The majority of recruitment agencies eventually change hands, either through an internal management buy-out (MBO) or a sale on the open market. Established agencies have developed, regular income streams which make them appealing businesses to buy – and potentially profitable to sell.
Every agency owner will look at their agency’s current value from time to time, and consider whether or not the time is right to sell – but there are ways to boost your sale value if you choose.
Here are some of the best:
Plenty of Contract Placements on the Book
A recruitment book that’s mostly contract or temporary placements will dramatically increase the value of an agency compared to an agency of the same size dealing only in permanents. The difference could be as high as a 2 – 2.5 multiplier on value – permanent agencies are seen as being only as good as their last permanent placement – or if your contract placements are all long-duration, you could see the multiplier reach the 4-6 range.
Long Term Contracts & PSL Agreements
Another major bonus to the strength of your contract recruitment book is being on any preferred supplier lists (PSLs). These show you have a strong ongoing relationship with a client and if it’s a long-term agreement it confirms long-term financial success to come.
Dedicated Management and Long-Term Staff
An agency is the sum of its reputation and its staff. With a dedicated management team to cut down disruption during and after the change of ownership and longstanding staff with a history of loyalty to the company – especially if they understand the sale and buy into the reasons for it – can really increase the perceived value of the agency.
Three Years of Growth
This is one of those points that shows why planning ahead is essential before your agency changes hands. Being able to show your company isn’t just growing but can sustain that growth with profit and turnover increasing over three years shows any potential buyer that the agency is a good bet for future success.
Show the Agency Doesn’t Need the Director
If you as the director can take a back seat on the day-to-day of the company – and especially if you’re distant from the main client relationships – it really underlines that your agency can survive and thrive. If it looks like the key business is handled by the owner who’s about to set up, most prospective buyers will turn their nose up.
The agencies we work with have often had to evaluate whether or not to buy other agencies, and we’ve developed a lot of experience working to assess these agencies and make sure the right price is offered through due diligence and advice. We’ve also worked with directors who wanted to assess their agency’s financial figures and internal procedures to plan a future exit at the best price.
We’ve also helped agencies to plan the optimal approach on an internal MBO, helping the internal management team to understand the financial figures and prepare for transition.