No doubt about it, competition in this business is steep, but so are profits. Choosing the right market and location is paramount. Deanna Kohlhoff, 34, founder of the Kohlhoff Group, a Round Rock, Texas, agency that staffs the high-tech industry, started capitalizing on the trend toward tech businesses five years ago. She started from a spare bedroom in her house with enough money from her old job to carry her through her first year. Today, Kohlhoff takes in a little more than $750,000 annually.
Finding an opening and seizing it is what gave Potenza his start. "I got into it at a perfect time," he says. His start-up required nothing more than a phone, a computer and a fax machine. Because he has a family to support, he socked $60,000 in the bank before quitting his job. Potenza's firm is expected to bring in $10 million this year.
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The hardest part about opening a staffing firm isn't the capital required, since little is needed. The real trick is finding clients who will use your services. "It was very difficult to get my foot in the door," Potenza acknowledges. He found most of his original clients through purchased mailing lists, networking and by scanning the help-wanted sections of newspapers. Once he snags a client, he maximizes the relationship by placing 10 to 15 people at a given firm. "I target larger companies, Fortune 500s, where they'll need more than one or two of my people," he explains.
Cultivating relationships with businesses also leads to word-of-mouth recommendation, the cornerstone of any thriving business. "The biggest percentage of work we do comes from referrals," Kohlhoff confirms.
Ben Smith, 28, founder of Intelitech, a Los Angeles staffing firm, learned the ropes by working for another staffing company. The one thing he didn't take from the company was clients. Thanks to a noncompete agreement, he had to start from scratch. Smith admits that translated into "eight months of really struggling," but he did manage to lure three of the company's employees away with him-even though it was six months before any of them drew a salary.
To drum up accounts, Smith turned to the telephone. "At first, it's all cold-calling, but then you start to build a client base," Smith says. "Once you get going, this business can be a cash cow." Indeed, Intelitech expects $5 million this year.
For Kristin Knight, 32, founder of Seattle-based Creative Assets, a staffing firm specializing in graphic arts talent, the most effective tool is her Web site. "It's the number-one marketing vehicle we have," she maintains. Indeed, the Internet helps in pumping up any business's visibility.