Originally posted by burntnurse
well EDDY i think your response presumes an awful lot; like i'm a "total idiot" which, beleive me, i am not.
Yikes! Sorry to ruffle your feathers. I am not saying you are a "total idiot", so please refrain from trying to put words in my mouth. I come to this board for intelligent discussion, not to flame.
I have a background in accounting and finance prior to my jump into nursing. I have been a CFO, controller, financial analyst, and now only do private work for some clients (for fun). I have experience in startups, and I know the kind of resources (financial or otherwise) required for such a venture.
I think it is safe to say that your response "presumes an awful lot" as well... so let's call it a draw.
sounds like sour grapes to me. tell me did you try and fail? [/b]
Nope, I have never tried and have no desire to do so. I did the research though, and that is why. At one time I too thought it was a great idea. I have read the books (they are terrible and talk of unrealistic profits... misleading at best). I have also seen a year's worth of office P&L's from a mom & pop agency that I did taxes and payroll for. FYI - I only saw a year's worth because that was how long they lasted before losing everything (house, cars, retirement, everything!) just as I told them would happen at month 2. From a financial and RISK stand point it is an incredibly ignorant investment. However, I won't leave it at that. Let's take a look at costs.
- Licensing (County, City, State)
- Cost of Incorporating (you better! Lest you wish to risk being sued for your personal assets!)
- Liability Insurance (will cost anywhere from $10k-50k yearly for a single office depending on risk your assesment, which agency tends to be very high... duh)
- Rent - $500-2000 depending on market
- Advertising (to recruit)
- Advertising (to market services)
- Office Equipment - Computers, fax machines, printers, phone systems, file cabinets, desks, etc., etc., etc. will cost about $10k at least I would guess.
- Payroll Taxes - approx 12% of employee payroll
- Disposable Office Supplies - paper goods, etc. will run about $500 a month
- State and Local Income Taxes - cost depends on market
- Telephone - HUGE cost $800-1000/month I would imagine.
- Workers Comp Insurance
- Utilities - guess about $200 a month minimum
- Entertainment/Marketing - Costs a fortune. Big corporate companies are taking clients out to dinner and buying big gifts, you'll have to do the same.
- Drug Screens, physicals, Criminal Background Checks
- License Verifications
- Tons of other stuff I can't think of off the top of my head...
Now the REAL big kicker....
Facilities rarely pay within 30 days. To be paid within this time frame is considered LUCKY. Most will stretch to 45 and many up to 60-90. Of course some will NEVER pay. Since I doubt you have the kind of cash needed to fund a payroll (hundreds of thousands a month if you are just mildly productive), you will have to get a floating credit line. Doh! Now you are paying interest on money OWED TO YOU! Youch!
While it seems like such a no-brainer that a staffing agency could make a ton of money with those 50% markups, you are not making 50% profit. You are lucky to see a 3% profit (Operating Income/Net Income) off your total revenues. Most agencies will need to do about $120k in revenues per month to see a 3% "profit". This IS somewhat an economies of scale model though, so at about $250k per month you may be seeing about a 7-8% profit.
To make a long story short, unless you are able to develop a thriving agency business almost overnight you will fail... And unless you have at least a million bucks in cash for initial operating capital, you'll run out of funding and die from the interest you are paying on loans just to float your payroll.
But by all means.... Go for it. I don't want to come off sounding like a jerk but just from your initial response, I think you may be the one "presuming" too much, as it is pretty clear you haven't done any true research. Maybe you can make it work.
-eddy
Would you like to comment?
best about agencies
