How to Prepare Your Recruitment Business for Sale

By Eric Allison

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Whether you’ve built your recruitment business ideally to sell, fund your retirement, or pay off debts, you’re going to want one thing: to get the best possible price when you make the sale. While the whole ordeal of transacting itself is no easy task, there are some things you can do to prepare for it.

 

These tips will keep your recruitment business in good shape as you gear up for a clean exit on the best possible deal you can hit with your buyer.

Check your business valuation

The first question to ask here is, “What is your recruitment business worth?” It’s important to ground yourself with the reality of the situation before making any decisions, as these will determine what kind of options you have for selling—if you can look into higher bids or compromise your ideal price.

 

After locking down your business valuation, you can then sort out what makes your company appealing to the eyes of your target and prospective buyers. Start consulting with companies that have access to national data on private transactions in recruitment—such as accounting firms, investment banking firms, and regional business brokers.

Identify your exit strategy options 

Business sale requires a lot of consideration with regards to who you’re appealing to. Understand who you want to sell to and what price this buyer can afford. Here are the types of buyers you may want to look into:

 

  • Strategic buyers - They will typically have a pool of other businesses and are looking to buy another business that complements their chain of companies. 
  • Financial buyer - Financial buyers are interested in acquiring gains from the sale.
  • Employee buyout - You can opt to sell stock ownership to your employees. This is a good alternative for when your best option for the business’s chance of success is within the internal team.

Conduct a SWOT analysis

Beyond your business’s financial numbers, taking a good look at your pillars of strength, weakness, and room for improvement will prepare you for any buyer’s questions. This way, you’ll also be able to brace yourself in how to position or phrase a response to put the spotlight on your strengths, defend your weaknesses, and explore your opportunities. 

 

In a survey conducted on the Philippine start-up industry, it was found that the availability of talent is one of the factors that have helped business owners successfully build their start-up. For this instance, you can upsell how highly valued the staffing and recruiting industry is. Look into successes that can make your case for buyer’s confidence and a higher sale price. 

Have your books ready 

Have an auditing firm do a clean sweep of your financials. M&A processes may require a review of several years’ worth of your statements. Keeping this aligned also boosts a buyer’s likeliness of following through on the sale, and could potentially increase your chances of negotiating for a better price. 

 

Keep your due diligence information organized

 

Buyers would want to review your business’s financial information. For this reason, you must be able to file and track your financial statements. 

 

If you know that there are essential filings that need to be addressed, try your best to resolve them before dealing with your buyer. If not, it’s good practice to be upfront about any concerns. It also helps to have a brief explanation as to why it might have been overlooked. 

Consult your financial advisor

Aside from your financial history, it’s also good to consult your financial advisor on a three-year forecast. Setting realistic goals that are more likely to be achieved and successfully following through will boost your value.

Build your business value

Have your M&A advisor review your company’s current standing. See how you can strategically build up your business value before setting it up for sale. Ideally, an advisor would have several action plans feasible over 6–12 months. Here are some general tips that can aid in growing your business value:

 

  • Streamline company processes - Clean up your business workflow. Make it faster and more efficient by cutting out any unnecessary procedures or merging steps in getting new recruitments if possible. Faster recruitment, after all, does drive better performance and costs significantly less than dragging out the hiring process. It uses less energy and resources.

 

  • Reduce your budget - Budget cuts don’t have to be for a negative reason. This helps you take control of miscellaneous spending so that you can allocate the funds elsewhere.

 

  • Strengthen your database - Having a well-maintained database can boost your team’s efficiency in recruiting. It makes finding new candidates faster and speeds up the actual recruitment process.

 

  • Invest in lead generation - Acquiring new candidates is no easy feat, especially if the roles you’re trying to fill are niche or more complex than the average. 

Check out how you can improve lead generation. You can expand beyond your regular job hunt platforms and emails. You can use social media platforms and market trends to revise and enhance your recruitment strategies.

  • Find new sources of funds - Look into the different ways to fund your business. Acquiring more monetary support can help you kickstart new revenue-driven projects or even build better programs for your recruiters. 

 

  • Reinforce your branding - Establish your business as a successful one. Have a mission statement that pushes for the kind of success you want your buyers to see. Make it a point to run towards that goal as a business.

 

  • Strengthen Employee Value Propositions - When you’re looking to attract strong applicants, you should be able to highlight strong EVPs that applicants would covet. You can build this with an appealing workplace culture that has morally grounding standards and always considers its employees' interests. 

With a strong EVP, you’ll get better employee engagement and better work performance.

Aside from complying with your advisor’s recommendations, you can also take the opportunity to build your business value by curbing the chances of low turnover rates. Here are some ways you can strengthen your recruiters’ preference to stay with your company longer:

 

  • Positive reinforcement - Don’t miss out on the opportunity to give employees a kudos or a due recognition for a job well done. Acknowledging their hard work can help foster a stronger sense of importance in their roles.

 

  • Build training programs - Allow them to grow in their field with training that can help your business thrive. This can be done through your newly acquired sources of funds. This can be in the form of strengthening their recruiting skills and sharpening their eye for suitable candidates.

 

  • Create mentorship programs - Partner mentors with recruiters new to the industry. Aside from training programs, mentorship programs provide employees with the opportunity to strengthen team camaraderie and forge a good recruiter’s mindset from learning with experienced employees.

 

  • Give them accountability to projects - Let them create their own projects with the goals they set for themselves. This will give them a stronger sense of purpose and feel even more important to the company.

 

When you’re dealing with your potential buyers, it’s imperative to put your best assets forward and package it in a way that helps them rather than merely to sell your business. Your sales process is what will undoubtedly determine the true success of the transaction. Here are some ways you can keep your sales process successful:

 

  • Show them the information they want to see - This includes well-organized financials and reports, business successes, strengths, and even your weaknesses.
  • Share your business mission - Ideally, your purpose is one that resonates with your buyers' intent on the business.
  • Boast of your processes - Let your buyers know how well your business functions with the recruitment processes and technology you already have in place. This will substantially boost your buyer’s interest.
  • Present business projections - Don’t hesitate to offer a forecast on your business’s success in a few years' time. This helps build your buyer’s confidence that they are making the right decision in choosing to purchase.

Evaluate potential buyers

 

While it may be great that there are organizations that expressed interest in your business, that doesn’t necessarily mean that they are fit to acquire your company. Do they have experience in handling a recruitment business? How do they plan to manage the company after the sale? Are their goals similar or wildly different from yours?

 

Have your M&A advisor screen your buyers to check for their qualifications before moving forward with any other kind of discussion. This way, you’ll save time and be able to keep the focus on growing your business worth before striking a deal.

Introduce the business to transition

 

If you’ve locked down the transaction, make sure to ease your business into the changes that may happen. This not only involves your buyer, but your stakeholders, clients, and employees, too. This ensures that everyone is prepared to make the transition a successful one, free of any confusion.

 

Here are some things you can do to introduce the transition:

  • Introduce business partners, stakeholders, and key clients
  • Walk through and prepare turnover process documentation and duties
  • Discuss industry standards and trade secrets
  • Review business operations 
  • Brief employees on any changes that may occur

Author Bio: Eric Allison is managing partner of Golden One Ventures, a boutique M&A firm catering to the middle market for the staffing and recruiting industry.

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