In the early days of starting your recruitment agency you’ll likely be focused on surviving the first year or two. But as the profitable years stack up and you get into your stride your focus will begin to change. There are several reasons why a recruitment agency owner may wish to increase the value of their business. You may wish to enhance your reputation, attract the attention of bigger clients or plan the end goal should you decide to sell.
Whatever your reason and wherever you are on your journey if you are wondering “How can I maximise the value of my agency?” then here are 5 ways to realise your financial ambitions:
- Industry Benchmark
The typical approach to assessing your business value is the multiplier EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
- EBITDA x multiple = enterprise value
This formula shows the earning potential of your business and is a good place to start when determining your agency’s value.
2. Growth and Profitability
Potential buyers will want to ensure that they are buying a business that is on an upward trajectory. So you’ll need to determine and demonstrate how scalable your business is.
Analyse your business’s growth in the last financial year. What is your profitability and what percentage does it represent of the overall turnover? What’s your topline growth? Is your trading activity trending upwards? Could your business open a new office? Are there any other opportunities to make more money?
These factors are huge when it comes to considering the value of your company. The ability of your team significantly contributes to the value of your recruitment agency. To maximise value, you must build a strong management team to prove that success of the business isn’t just down to the business owners involvement. Being able to show that your employees have strong and sustained sector knowledge and capability will make your business more sellable.
Buyers will also want to see evidence that you have some top billers and a good spread of loyal clients. Some may deem that agencies with a high concentration or reliance on one client too risky an investment.
You will need to consider your business culture too- having a strong positive business culture will boost value by demonstrating good staff retention, training programmes and incentive schemes. All will give your buyer confidence in employee loyalty.
Business brand makes your business attractive to candidates, adding to your overall value. Your brand is what makes you unique or different, and it’s how you differentiate yourself from your competitors. So, consider how easy it is to define what you do and what makes you different.
The other thing to think about are the processes within your business. Are they effective and efficient? Advanced RecTech executed by a highly skilled team increases business confidence. Fintech solutions, such as those provided by 1PS can drive a recruitment agency forward by streamlining processes and boosting cash flow.
Technology is a key indicator of how valuable a business is and how easy it will be to purchase and then scale that business.
What’s Your Worth?
One of the things to remember is that your business is only worth as much as someone is willing to pay for it. A lot of value will be based on how well you present both your monetary and intangible worth. Contact 1PS today and talk to our experts about ways to enhance processes, encourage growth and ultimately increase the value of your recruitment business.