Profitable staffing companies should have one main objective in mind – growth! Growth generates additional revenues, promotes increased profit, and propels a company to higher levels of brand awareness that will expedite future growth.
There are five diverse ways to grow a staffing business:
- Expand operations to serve a new area or region.
- Taking on larger client(s) than you might otherwise.
- Do more business with existing clients as their labor needs increase.
- Diversify and engage in new business sectors.
- Expand market share through acquisition.
These growth strategies not only require effective industry and business insights, but also increased financial backing to execute successfully and stay ahead of the competition.
Given the opportunity to grow, many staffing companies are faced with a two-fold problem. First, is the income gap between the time you need to pay salaries on a new contract and the 30 to 45 days or more into the future when clients pay you. The second problem is accessing more funds as the business grows. Staffing companies that have the confidence of knowing their financial provider supports business development have the distinct advantage of acting quickly when presented with opportunities to grow. An effective financial strategy is to partner with an industry-leading payroll funding company renowned for fast, flexible services. This approach ensures reliable funding and the capacity to expand credit limits to support growth. If the lender you choose is well experienced in the staffing industry, your business will gain the additional benefits of industry insights and strategic recommendations.
Today’s opportunities and challenges
The staffing industry is currently poised for tremendous growth due to the extremely high demand for labor. Staffing revenue is forecast to grow in the United States by 16% this year to a record total of $157.4 billion, according to the Staffing Industry Analysts (SIA). This forecast is up from the 12% growth they estimated in their April/21 forecast. While this forecast is optimistic, the industry’s current state poses tremendous challenges to growth opportunities. It is a job seeker’s market. Candidates are inclined to want increased salaries, better work conditions, and a better life balance. The challenge of attracting, recruiting, and retaining qualified talent keeps most staffing companies from capitalizing on growth opportunities.
While job openings are currently at historical record highs, a lack of government stimulus and subsidy packages will likely bring more people back to the workforce. Staffing companies that cover all the bases are the ones who will be able to take advantage of the staffing boom and grow their businesses. Taking a creative approach to recruiting, taking care of their employees and clients, having the ability to finance expansion, and having business intelligence to optimize market opportunities are the foundation for growth in this industry.
Payroll funding is a flexible cash flow solution
Many staffing companies happily use banks without issue to manage cash flow and maintain operations. Traditional business loans can be an effective cash flow solution to maintain the business status quo. But, if growth is a strategic direction your company wants to pursue, the financial covenants that govern a conventional business line of credit can significantly hinder your ability to expand and diversify.
Payroll funding has far greater flexibility compared to conventional financing – it has none of the financial covenants that banks include to restrict growth. If your business quadruples overnight, a responsive payroll funding company will provide financial support. They will look at who you’re doing business with, confirm their creditworthiness, and help you make informed credit decisions. Approval to provide the funding needed to service the contract and maintain operations is usually given within days.
The speed with which payroll funding companies underwrite new company deals and how quickly they can expand your facility is one of the defining characteristics of payroll funding. Where a bank might take three months to underwrite a staffing company’s growth initiatives, payroll funding companies can increase credit limits, usually within days as long as invoices are from creditworthy customers.
Your lender needs to have industry expertise
A fast, flexible funding solution is necessary to meet expanding payroll burden once a new service contract is signed, but more is required. Industry expertise from your financial provider is key to ensuring you are maximizing your working capital, using funds to the greatest benefit, and tapping into in-depth business knowledge.
Your staffing company needs a competitive edge to outperform rivals. Partnering with a payroll funding company infused with in-depth industry knowledge provides trends, analysis and recommendations your company can leverage to expose and react to developing market opportunities. With years of accumulated industry knowledge and expertise, an experienced payroll funding company can advise on investing in new recruiting services or software, provide a deep understanding of the market, highlight and consult on evolving trends, suggest new segments to enter, etc.
A prime example to illustrate this point is the management acquisition strategies. The payroll funding company will conduct fast due diligence to assess targeted companies’ potential risk and contribution to your business’s growth. Providing industry knowledge, debtor background, and credit information, the funding company’s intelligence will prove essential during due diligence and negotiations.
A payroll funding company’s industry insights and financial support will strengthen your position in an acquisition scenario. Further, a good payroll funding company can help identify potential acquisitions, finance your target company’s receivables and roll them into your existing company. They may even be able to give a slight advance to help with the initial payment to the acquired company’s owner.
Healthy cash flow, in-depth business acumen, and smart strategies are needed to take advantage of new opportunities and meet expected and sometimes unexpected challenges. In short, they are needed to achieve growth.
More benefits with payroll funding
Meeting payroll and supporting growth are key benefits to using payroll funding – but there’s more. Utilizing payroll funding to bridge cash flow gaps and meet financial obligations is an effective strategy to build brand strength:
- Employee recruiting and retention is improved with the assurance of regular uninterrupted wages and benefits.
- Customers are given the confidence that your workforce is stable and well supported.
- Reserve funds can be accumulated to fuel marketing and promotional efforts.
A strong brand built on these benefits from utilizing payroll funding will elevate your standing in the market and facilitate even further growth.
Staffing is a competitive industry, but distinctive in that many cooperative relationships exist between providers. It’s a unique industry needing unique resources. Staffing agencies need a trusted financial partner with flexible terms, industry insights, and a commitment to exceptional customer service to best meet growth plans. A payroll funding company invested in your success and capable of providing valuable advice and insights is the preferred choice to diversify and grow your staffing business. Ask questions and choose carefully when selecting a payroll funding company to work with.
eCapital has served the staffing industry since our inception in 2006. We are an innovative industry leader in the alternative lending space. We provide the capacity to manage customers from small accounts to double-digit, million-dollar facilities with extensive resources. Our flexible payroll funding solutions and ability to manage complex financial challenges have benefitted staffing companies, from start-ups to established firms executing aggressive growth plans.
Strong client relationships anchored in mutual trust are an essential part of our business model.
For more information about how invoice factoring supports staffing agencies through all stages of development, visit eCapital.com.