Typically, recruitment businesses have relatively short life cycles; you can go from starting up your agency to exiting within just five years. It is important to be conscious of the key factors that will affect the value of your recruitment business as early as possible so that when you do want to exit, you are ready to go.
Get your house in order
When selling your business, you will have to go through a lengthy and tedious due diligence process (a ‘health check’ of your business carried out by the buyer). The more issues that arise from this process, the more likely the buyer will try to price chip. It can be difficult to stay on top of all the legal, regulatory and ‘good practice’ requirements and much easier to add them to ‘next week’s to do list’. To avoid this, check out our blog posts on our website to keep up to date with the legislative and regulatory changes that might affect your recruitment business.
High-value clients are great for your business; they give you impetus when you are on the upward growth trend and increase the value when you are looking to sell. But, a heavy reliance on a small number of high-value clients will increase a potential buyer’s risk, and with that risk, they will almost certainly want to reduce the purchase price. Create a varied client base to provide balance and reduce over-reliance on certain clients.
Establish a business that has a strong temp division and permanent division. While the permanent division will be that part of the business that gives you the big wins, the temp division will provide dependable, regular income that will help the cash flow. This combination of different types of income will reduce the financial risk of your business.
But don’t diversify too much… find a niche
If your recruitment business does a bit of everything, that can prove to be valuable; but if you are looking to make your agency as valuable as possible, develop a specialist area. Make your recruitment business stand out from the crowd.
Establish a strong database
In a world where ‘big data’ is becoming ever more important, it is equally important that your business establishes a strong database (that is fully compliant with GDPR of course!) as quickly as possible. A strong database is attractive to a buyer as it significantly increases the scalability of your business.
Recruit Well (it is the business of your business after all!)
You want to be selling your recruitment business with long-serving, highly motivated key employees and an innovative management team, who have a strong understanding of the inner-workings and daily operation of the business. Foster a positive culture by putting in place loyalty and incentive schemes to keep staff retention as high as possible.
Prepare for your Exit
Undoubtedly, it will be upon your expertise that your business has been able to grow. However, you should look to create structures (such as a strong management team) that will allow the business to operate at the same levels of success without your input. Without doing so, most potential buyers will take the view that the business is dependant on your continued involvement and they will require you to stay on after the sale, or they will link part of the sale price to the future performance of the business. Neither of these
The factors mentioned above, are not the only ones that will affect your recruitment business, as each agency will have their unique features that will affect its sale. However, if you can focus on the factors above early in your business’ life you may just reap the benefits.
If you require further advice on the sale of your recruitment business, please contact Kerry Jimenez on firstname.lastname@example.org who would be happy to assist.