Staffing Owners Secret Sauce to Expansion

The hot job market has been a boon for staffers. The popular refrain for the last year: “If you can find the people – you can place them”.

While the top line jobs numbers are still strong, there are more and more signs the labor market is slowing down. More workers are filing for jobless insurance claims, working part-time jobs for economic reasons, fewer of them are quitting, and more employers are curbing hiring.

But other data shows the gradual cooling is unlikely to let up. Wage growth is a “late-cycle indicator,” said Michael Gapen, head of U.S. economics at Bank of America. Unemployment insurance claims, job openings and hiring rates are better at predicting what will happen in the future.

So what is a staffer’s next move to keep the company growing?

For example, as the economy slows executive search firms can add easily add contract staffing. Contract staffers can add different verticals that have more demand for talent. If some staffing companies fail, there is an opportunity to “pick-up” some of that business. Companies with unlimited access to cash and a variable back-office cost structure are best positioned to weather any down-turn and take advantage of the aforementioned growth opportunities. More on this later.

Right-Hand Person(s)

Take note: There is no way to take advantage of any growth / expansion opportunities with the right internal staff. No staffing owner can do it by themselves. As the company grows, the owners need to “clone themselves” to successfully take the business to the next level.

3 Keys to Growing in a Slowing Economy

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 and hired a brilliant young man named Tony Hall. They only added locations after they had developed the talent to lead the expansion outside of 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 a store in Nashville, TN. Furthermore, both 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, and cash-flow is a must. It takes money to replace the promoted employee. It takes money to add an office and in staffing, it takes lots of money to grow payroll. It also takes money to build infrastructure: software, payroll, invoicing, A/R management etc. These are fixed costs that could be difficult to maintain if business doesn’t grow quickly.

Using an unlimited funding source like my employer 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.

The big takeaway to growing any business is don’t go it alone.

Please feel free to contact me to learn more.