Less than you think for setup, and more than you think for payroll. Registrations, insurance, software and a basic office can be done for a few thousand to a few tens of thousands of dollars. The big cost is the payroll gap. You pay temp workers every week and clients pay you in 30 to 60 days, so you need cash or payroll funding to cover several weeks of wages. For a small desk that can be $50,000 or more. And there is one cost founders never put on the spreadsheet: their own hours reviewing everyone else's work.
The setup costs
- Business registration and licenses. A few hundred to a few thousand dollars, more where a state license is needed.
- Insurance. General liability, workers' comp, and often professional liability. Several thousand a year, paid partly up front. Clients will ask for certificates before the first order.
- Software. Payroll, a way to track candidates and orders, and a way to check work before it goes out. A few hundred a month.
- Office and basics. Many agencies start from a home office. A phone, a laptop and a website.
Call it $10,000 to $30,000 for a lean temp agency before the first worker starts, depending on the state and the niche. Direct-hire-only firms can start with less, because there is no payroll to fund.
The payroll gap, worked through
Say you have ten workers on assignment at $20 an hour. Your cost per hour, with taxes, insurance and workers' comp, is about $23.40.
- Ten workers, 40 hours, $23.40: about $9,360 a week in payroll and burden.
- Clients pay in 45 days on average: about six and a half weeks of payroll before the first invoice is paid.
- Cash needed to cover the gap: about $60,000.
At twenty workers, double it. This is why most new temp agencies use payroll funding or invoice factoring, where a lender advances most of each invoice for a fee. It costs margin, and it beats missing payroll.
The cost founders forget
The founder's own hours. In year one, the founder reads every submittal, confirms every start, and checks every worker file against the client's list. Those hours are not on the spreadsheet because nobody pays for them. They are real. A founder spending fifteen hours a week on reviewing work is a founder not spending them on clients.
Put a number on it: fifteen hours a week at what your time is worth. Then plan to replace yourself as the last check before you hire the second recruiter. It is cheaper than the client you lose in month eight.
Where M-Tracker fits
The forgotten cost is the one M-Tracker takes off the founder's desk. Every submittal and confirmation is read against the written order before the client sees it, with a plain-words note on what is missing, so the check happens without the founder doing it at midnight. For admins, M-Tracker also shows billable value against labor cost on tracked time, so the margin is visible by client.
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Questions people ask
Can I start with no money?
A direct-hire desk from home, maybe. A temp agency needs the payroll gap covered from day one.
Is factoring worth it?
For most new temp agencies, yes, until the cash builds up. Compare fees and check whether the client is notified.
What is the first thing to spend on?
Insurance and the payroll plan. Without them, the first client cannot sign and the first payroll cannot run.
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