set, which could make up for shortfalls in other areas, like cash flow and collateral.
- Alternative lending in the form of staffing factoring is a lesser-known tool that can provide access to working capital when banks and other funding sources are limited or too restrictive. Traditional factoring, or invoice financing, works on an invoice-by-invoice method that can be costly. However, some factoring companies offer a factoring product that works like a revolving line of credit, using a pool of accounts receivable as the collateral to establish a borrowing base. Businesses can tap into their lines of credit on an as-needed basis. This type of factoring can be less costly, as you only pay for what you borrow.
4. Welcoming change
Contentment can be a threat to a high-growth business. Revisiting your business plan allows you to assess market conditions and identify any number of actions, such as upgrading technology, renegotiating contracts, ramping up marketing efforts, or expanding your team with trusted new hires.
Running a staffing company isn't easy, but there are countless resources and tools at your fingertips. I advise business owners to find a handful of trusted advisors and, when needed, a financial partner who will work in your best interest to provide stability during periods of growth and transformation.