According to American Staffing, staffing companies hire an average of 16 million temporary and contract employees a year.
Temporary staffing helps thousands of service-based businesses deal with employee shortages. But as labor shortages have increased, hiring temporary staff through these agencies has become less effective. I talked to one founder who thinks it’s time for something new.
As a restauranteur in Cincinnati, Ohio, Steve Anevski repeatedly suffered poor staffing agencies that over-promised and under-delivered. On a fateful trip to the West Coast in 2015, he tried Uber for the first time and realized a mobile-based marketplace was the solution he was looking for. He teamed up with cofounders Nick Jordonovski and Alex Pantich in 2016 to create Upshift, an online solution matching temp workers with vacant positions.
To compete with the giant temporary staffing agencies, Upshift created an all-new business model for sourcing workers. The company moved state-by-state and city-by-city, creating legal entities and light training centers for Upshift employees while their Silicon Valley-backed competition burned astronomical amounts of capital on paid marketing and legal hurdles.
Today, Upshift’s results speak for themselves. While most staffing agencies have a no-call-no-show rate of 40-45 percent, Upshift’s is less than two.
Steve projects annual revenue in the tens of millions and expects to crack the hundred-million mark by the end of the year. They’ve also onboarded over 70,000 workers and 1,200 businesses including some of the biggest names in hospitality, food service, and logistics.
Here’s how Steve went from midwestern sports-bar owner to cofounder of what could be the next big thing in HR tech.
Why Modern Staffing Solutions Don’t Work
As a successful entrepreneur with multiple profitable businesses and over 100 employees in Cincinnati, Steve was by all accounts doing well. But he didn’t just want to do well, he wanted to create a world-changing business. He also thought he’d stumbled on the solution through a handful of random events.
As a child of immigrants from Macedonia in Cincinnati, Steve was raised in an entrepreneurial environment. “I grew up in the restaurant industry,” he says. “Everyone from Macedonia is in the restaurant industry.”
Steve had been yet another graduate caught in the job market collapse of the late 2000s. Seeing no jobs in 2009, he used his knowledge of restaurants to open a sports bar. This soon turned into seven bars and restaurants.
Becoming a full-time restauranteur in the 2010s with 120 employees made Steve acutely familiar with the headaches of managing hourly workers. He frequently used staffing agencies to cover shifts when he put on events. “I realized how atrocious the solution was,” he says. “You’d ask for ten people, you’d get three, and two might not have the right shirt.”
One fateful day while visiting the West Coast, Steve tried Uber for the first time and was impressed by the concept. “At the time, Uber in the midwest was pretty much nonexistent,” he says. “I wondered if people had done the same thing as Uber in staffing. The idea germinated for a while. I was running bars, a real estate business, and some salons at this point. All of them were steady businesses, but none of them were going to make an impact in the world.”
Steve was working on a project with a small software development company at the time. He’d hit it off with one of the owners named Alex Pantich who was also looking for his next big thing. “The idea for Upshift was burning at that point,” says Steve. “So we said, ‘Screw it, let’s do it.’ We decided to team up and it just worked out great.”
Coincidentally, Alex’s partner in the software business was also Macedonian, a developer named Nikola Jordanovski. Alex and Steve brought him in as the third cofounder. Today, he is the CTO of Upshift and runs a team of developers in Macedonia’s capital, Skopje.
But back to 2016. To kickstart their project, they applied to an accelerator in Cincinnati. The judges selected Upshift from 3,000 applications and awarded it $50,000 to start the business.
While Upshift attracted customers almost immediately, it wasn’t until the Spring of 2017 that it started picking up major traction in its first market. “We didn’t realize there was a lot of cyclicality in the business and Q1 is usually the slow quarter for our end users,” says Steve. “That spring we were out there chasing business and they weren’t coming in. We wondered, ‘Is this going to work?’ Then, suddenly, we landed a large fulfillment client and it was to the races. We captured lightning in a bottle.”
Soon, Upshift had captured Cincinnati and launched its business in Columbus, Cleveland, and Dallas. Getting the entire country on board suddenly seemed possible.
How Upshift Started Scaling to the Rest of the US
Unlike many Silicon Valley tech businesses, Steve and the team made sure Upshift grew sustainably by setting up operations in areas with strong supply and demand first. “We set up a salesperson in each market with an office and a community representative,” he says. “Workers have to onboard at our office and then they can pick up shifts.”
The most powerful channel in B2C is referrals.
Steve says sourcing workers in these markets becomes an automated process once they set up operations. “We use all the different channels like Facebook and Google ads to bring in workers,” he says. “Once we have more workers, we can fill shifts faster, which leads to more business and even more workers. It compounds on itself. The most powerful channel in B2C is referrals. We’ve created a flywheel effect in our markets where we start to get most new workers with low cost per acquisition.”
Even though securing workers has been easy to systematize, Steve says finding businesses to contract with is substantially more difficult. “You have to reach out to these businesses that are spending millions of dollars a year on staffing and you can’t reach them with Facebook ads,” he says.
Fortunately, Upshift only needed to draw in a handful of contracts with large foodservice providers with national reach to get all the business they needed. “We landed a contract with one of the biggest food companies in the world,” he says. “They operate many of the universities, convention centers, and stadiums in the US. If you execute well in Miami, guess what? The regional director finds out and they want you in Tampa or Orlando next week.”
Expanding contracts and steady growth have culminated in Upshift’s presence in 28 markets throughout the United States today. “We’re in most of the Midwest and Southeast. We’re in Texas, Vegas, and Phoenix. We just launched in Kansas City and we’ll be in St. Louis last week. We hope to be in Minneapolis and Detroit next month,” Steve says.
Why Upshift Is Different From Other Staffing Solutions
Steve believes Upshift offers a better-quality experience for both businesses and upshifters compared with the recruitment model they’re disrupting.
“On our platform, clients can fill shifts at success rates double the industry norms,” he says. “It also costs thirty to sixty percent less than competitors and gives them much more transparency on who they are hiring.”
Steve also thinks they are bringing a more diverse range of talent into temporary staffing. “Because they’re hiring through an app, our clients attract new talent to the space. Most of the people on Upshift would never work for a staffing agency.”
Besides Upshift’s benefits to businesses, Steve thinks it also creates a much better environment for staff compared to the old staffing agencies. “Recruiters at staffing agencies often just show you jobs that give them the highest commission,” he says. “With us, you can see all the different jobs out there. You can also see how much they pay because they’re hourly positions.”
Not only can they see all the work available, Upshift employees also have a huge number of vacancies to choose from. They fill positions at stadiums, arenas, convention centers, hotels, venues, catering, fulfillment and distribution centers, and printing companies – almost any unspecialized hourly job you can think of.
Upshift also sets itself apart from other temp staffing marketplaces by making all workers legal employees. “We’re a W-2 platform,” says Steve. “For us, everyone is an employee and gets healthcare and traditional employee protections. Most other platforms hire their employees as contractors, which technically makes them illegal in the US.”
Steve says staying legal is necessary for securing contracts with desirable clients like major hotels chains or foodservice operators.
“These Fortune 500 businesses all know the labor laws well,” he says. “If they used our platform to source 1099 contractors the liability would be on them. However, with Silicon Valley arrogance, some people are doing this as a contracting business and they’re starting to get hit. Investors have put massive amounts of money into these businesses and now they’re getting kicked out of states, audited, and sued. At the end of the day, I only really see staffing agencies as our competition.”
However, Steve found that along with benefits, he needed to be strict about things like no-call no-shows from employees. These are situations when a worker doesn’t show up to their scheduled shift and doesn’t alert management they won’t show up. Just a couple of missed shifts can make a business lose all credibility with clients.
Steve and his team implemented a strict system for disciplining employees. “If you cancel within 24 hours, you get a strike,” he says. “If you get two strikes it’s a one-week suspension. Three strikes it’s a termination. With no-call-no-shows, we’re pretty draconian. If you get one of those, you are terminated from the platform and banned for life.”
Those strict policies have worked well for Upshift’s market position. “Our success rate for employees showing up to shifts once confirmed is over ninety percent,” says Steve. “The industry average is probably forty to forty-five percent. That’s game-changing. There is lots of power for businesses knowing they can see how many staff are confirmed with a high success rate.”
How Upshift Onboards Employees
To prevent onboarding truant workers, the Upshift team designed a multi-stage assessment that employees must pass before they can find work on the platform.
“If you download our app or sign up online, you’ll take a personality assessment,” says Steve. “It’s not an IQ test, but there are some knockout questions like, ‘Have you ever stolen from your employer?’ It tests morality, dependability, and their ability to work with others. Also, we want to know if employees can even sit there for eight or nine minutes and complete the test.”
Finally, to make sure they only hire employees who can keep a schedule, they introduce a couple of friction points into the onboarding process. “When they finish our tests, workers get an invitation to an onboarding session at our local office,” says Steve. “These onboarding sessions happen every hour and if you are more than five minutes late you have to reschedule. This tests if they can get to a certain location on time. We’d much rather have someone no-call-no-show their onboarding than no-call-no-show their first shift with a client.”
Taking a Slice of a 200-Billion-Dollar Industry
Steve thinks growing without outside investment in the formative years was key to Upshift staying profitable.
“We’ve been very capital efficient. I think that’s partially a side effect of being in the Midwest and having that traditional business experience,” says Steve. “Our competitors have raised huge amounts of venture capital from the beginning and I don’t see them doing anything better than we do. On the contrary, I think it’s much easier to get sloppy.”
Solve the hard side of the marketplace first.
Steve’s best advice for marketplace startups is to first and foremost make sure you know which half of your marketplace is harder to find. “Solve for the hard side of the marketplace first,” he says. “Once you solve for that it takes care of itself. However, you can only do that if you have product-market fit.”
Steve also thinks founders need to do everything they can to prevent leakage, “Once you connect two parties in a marketplace, there’s always a chance they’ll try to go outside of it. You need to find incentives to minimize that.”
Upshift is a refreshing take on the popular work marketplace model. One that focuses on legality and benefit to employees first before size and earning potential. Part of their profitability might be because Steve and his team followed a key tactic in the bootstrapping bible: targeting B2B clients first. That’s where the money is and perhaps where marketplaces like Uber and Airbnb miss the mark.
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