As negative news dominates the media coverage, business has been coming back slowly. I have been seeing my clients recover a little bit each week and hopefully that trend will continue. According to the BLS, temporary help has added jobs over the last three months.
This is certainly an encouraging sign for the labor market.
However, the shut down and slow reopen of the economy has devastated some independent staffers into closing their business and the national staffing agencies to shutter offices. As devastating as that is, their customers had to go somewhere. And as demand continues to come back, it will create additional opportunity for staffers that are in business.
In the past, the economic cycle that we are currently in creates an excellent time to start a staffing company. It also creates an excellent time to expand an existing staffing business. There are many ways to successfully achieve expansion without as much cash outlay as one may think. Perm companies can add contract. Contract staffers can add different verticals.
I have seen a lot in 30 years and here is a template that has worked for many small staffers looking to add offices with little cash outlay:
1. Develop a “Farm System” of Leaders
2. Anchor Client with Multiple Locations
3. Turn A/R into Cash & Outsource Back Office Functions
Headquarters as a Farm System
It’s difficult for smaller staffing companies to buy an existing business or to lure top talent away from established agencies. The cost is just too high. So, unless you’re the New York Yankees of staffing, growth by acquisition is just out of reach.
Instead, think of your office as a farm system for developing internal talent. Raw talent costs less and you get to develop them. As your young, talented staff gains experience, they will be seeking growth opportunities (and salary increases) that expansion can provide. It’s a great way to retaining top talent!
My good friends in Alabama did just that. Shell and Carol Lawhorn, former owners of Men at Work, Inc. a provider of day labor to the construction industry, successfully expanded beyond their Birmingham HQ location. After many false starts, they decided to train and promote from within. They only added locations after they had developed the talent to lead he expansion in Birmingham. Using this model, they grew to over 15 locations in four states before selling their business.
Anchor Client
Another great way to expand is by adding a large client in another location first. Shane Headlee, owner of On Demand Staffing in Indianapolis did just that. He has a client that needs large numbers of temps in different facilities throughout the US. As he added service to the out of state locations, he also opened an office to develop other business in the area. The anchor client generated instant revenue that helped him to finance expansion.
Just a side note, Shane learned the ropes at Men at Work. He started in Birmingham and opened their store in Nashville, TN. Furthermore, both of these companies were vital in the start-up success of Carvin Wilson, Founder of Carvin Software. Talk about a chain reaction of success!
Outsourcing is the Best Model
The above-mentioned examples are a couple of cost-effective ways to expand but some cash is still required. It takes money to replace the promoted employee. It takes money to add an office and it takes money to finance receivables. It also takes money to build infrastructure: software, payroll, invoicing, A/R management etc.
Using a funding source like my employer Madison Resources is an excellent way to turn receivables into cash and outsource non-revenue producing functions to keep fixed costs to minimum. Plus, this gives the owner the ability to manage the business remotely with the added security of a third party processor.
Again, there still is plenty of uncertainty and fear in the economy right now. But with uncertainty comes opportunity. Please feel free to contact me for more information.
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