At some point most recruitment company owners and directors want to sell. If they have prepared the business in the right way then it has a huge impact on the value buyers are willing to offer. But even if you have no intention of selling your business, the ideas and principles in this short article are worth adopting to help you grow your recruitment company more sustainably and efficiently.
Building a robust structure
When considering what to pay for a business, investors will consider the future earning potential of their proposed investment and the associated risks. Many owners are so focused on exploiting opportunities that they lose sight of what de-risks the business and the result is a lower multiple than they could achieve.
And risks matter. Investors buying a business take a similar approach to you or me buying a house. If you spot a crack in a wall you will scrutinise the purchase with even more caution to ensure you identify any potential surprises. And furthermore you will use that information when negotiating with the seller to get the best possible price.
Future-proofing your recruitment company isn’t rocket science. Start by breaking your business into different operational areas, for example: internal recruitment, candidate care, marketing, account development etc. For each of these areas you need to: review the current process; document it in a strategy; establish a process; and then improve it. It isn’t realistic for one person to do this for every area of the business. Instead make different people responsible for reviewing and continually improving each of the different areas.
I cannot over-emphasise the importance of a three year plan and how it will steer you towards good decisions, avoiding regrets. One of the most common conversations I have when starting work with clients is “I wish we had done / hired xxxxxxxx twelve months ago…”. Occasionally this is simply hindsight but more often than not it is the result of a lack of planning.
The plan doesn’t need to be a big document – a 3 year budget forecast, a hiring strategy (i.e. details of which positions will be recruited when) and 3 years of financials including cash flow are the key elements. When building your revenue forecast it is not enough to predict 20% year on year growth without justification. Identify whether revenue will be from new or existing clients and ensure you will have the staff to achieve it.
To predict the staff you will need, work out your key ratios as it is activity that drives revenue. For example, if every 100 calls resulted in 5 interviews and one placement last year then the same will most likely be true this year. This means that if you monitor the right KPIs then you will know what needs to be done to hit each of your targets over the next few years and the staff needed to hit those activity levels.
Visit www.mynonexec.com/recruiter-club for free, immediate access to a full 30 minute training session (along with other recruitment webinars).
For further advice on preparing your business for sale contact Partner and Recruitment Sector Specialist Lee Manning at firstname.lastname@example.org.