Building a recruitment firm is all well and good. But building a sellable one is something different entirely.
Whether you’re eyeing up exit options now, or simply curious about selling your business in the future, we have some tips for looking at your financial model with a fresh, critical pair of eyes. Is it healthy? Could it be improved to attract a higher value?
Keep reading for the questions to ask before you start looking to sell…
Review Your Bottom-Line Trends
The new owner will want to have a business in ascendance – not one that’s experiencing a dip in revenue and profit. If the figures are rising (on average) and have been doing for some time, you’re in a strong position.
However, if the opposite is true and you’ve experienced a recent spike down in margins, it may be the result of an investment – such as a new office or an agency-wide implementation of software. Make sure that dips are explained or placed in context.
Outline Debtor and Credit Days
How effectively does the business cover its debts? Moreover, how many are there? A great financial model pays its creditors on time, with sufficient cashflow to comfortably cover it.
At the same time, it’s critical to be aware of how long your clients take to pay you. Averaging invoice timescales over the year will help you determine the best, most reliable ones, and where you typically experience gaps. Then you can focus on tightening collection procedures, with better admin or penalty stipulations.
Work Out the Profit-Per-Head
Your recruitment team may be large, small or growing rapidly – calculating its profitability per individual gives you a clearer view of whether someone is likely to buy your business. Take another look at the profit your staff are able to bring in – weighing the revenue they generate or contribute towards, minus the cost of keeping them (wage, desk fees, commission etc).
This calculation might be trickier for ancillary staff or stakeholders who don’t generate fees directly. In that instance, you may want to divide all current employees by the profit they create, which leads to a generalised figure. Again, comparing it to previous years will be a big mark in your favour.
Discover What Competitors Are Earning
To attract a buyer that’s as yet unversed in your industry, you’ll need to outline to them what’s considered ‘good’ for a business of your size, nature and specialism. The resulting table or graph can go a long way to making you a convincing sales prospect.
Check stock prices for your nearest competitors if they’re on the market. Otherwise, dive deeper into past, comparative exit scenarios, or how much your rivals are valued at right now. The more you can explain and contrast, the more solid your offer will appear.
RJF Accounting & Business Support are well versed in these tactics. We’ve helped numerous recruitment agencies view their financial advantages, before advising on the next steps they need to take prior to a sales pitch. For more information about how you may benefit too, and to learn what else must underscore a brilliant sales ambition, speak to us today.