What do potential buyers look for when searching for staffing companies to buy?
You did it: you took an idea, conceptualized it into a profitable, thriving agency, and now you are ready to sell. Selling your staffing agency is a lot like selling your home: it should be attractive from the “curb” and pass a buyer’s inspection. Buyers want to maximize their investment and lower their risk when looking for staffing companies for sale.
Even if your balance sheet shows evidence of success, buyers will look at various key attributes of staffing companies for sale to assess the risk within your agency.
Having an in-depth understanding of recruitment M&A is important for helping you initiate and manage the sales process. Here are some of the factors buyers use to judge a “well-run” staffing agency:
Financials and Profit Trends
Reviewing the financials is one of the most important parts of buying a staffing company for sale. A buyer will work with an accountant to evaluate your business and key financial indicators such as profits, expenses, cash flow, and debt. The goal is to buy a company with healthy profit margins.
What’s more, buyers will also review your agency’s profit trend. Are profits going up or down? Are they sustainable? The trajectory of your agency’s profits is a key value driver, so timing a sale is essential.
Track the performance indicators, document the groundwork for future earnings, and work to increase your bottom line.
Quality of Management
Because staffing is a people business, potential buyers would want to see the type of individuals overseeing the daily operations of the company. They’ll look into their training, tenure, autonomy, and structure.
Once you have departed, buyers want to make sure there will be continued success. A significant part of this is the strength of your management and employees and their ability to continue delivering results. So, having a strong sales team and incentivized leadership can be a major asset.
Transferability and Operability
While buyers will primarily focus on your staffing agency’s future earnings, they’ll also consider how smooth the transition of ownership would be. Buyers will want to know how much your agency’s customer base relies on personal relationships with the owner. If customers choose your agency just because you’re at the helm, the transfer of ownership can significantly impact future earnings.
Also, buyers will want to know if business processes can be taught and replicated. They’ll also want to make sure your firm has established processes for operations, sales, and finances. If you’re the only person who can run your recruitment agency or lack defined operations processes, then your agency will be less attractive to potential buyers.
Solid Sales Team
Your annual sales play a critical role in valuation. When selling your staffing company, you’ll want to ensure your sales are at an all-time high and on the rise. The perfect time to sell a staffing business is when it’s doing well, and while this may sound perversely counterintuitive, look at it through the buyer’s lens. Would you be willing to acquire a business that is not positioned for continued success?
Your sales team should have comprehensive training and experience in the staffing industry. They should have a list of prospects that are always going to choose your agency when staffing needs arise. A strong sales team will increase your numbers and boost potential buyers’ confidence in your company.
Diversification
Because of seasonality and concentrations in the staffing industry, client diversification is a key value driver. Buyers are looking for sustainability and balance in the customer book. In other words, they want to avoid overdependency on a handful of main accounts and ensure there are some long-standing repeat accounts and engagements.
So, if your company is currently specializing in one area, you should consider branching out into other industries to broaden your customer base. Diversifying your staffing solutions will attract a larger pool of clients and help you grow your profits.
Regulatory Compliance
Sellers operating without the required compliance frameworks leave the buyer exposed to risk or saddled with the expense of developing a compliant operating model. According to the 2013 U.S. government regulatory standards, staffing agencies and their clients are joint employers and therefore jointly liable for compliance. Therefore, a staffing company needs to spell out the responsibilities of each in their client contracts as well as general arrangements for offering temporary employees.
While operating in a fully compliant manner may seem taxing and expensive, it’s crucial to building value for a business.
Staffing Companies for Sale: Temp vs. Perm Split
If more than 10 percent of your revenue is generated from long-term placement, it could have a huge impact on your staffing agency’s valuation. A combination of temporary, contract, and permanent work perfectly. The annuity-style income produced by the temp/contract and permanent combination works better compared to an agency delivering the same amount of profits but through permanent placements.
Start Making Your Staffing Company More Attractive Now
Thinking about selling your staffing company? Call Lonnie Veasley today to get the conversation started. Lonnie is a practical, hands-on Florida business broker who seeks to add value to every transaction he advises on.
His team will help you review your staffing agency from a buyer’s perspective, highlighting areas that need improvement. The goal is to find a strategic buyer who’ll pay the right price for your agency.
