If you are looking to sell your recruitment business, you will want to be sure that the sale will be simple, effective and most of all profitable.
Selling My Business has a dedicated team of experts with vast experience of selling recruitment businesses. With over 30 years’ experience and over £500 million raised in business sales, we know that selling a recruitment business requires specialist industry knowledge and insight. This allows us to connect you with the right buyer, at the right time, for the right price.
Get a business valuation or contact Selling My Business to find out more about how we can help to sell your recruitment business.
Recruitment businesses are essentially people lead, with most of their value tied up in the skills of their key staff, rather than in tangible assets. This does not mean that they are impossible to sell, it merely requires specialist knowledge of how recruitment company sales should be planned for and the sales process itself should be handled.
With our in-depth knowledge of both the recruitment and business sales sectors, our experts can ensure that:
There are many reasons why you might wish to sell your recruitment company, but the end aim is always the same – to achieve the best sale price possible. You may be looking to pay off debts, fund your retirement or to explore the next investment opportunity.
You will often hear conflicting reports about the current state of the recruitment industry. Even though in general the economy is showing signs of recovery, many companies are still seeking to make efficiencies, especially concerning their wage bill, and so some areas have seen hiring rates drop. However the recruitment industry as a whole has seen an increase of 9% annually taking its value in the UK to £35.1 billion in 2016.
Sectors such as IT recruitment and temporary recruitment have seen some of the biggest growth recently. As firms cut their staff they then either need to invest in smarter IT solutions to replace them, or require temporary staff to plug the gap. There is also an upwards trend in companies preferring to outsource their recruitment, rather than keeping in-house staff on their wage bill. External recruitment specialists also provide the specialist skills required to navigate the challenges that an increasingly globalised labour market, mobile workforce and proliferating employment regulations bring.
There is also growing concern across many industries about the increasing UK skills shortage. Many sectors are heavily reliant on migrant workers to fill these gaps and the potential effect of Brexit on this is causing mounting apprehension. Here again is another area in which savvy recruitment companies could prosper. Building international links and expertise in international employment practice could make some recruitment businesses even more indispensable.
So it seems that the current climate could be the ideal one in which to sell your recruitment business. But how do you know if it is the right time for you to sell? Our specialist recruitment business sales team can evaluate your business against its market position and the current economic trends and provide honest advice about the viability of selling your recruitment company.
Although overall the recruitment industry in the UK is doing well, that does not guarantee that it is the right time to sell your recruitment company. Each business is different and we know that market trends are only one factor affecting a business’s saleability.
One of the most important factors in deciding when to sell your recruitment business is knowing exactly when your business is ready to be sold. Many of the most successful business sales have been planned for at least 2 or 3 years pre-sale. This allows time for the implementation of any required succession planning, staff retention policies, financial auditing and compliance checks.
The only true way of knowing exactly how much your recruitment company is worth, is by finding out how much someone is willing to pay for it. However agreeing upon a realistic business valuation at the very beginning of your sales process will ensure that things go smoothly and a profitable outcome is reached.
There are a number of standard models that can be used to value your recruitment business. These include using an agreed multiplier of EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), which essentially looks at the potential profits of the company over an agreed period of time. However we believe that this figure should be viewed as a starting point, from which additions or deductions need to be made regarding business assets (both tangible and intangible), goodwill and scalability.
One of the main difficulties in valuing a recruitment company is placing an accurate cost assessment on one of a recruitment businesses most important yet most intangible assets - its people. In many cases a recruitment company is only as good as its brand reputation and the individual recruiters that it employs. Both of which are intangible and therefore very difficult to value. One of the main concerns purchasers face when buying a recruitment business is the potential loss of key staff. However with pertinent planning said staff can be incentivised to ensure that this valuable asset is not jeopardised.
There are a number of key steps that all businesses should take when looking to sell. As we have already mentioned planning is key to a successful sale. Even if a surprise offer comes in, having your company in a sale-ready position will result in a better outcome. Ensuring that factors such as; clear accounting practices, maintaining a strong credit score and building up a strong network of contacts, will help to make any business an attractive prospect. However there are also a number of industry specific concerns that recruitment companies should address to maximise their saleability.
In many cases the most successful recruitment company sales are from those who have cornered the recruitment in a particular, and often niche, market. Not only does this give a potential buyer confidence they will not be facing an onslaught of competition, but may also make the business more attractive to other recruitment companies who are looking to branch out into that area through a mergers and acquisitions strategy.
Also ensuring that your business is not overly reliant on a small number of larger clients, but has a well spread base of reliable long-term clients will provide more incentive for a purchaser to take over the business as a going concern. In some sectors this can also be consolidated by having a mix of both permanent and temporary contracts, which can be seen as more impervious to fluctuating market forces.
As previously mentioned many recruitment businesses are built upon their staff, and so ensuring the retention of key staff after a sale is crucial. Implementing incentives such as staff share schemes before the sale can help to assuage buyer’s concerns; however there may then be tax and other financial issues surrounding a complete buy-out. Essentially it is important that the business can be seen to continue to be successful without the owner in place, but maintaining its most vital personnel assets.
Any potential acquirer will want to be able to easily evaluate the exact state of the finances of the recruitment business that is being sold. Ensuring that they do not have too much cash on the balance sheet, that there is no outstanding employment claims and that bad debt is erased will all help to increase saleability. Clear records will not only be imperative during the due diligence process of the sale, but will also support the valuation and give potential purchasers a strong view of the company’s current trading status.
There are also further factors which recruitment businesses specifically must take into account when looking to sell.
The UK recruitment industry is very heavily regulated and so businesses that are looking to sell must be able to prove their compliance. Proven adherence to the principles set out in:
There are also a number of practices which, whilst not illegal, are frowned upon by the authorities and which may adversely affect your recruitment business sale if they are discovered during the due diligence process. For example the instigation of Employment Benefit Trusts which were once widely used throughout the recruitment industry to incentivise staff as a form of tax-free bonus scheme. However HMRC now views these as illegal tax avoidance schemes and they may be subject to litigation to recover outstanding tax liabilities. Before selling your recruitment business consider taking advantage of the ‘Settlement Opportunity’ that HMRC has published which allows Employment Benefit Trusts to be dissolved and any tax liabilities settled without the need for litigation.
For more information or advice about selling your recruitment business contact Selling My Business today.
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