With these things in play, the agency becomes more profitable and so it becomes a more of an appealing business to buy. As this happens it’s not unusual for Recruitment Directors to sell their agencies for a sizable profit, this can happen one of two ways:
- Through an internal management buy-out (MBO)
- Through a sale on the open market
On that note, every agency owner should be looking at their recruitment agency value from time to time to consider whether it is the right time to sell or not.
To help Recruitment Directors with this process, TBOS lists the 5 proven ways to increase your recruitment agency value:
PLENTY OF CONTRACT PLACEMENTS ON THE BOOKS
A recruitment book that’s mostly contract or temporary placements will dramatically increase the value of a recruitment agency compared to an agency of the same size dealing only in permanent placements. The difference could be as high as a 2 – 2.5 multiplier on value. This is because permanent agencies are seen as ‘only being as good as their last permanent placement’. If you’re an agency that has long-standing contract placements 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 & LONG-TERM STAFF
A good and profitable recruitment agency is the sum of its reputation and its staff. With an experienced and dedicated management team who support the transition, this can limit the level of disruption during and after the change of ownership. Also having long-standing staff with a history of loyalty to the company can contribute to the recruitment agency value, as again this will provide a smooth transition and will be highly attractive to the buyer.
THREE YEARS OF CONTINUAL GROWTH
This is an essential part for showing recruitment agency value. The Recruitment Director must demonstrate a strong business plan that shows continual growth for the next three years. This will show the agency’s ability to sustain a profitable turnover which ultimately makes it a good bet for success.
SHOW THE AGENCY DOESN’T NEED THE DIRECTOR
If the Recruitment Director is able to take a back seat on the day-to-day operations of running the company, with little involvement in the main client relationships, it underlines that the recruitment agency can survive and thrive with a new owner. If it looks like the key business is handled by the key Recruitment Director, most prospective buyers will turn their nose up.
HOW TBOS CAN HELP WITH YOUR EXIT STRATEGY
TBOS have helped many of our recruiting clients to evaluate their recruitment agency value by providing comprehensive reports on business figures and recommendations on ways to boost their agency value before they go to market. We have also provided specialist advice when our agencies have looked at buying other agencies to broaden their scope in the industry.
With over 10 years’ experience dealing with these matters we are able to provide specialist advice and support to guide our clients on their best exit strategy, ensuring they negotiate the right price for their agency and carry out the necessary due diligence to ensure a smooth transition for them and the new owner.
Additionally, we have helped agencies to plan the optimal approach for an internal MBO. This includes supporting the internal management team to understand financial figures and processes whereby they are fully aware of the agency’s operations before day of purchase.