6 WAYS TO INCREASE THE VALUE OF YOUR RECRUITMENT AGENCY

Selling a recruitment agency is a dream for many new recruitment directors, especially if it can be sold for a life changing amount of money. However, due to poor planning, this may not be the case and often, the company will end up undervalued or continue to trade indefinitely.

When considering selling a recruitment company, it is best to take a step back from the business and look at it from a buyer’s perspective and consider what can make this an attractive proposition and attract the value that it desired.

Here are 6 ways that you can increase your recruitment agency value: –

HAVE AN ELEMENT OF CONTRACT BUSINESS

    When valuing a recruitment agency, if an agency is engaging its clients to provide contract and/or temporary recruitment services then it will attract a larger multiple value compared to a permanent only agency.  It is best to have a split of 60/40 in favour of contract recruitment to secure the best multiple.

    ENSURE AS OWNERS, YOU ARE NOT PART OF THE DAY-TO-DAY OPERATIONS

    When a prospective buyer wants to buy an agency, they will often not want to take on the existing owners of the business to continue after the sale.  Therefore, it is best for any owners to ensure they are not making any placements, that the relationships with clients are with the agency and that their input in the day-to-day operations is minimal.

    HAVE A NUMBER OF PSL/LONG-TERM AGREEMENTS WITH CLIENTS

    Any prospective buyer will want to know what the future earning potential there is within the business after the sale.  If the agency is signed up to preferred supplier agreements or long-term contracts with their clients, then this means that the business should continue to make money after the sale has occurred and makes the agency more attractive to buy.  If these are long-term government contracts, then this can also increase the multiple value of the agency.

    ENSURE YOUR KEY STAFF ARE ENGAGED WITH THE SALE OF THE BUSINESS

    As the owners may not be working within the agency post sale, it is important that the key staff members within the business will stay on to ensure that the agency continues to bill and run smoothly.  It is best to engage the key staff members regarding the sale and potentially provide some kind of incentive to ensure that they don’t jump ship as soon as the sale has gone through.

    REVIEW YOUR CONTRACTS AND COMPLIANCE PROCESSES

    When a potential buyer completes their due diligence, part of the process will be to examine the contracts and compliance within the business to ensure there are no risks that they may inherit once the sale goes through.  Therefore, doing a full review to ensure that there are signed contracts in place, all compliance documents are compiled, and that the agency is complying with IR35, AWR and is up to date with its tax filings.

    SHOW A YEAR-ON-YEAR GROWTH ON YOUR P&L AND BALANCE SHEET

    To make a business more appealing to a potential buyer, it is always best to show a year-on-year growth on both the P&L and Balance Sheet. This may involve working with the accountants to understand how this can be shown on the year end accounts and whether taking dividends or paying for large internal costs will have an impact on the balance sheet and profit & loss.

    HOW CAN MAYACHI HELP?

    MAYACHI Ltd has helped multiple recruitment agencies with the preparation and sale process when it comes to selling their business. We work with directors to ensure that their company is prepared for a sale to maximise their return and have first-hand experience of selling a business and we understand what is required to sell a company at the maximum value and the processes that will be followed.

    If you’re considering selling your recruitment agency, or want to prepare for the future – book your free 2 hour consultation call and we’ll go through what you need to know. Book here.

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