Starting a staffing agency can be a rewarding venture but like any business, generating revenue in the early days can be challenging. How staffing agencies make money when they first start out is a key question every new owner faces. Without a track record, deep client relationships, or a long list of candidates, how do new staffing firms begin generating income from day one? In this post, we break down how new staffing agencies can start making money, even in their startup phase.
1. Start with Direct Hire Placements
One of the fastest ways for a new staffing agency to generate revenue is through direct hire placements. In this model, a client pays your agency a one time fee usually a percentage of the candidate’s first year salary when you successfully place a full time employee.
Why it works early on:
- No need to manage payroll or fund weekly wages.
- Easier to pitch to clients who are looking for permanent hires.
- You receive payment shortly after placement (depending on payment terms).
Tip: Focus on roles you know well or industries where you have connections. Speed and trust matter when you’re trying to prove yourself to clients.
2. Leverage Temp to Hire Opportunities
A temp to hire model lets you place candidates on a temporary basis with the potential for the client to hire them permanently. You earn income while the candidate is temping, and may earn a conversion fee if the client hires them full time.
Benefits for new agencies:
- Clients pay a premium for recruiters who understand their field.
- You can place higher paid candidates with higher margins.
- It’s easier to build a strong talent pipeline when you focus.
3. Mark Up on Temporary Staffing
The core of most staffing agency business models is the markup between what you pay the worker and what you bill the client.
For example:
You pay a temp worker $20/hour and bill your client $30/hour. That $10/hour difference, before overhead, is your gross profit.
Early-stage strategy:
- Start small. Even a few workers on assignment can create consistent weekly cash flow.
- Be transparent with clients about your value (recruiting, screening, payroll, compliance).
4. Build a Niche and Charge Accordingly
New staffing agencies often make more money by narrowing their focus. Instead of trying to serve everyone, specialize in a particular industry (e.g., healthcare, IT, skilled trades) or job function (e.g., sales, customer service, administrative support).
Why this works:
- Clients pay a premium for recruiters who understand their field.
- You can place higher paid candidates with higher margins.
- It’s easier to build a strong talent pipeline when you focus.
5. Use Payroll Funding and Back Office Support
One of the biggest hurdles for new staffing agencies is cash flow, especially when placing temp workers and waiting weeks to get paid by clients.
Many new agencies partner with a payroll funding company to cover worker wages upfront. These firms also often provide back office services like invoicing, collections, insurance, and compliance, freeing up time for you to focus on sales and recruiting.
Why it matters:
- You don’t need large reserves of cash to grow.
- You can take on more clients and placements without delay.
- It removes the administrative burden that slows many startups down.
This is a crucial part of how staffing agencies make money when they first start out by having the funding and support needed to operate like a larger, established firm.
6. Offer Value Add Services
If you’re having trouble landing placements right away, consider offering related services like:
- Resume screening
- Interview coordination
- Recruiting consulting
- HR compliance audits
These services may not bring in as much as full placements, but they can establish your credibility and bring in short term income while you build your client base.
Final Thoughts
In the beginning, a staffing agency’s income is driven by hustle, niche focus, and smart use of resources. By starting with direct hire or temp to hire placements, building a strong client network, and using payroll funding to manage cash flow, new agencies can create a reliable revenue stream from the start.
At Madison Resources, we specialize in helping new staffing firms succeed from day one with payroll funding, back office support, and industry expertise. If you’re ready to turn your vision into a thriving agency, we’re here to help.
Need help starting your staffing agency?
Contact us today to learn how we can support your launch and growth from the very beginning.
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About the Author
Nick Andriacchi is the Chief Revenue Officer at Madison Resources, bringing over 30 years of experience in the funding and payroll industry. Before joining Madison, Nick held leadership roles at two other funding companies, where he built a reputation as a trusted advisor and strategic thinker. Widely regarded as a true industry expert, Nick is passionate about helping staffing firms grow through smart funding solutions and operational support.
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