Question 1

Should a staffing agency use payroll funding or invoice factoring?

Accepted Answer

Use payroll funding if you run contract or temp desks: it pays contractors on time and funds the invoice in one process. Use factoring if you already have back office and payroll handled and simply need the receivable turned into cash faster and cheaper.

Question 2

Should a new recruitment agency start with a contract desk or a perm desk?

Accepted Answer

Start perm if you are self-funding and need revenue inside 90 days. Start contract if you have working capital or a funding line, because a contract book compounds weekly and is what gives the business a sale value later. Most durable agencies run perm first, then convert.

Question 3

Should a UK recruitment agency use an EOR or set up a US entity?

Accepted Answer

Use an EOR for your first placements — it puts you live in weeks with no entity, state registrations or payroll build. Form your own entity once you can see sustained volume, typically past roughly ten contractors or a second state, where per-head EOR fees start to exceed the cost of running it yourself.

Question 4

Is it better to launch a recruitment agency with backing or self-fund it?

Accepted Answer

Self-fund if you are perm-focused, have savings covering nine months and want full ownership. Take backing if you want a contract book, because working capital, back office and compliance are the three things that stop self-funded contract desks — and a minority stake in a funded agency usually beats full ownership of a capped one.

Question 5

Should a staffing agency place contractors as W-2 or 1099?

Accepted Answer

For agency-supplied contract work, W-2 is the defensible default: you control assignment, rate and supervision, which is what classification tests examine. Reserve 1099 for genuinely independent, project-scoped specialists you can evidence — misclassification penalties and client indemnity claims cost far more than the burden you saved.

Question 6

Should a new recruitment agency specialise in a niche or stay generalist?

Accepted Answer

Specialise. Niche agencies command higher rates, fill faster from a reusable candidate pool and attract better valuation multiples, because buyers pay for defensible market position. Go generalist only if your network is genuinely cross-sector and you plan to narrow within twelve months.

Question 7

Should a staffing agency run its back office in-house or outsource it?

Accepted Answer

Outsource until the fee exceeds the loaded cost of the team it replaces — usually somewhere past 75 to 100 contractors. Before that, an outsourced back office buys compliance cover and founder time, and founder time spent selling is worth more than the fee saved.

Question 8

Should a staffing agency work through MSP programmes or sell direct?

Accepted Answer

Build direct clients first and use MSP programmes to fill capacity. MSP volume is real but arrives at capped rates, supplier fees and tiered access, so an agency built only on programme work has little pricing power and a thinner valuation.

Two options. One clear verdict

Pick the decision you are facing

Payroll funding vs invoice factoring

Contract desk vs permanent desk

EOR vs setting up a US entity

Backed launch vs self-funded launch

W-2 vs 1099 contractors

Niche agency vs generalist agency

In-house back office vs outsourced

MSP programmes vs direct clients

Still weighing it up?