How Profitable is a Staffing Agency (2024 Stats)?

The US staffing agency industry is a behemoth, accounting for a staggering $248.7 billion in revenue in 2023. But what does this mean for individual staffing agencies operating within this vast market?

How much can they expect to earn? And what are the costs associated with starting and maintaining a staffing agency?

This article provides a comprehensive analysis of the staffing business landscape. We’ll break down the market segments, average revenues, and startup costs, offering a clear perspective on the profitability metrics that define the industry.

With insights grounded in data, we present an in-depth look at the economic dynamics of the staffing sector in 2023.

Staffing Business market overview

As per IBIS, the staffing market in the U.S. represented revenue of $248.7 billion in 2023 and is expected to grow to $332.8 billion by 2028.

Industrial staffing represents the largest share ($21 billion), followed by office, clerical, and administrative staffing ($19 billion), information technology staffing ($17 billion), professional and managerial staffing ($17 billion), healthcare staffing ($10 billion), engineering and scientific staffing ($9 billion). and other staffing ($7 billion).

Yet, with over 16,000 staffing agencies across the country, the competition is also fierce.

How much revenue does a staffing agency make?

Using the data from more than 1,200 franchised staffing agencies, a staffing agency earns $4.0 million in gross revenue per year on average. This number is the average gross revenue per agency from 1,200 agencies of the largest 6 staffing franchises in the U.S.

Staffing agencies typically earn for every hire they provide to their client (usually a percentage of the hire’s annual salary). With an average of $60,000 annual salary and an average of 20% share, that’s $12,000 per hire, and that’s an average of 334 hires per year.

Yet, not all staffing agencies have the same yearly revenue. Logically, some will earn more than others because of many factors such as the size of their client base, industry specialization, geographic reach, and the effectiveness of their recruitment and placement strategies.

How much does it cost to start a staffing agency?

On average, it costs between $147,000 to $222,000 to open your own staffing agency.

This includes various costs such as lease and deposit, leasehold improvements, training costs, furniture and fixtures, office equipment, computer hardware and software, signage, working capital for the first 6-9 months (salaries, etc.), and other costs.

• Rent deposits and leasehold improvements (13%): involve the initial cost for securing office space, including upfront deposits and any enhancements made to the leased premises.
• Training costs (4%): encompass the costs of preparing and educating staff for effective agency operations.
• Furniture and fixtures (6%): costs of office furnishings and equipment to create a functional and comfortable work environment for agency personnel.
• Office equipment (2%): costs of essential tools and machinery required for day-to-day business activities
• Computer hardware and software (11%): investment in technology infrastructure, including computers and software applications, vital for efficient data management and workflow processes.
• Signage (4%): includes the expenses related to the design, production, and installation of signage to promote the staffing agency and enhance visibility.
• Working capital (57%): financial reserve for the first 3-6 months available for meeting daily operational expenses.
• Other costs (3%): miscellaneous expenditures, ranging from marketing expenses to unforeseen operational needs.

How profitable is a staffing agency?

A staffing agency has a ~10% operating profit margin (EBITDA margin) after operating costs (salaries, admin expenses, etc.) have been incurred.

Indeed, there are various recurring costs involved in running a staffing agency. The major expenses included the cost of services followed by other operating costs:

• Cost of services (~60-70% of revenue): includes the wages paid to the staffing personnel who are deployed by the agency to their client companies.
• Salaries (~5-10% of revenue): represent the compensation paid to agency staff in managing the recruitment cycle and maintaining client relationships.
• Facilities expenses (~1-2% of revenue): costs such as office rent, utilities, telephone, software, etc.
• Other operating expenses (~8-12% of revenue): cover additional costs such as marketing, office supplies, travel, and other administrative expenses.