Many staffers have the good fortune of winning deals. They are great recruiters and can fill orders. Then the big question becomes: How do they finance it if the client requires 60 days to pay the first invoice?
Conversely, what happens if payment trends slow? Staffer’s will need more money to finance the same amount of business.
In my 30 + years in the business, the best way to scale a staffing business is using a staffing specific lender that offers unlimited funding.
Unlimited funding allows staffing companies to scale rapidly by eliminating cash flow constraints tied to contractor payroll. With this financial flexibility, a staffing company can on-board and pay unlimited contractors without worrying about delayed client payments.
For example, a staffing company limited to $2 million in revenue at a 17% profit margin generates $340,000 in profit. However, with unlimited funding, it could scale to $10 million in revenue, even at a slightly lower 15% margin, resulting in $1.5 million in profit—over four times the original amount.
Highlight:
Limited Financing Unlimited Financing
(Self or Bank) (Staffing Specific Lender)
Annual Sales: $2,000,000 Annual Sales: $10,000,000
Gross Profit: $340,000 (17% GM) Gross Profit: $1,500,000 (15% GM)
The cost of financing is covered by the increased revenue and profit, making it a self-sustaining growth model.
Additionally, delayed invoice payments can create severe cash flow issues. A company billing $10 million annually with a 35-day DSO has $1,000,000 tied up in accounts receivable. If DSO extends to 42 days, the outstanding A/R balance increases to $1,400,000. Without sufficient cash reserves, the company must finance the $400,000 gap, which can strain operations and limit growth.
Highlight:
(Self or Bank) (Staffing Specific Lender)
DSO 35 days DSO 42 days
Annual Sales: $10,000,000 Annual Sales: $10,000,000
$1,000,000 needed to support $10mm $1,400,000 needed to support $10mm
With an unlimited funding program, staffing companies no longer need to slow hiring or restrict client acquisition due to cash flow concerns. Instead, they can focus on expanding contracts, increasing placements, and driving profitability without financial roadblocks.
Please contact me for more details.
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