Buying a staffing firm in Florida

Staffing firms place workers with client businesses. In temporary staffing, the firm employs the workers, pays their wages and payroll taxes, carries workers' compensation, and bills the client an hourly rate. The gap between that bill rate and the full cost of the worker is the gross margin, and it pays for everything else. Some firms also do direct hire (permanent placement) and earn a one-time fee, often a percentage of the new hire's first-year salary.

Firms tend to specialize: light industrial and warehouse, office and administrative, construction labor, hospitality, health care, or professional fields like IT and accounting. Clients often take 30 days or more to pay, while the firm pays workers every week. So a staffing firm needs working capital: cash to cover payroll before clients pay. Many firms use a line of credit or sell their invoices to a lender (called factoring).

A typical small firm has recruiters, account managers who sell and look after clients, and payroll and compliance staff.

• A spread of clients, with no single client dominating hours billed. Losing one big warehouse account can erase a year's profit.
• Gross margins that hold up when clients renegotiate or put the work out to bid.
• Long-standing clients with written agreements covering rates, payment terms and who is liable for what.
• Few workers' compensation claims and a real safety program for placed workers, which keep premiums down.
• Recruiters with a deep pool of workers, tracked in a proper applicant system rather than in someone's phone.
• Clients that pay on time, with little bad debt.
• A specialty with skilled workers, where clients pay more for the firm's ability to find people.

Florida doesn't license ordinary temporary staffing or recruiting firms. Some related arrangements are licensed:

• PEOs (professional employer organizations, which co-employ a client's whole workforce) count as "employee leasing" under part XI of chapter 468 of the Florida Statutes and are licensed by the Board of Employee Leasing Companies at the DBPR. Temporary help for absences, seasonal peaks and projects doesn't count. Anyone acquiring control of a licensed company generally needs the board's approval before the change (section 468.5245).
• Health care staffing firms that supply nursing assistants, aides and similar workers to facilities must register with the Agency for Health Care Administration (AHCA) as a health care services pool (section 400.980). The registration doesn't transfer. The seller notifies AHCA, and the buyer's application is due at least 60 days before closing (sections 408.806 and 408.807).
• Day labor halls fall under Florida's Labor Pool Act, starting at section 448.20.

Private employers with 25 or more employees must use E-Verify for new hires (section 448.095), and a staffing firm is usually the employer of the workers it places. Workers' compensation is required once a business has four employees, or just one in construction (section 440.02).

• Workers' compensation: the job classifications used, claims history, and the experience rating (a score based on past claims) that sets the premium. Make sure placed workers are classed for the work they actually do.
• Payroll taxes. Taking over more than half of a business or its assets can make you liable for the seller's unpaid Florida taxes, including reemployment tax (Florida's unemployment tax), unless you get a certificate of compliance from the Department of Revenue first (section 213.758). A buyer that carries on the business can also take over the seller's reemployment tax record and rate, good or bad (section 443.131).
• How much depends on the biggest clients, and contract terms on who pays for accidents at client sites.
• How long clients take to pay, and any factoring agreements that must be paid off at closing.
• I-9 forms and E-Verify records.
• Overtime and wage compliance, and the risk when clients direct the work.
• Agreements with recruiters and account managers, including non-solicitation terms.

• Who are your five largest clients, and what share of gross margin do they produce?
• What workers' compensation claims have you had in the last five years?
• How do you fund payroll before clients pay?
• Do any clients use you for their whole workforce rather than temporary help?
• How would you find 20 workers if a client needed them next week?
• Which client relationships depend on you personally?
• Have you had any wage, tax or immigration audits?