Sales and profitability are key indicators of success in the staffing industry. However, cash flow constraints often limit growth, forcing companies to slow hiring or restrict client acquisition.
With unlimited funding, staffing firms can scale without financial roadblocks – expanding contracts, increasing placements, and driving higher profitability.
The Impact of Financing on Growth
Consider a staffing company generating $2 million in revenue at a 17% profit margin, yielding $340,000 in profit. With unlimited funding, let’s say the company scales to $10 million in revenue, even at a slightly lower 15% margin, resulting in $1.5 million in profit—more than four times the original amount.
Comparison: Limited vs. Unlimited Financing
Financing Type: Limited (Self or Bank) Unlimited (Staffing-Specific Lender)
The cost of financing is covered by increased revenue and profit, making it a self-sustaining growth strategy
Managing Cash Flow & Reducing Risk
Delayed invoice payments can severely impact cash flow. A staffing company billing $10 million annually with a 35-day DSO (Days Sales Outstanding) has $1 million tied up in accounts receivable. If DSO extends to 42 days, the outstanding receivables increase to $1.4 million, creating a $400,000 cash gap. Without sufficient cash reserves, this can strain operations and limit growth.
Comparison: Cash Flow Impact
Financing Type: Limited (Self or Bank) Unlimited (Staffing-Specific Lender)
Madison Resources, a staffing specific lender, is the solution for both scenarios.
Invest in what you do best
Outsourcing back-office functions can be just as beneficial, even if a staffing company doesn’t need financing. And in more ways than just cost savings.
Case Study: Monday Temporaries
In the mid-2000s, John Monday, the owner of Monday Temporaries, was preparing to sell his staffing business. He didn’t need financing but a needed to make a major investment in infrastructure to maintain operations.
Instead of spending heavily on software, hardware, firewalls, and personnel, he outsourced these functions to a staffing specific outsourcing company like Madison Resources.
The Results?
- Cost Savings – Eliminated large infrastructure investments.
- Simplified Sale – The purchasing company valued the secure data, streamlined operations, reduced employee redundancies, and less layoffs and severance packages.
By leveraging smart financial solutions, Monday Temporaries not only saved money but also made the sale process smoother and more attractive to buyers.
Unlock your staffing company’s full potential with the right financial strategy.
Explore our website to find more staffing insights. Madison Resources is the premier payroll funding and back office support partner to the staffing industry. Grow with confidence.