startup for staffing agency as LLC

mudget · Aug 27, 2005

Hello I am new to the forum and new to several ventures I am persuing. I am a RN that has been in the medical field for 12 years. I have done extensive research on staffing agency and their success. I plan to start my business in this area and am of coorifice very scared yet excited. I guess I need someone to tell me it is ok and give me some insight or their thoughts on whether this could be successful or not. Please help.
Thank You so much!!!!!!!!!!!!
PS Maybe someone who has done so themselves or have thought about it!

What area are you referring too?

jevonlabarge · Aug 27, 2005

What area are you referring too?

rn's lpn's cna's etc to start

jsteine1 · Aug 27, 2005

Hello I am new to the forum and new to several ventures I am persuing. I am a RN that has been in the medical field for 12 years. I have done extensive research on staffing agency and their success. I plan to start my business in this area and am of coorifice very scared yet excited. I guess I need someone to tell me it is ok and give me some insight or their thoughts on whether this could be successful or not. Please help.
Thank You so much!!!!!!!!!!!!
PS Maybe someone who has done so themselves or have thought about it!

Here are some items to think about as you look into a staffing agency start-up:

1. Pay for professional marketing research in the county or counties you wish to to do business in. It's important for you to know if your potential referral sources all have their own agencies, ie the hospitals. ManySNF companies also have their own staffing companies operating under a different name most of the time. You will want to know which of the freestanding staffing companies with the name brands are in your community. This research will also yield you information about the billing rates and pay rates. Many hospitals will only give staffing orders to those agencies that are also medicare certified. It's in many ways a stamp of approval, even though staffing and certified home health are very different businesses.

2. You will need a great deal of cash flow and a very large line of credit at your disposal at all times. An established office in a business address is important for both recruiting and selling the services. At the start, you will need office equipment, an excellent telephone system, business licenses, printing of business cards, letterhead and envelopes, invoicing systems software or outsourcing,payroll systems or outsourcing, brochures or some custom "leave behind", and of course,advertising dollars to get the nurses in your door. Dont forget insurances,malpractice, workers comp and unemployment. Your staff cannot work as contractors, they are hourly employees.

3. Income versus expense and it's timing:

ok- now you've signed up one RN- you bear the cost of the background checks required. You get a job order and place the RN for that shift. She shows up and all is well. You are the new kid in town so you had to offer discounted rates to attract some job orders. You are the new kid in town so you had to offer above market pay to get a nurse.The nurse completes her shift and expects payment the same day, preferably in the form of a reloading visa-type card. Heres the math:

8 hour shift

Billing to the hospital:46$ per hour or 368 Dollars

Payment to the nurse:36.00 per hour or 288 Dollars

Gross margin: 80 dollars

Net profit: none-a loss because the background checks can cost 200 dollars depending on whats required. You had to run ads to get the nurse to apply. Great volume of orders over time brings you eventually to a break even point and then profitability if your overhead growth is slow and revenue growth swift.

Immediate cash outlay of 288 to the nurse

Invoicing to the client gives them 30 days to pay your bill. Rarley if ever will a customer accept pay terms less than 30 days, most want 45. So you have to be in a position to "Carry" your overhead as you will always be paying people long before the invoice is paid back to you. Money loses intrinsic value to you the longer you have to wait for it. So collections efforts can take up a bulk of your time. And you have to be prepared at all times for deadbeat customers that will never pay the bill. Typically about 1.5% of all gross revenue should be assumed lost due to non payments.

Theres a lot more to this business certainly than stated here, but these are the basic startup considerations.

This is not at all meant to discourage you, but meant to provide you with a realistic picture of what appears to be a simple business, but in fact is not.

If you do not personally have a significant business background, I would suggest you seek a franchise or licensee situation where the startup training is provided along with marketing tools, payroll, advertising and collections support. Best of luck to you!

jevonlabarge · Aug 29, 2005

Here are some items to think about as you look into a staffing agency start-up:
1. Pay for professional marketing research in the county or counties you wish to to do business in. It's important for you to know if your potential referral sources all have their own agencies, ie the hospitals. ManySNF companies also have their own staffing companies operating under a different name most of the time. You will want to know which of the freestanding staffing companies with the name brands are in your community. This research will also yield you information about the billing rates and pay rates. Many hospitals will only give staffing orders to those agencies that are also medicare certified. It's in many ways a stamp of approval, even though staffing and certified home health are very different businesses.
2. You will need a great deal of cash flow and a very large line of credit at your disposal at all times. An established office in a business address is important for both recruiting and selling the services. At the start, you will need office equipment, an excellent telephone system, business licenses, printing of business cards, letterhead and envelopes, invoicing systems software or outsourcing,payroll systems or outsourcing, brochures or some custom "leave behind", and of course,advertising dollars to get the nurses in your door. Dont forget insurances,malpractice, workers comp and unemployment. Your staff cannot work as contractors, they are hourly employees.
3. Income versus expense and it's timing:
ok- now you've signed up one RN- you bear the cost of the background checks required. You get a job order and place the RN for that shift. She shows up and all is well. You are the new kid in town so you had to offer discounted rates to attract some job orders. You are the new kid in town so you had to offer above market pay to get a nurse.The nurse completes her shift and expects payment the same day, preferably in the form of a reloading visa-type card. Heres the math:
8 hour shift
Billing to the hospital:46$ per hour or 368 Dollars
Payment to the nurse:36.00 per hour or 288 Dollars
Gross margin: 80 dollars
Net profit: none-a loss because the background checks can cost 200 dollars depending on whats required. You had to run ads to get the nurse to apply. Great volume of orders over time brings you eventually to a break even point and then profitability if your overhead growth is slow and revenue growth swift.
Immediate cash outlay of 288 to the nurse
Invoicing to the client gives them 30 days to pay your bill. Rarley if ever will a customer accept pay terms less than 30 days, most want 45. So you have to be in a position to "Carry" your overhead as you will always be paying people long before the invoice is paid back to you. Money loses intrinsic value to you the longer you have to wait for it. So collections efforts can take up a bulk of your time. And you have to be prepared at all times for deadbeat customers that will never pay the bill. Typically about 1.5% of all gross revenue should be assumed lost due to non payments.
Theres a lot more to this business certainly than stated here, but these are the basic startup considerations.
This is not at all meant to discourage you, but meant to provide you with a realistic picture of what appears to be a simple business, but in fact is not.
If you do not personally have a significant business background, I would suggest you seek a franchise or licensee situation where the startup training is provided along with marketing tools, payroll, advertising and collections support. Best of luck to you!

Thank You so much for your insight although it is really discouraging too. I am scared to death to begin with. If I am willing to put in the time and the money will it eventually pay off or am I on a road of destruction?

jsteine1 · Aug 29, 2005

The most experienced folks would feel anxiety about a new venture, so thats par for the course. Careful preparation as outlined in my first post to you as well as access to a large line of credit can help you over the hurdles of startup. Again, if you dont have sales, finance and management experience with an established company, the safest and smartest way to go is with a franchise or licensee situation, where the expertise is readily available to you and you will be prepared by your Franchiser for most eventualities. Also, in the Franchised situation, you get the benefit of Volume discouting for advertising, payrolling, collections and invoicing. Purchasing these services on your own would be significantly more expensive as a single owner. I have no personal connection to any particular franchise or licensee organisations, but have managed employees in company owned stores and franchisees in multiple sites of these national companies at the regional level. One consideration if you are truly serious about this is to work for a staffing company in some capacity in the office and really learn the mechanics of whats involved and then make your decision to put your own money on the line.

jsteine1 · Aug 29, 2005

Thank You so much for your insight although it is really discouraging too. I am scared to death to begin with. If I am willing to put in the time and the money will it eventually pay off or am I on a road of destruction?

Time, money and the best of intentions unfortunately are not enough. Staffing is very very competitive and cut throat. Here's an example of an unethical but common occurance in the staffing business. Most hospitals, if they have a block of orders to place will place the identical orders with their 2 or 3 preferred agencies. Whoever calls them back first with the nurses name that will be performing the shift for them gets the order. Some agencies will immediately call in names of nurses or CNAs they have on their books without ever actually speaking to the employee as to whether they are available or interested in doing that shift. This way they have "locked in the order" and no else gets a shot at it. They have bought themselves some time now to really fill that order. Then, at the last minute, they call the hospital and give them a different name and license #, ie the person who really is going to work the shift. If you have an excellent rapport with those nurses that can work for you and highly organised systems that allows you to reach them in any number of ways quickly, thats the right way to capture an order and make it yours. If a customer catches on to what you did, they may not say anything, but you may rarely if ever get orders from them again.Just one of a hundred competitive and unethical techniques some agencies will employ.