Thinking Different to Sell

EXCLUSIVE CONTENT – Adnan Sajid, corporate finance partner, UHY Hacker Young on selling your recruitment business.

Recruitment is an industry which is built on finding the perfect balance of skills, knowledge and experience to help clients reach their goals. The same thinking process is applied when choosing an accountant to advise on the possible sale of your recruitment business. To achieve the maximum price for your recruitment business, seeking expert advice from accountants who understand the sector and have experience in Mergers & Acquisitions can make the process run as smooth as possible.

A dedicated and integrated team can help with everything involved in a sale including accounting support, preparing management information for due diligence, corporate and personal tax and wealth management of your sale proceeds.

The recruitment industry in the UK suffers from too much of yesterday’s data and business owners are often flooded with information and told they should compare themselves on certain obvious KPIs. Often, the advice comes from within the recruitment industry itself.

However, the recruitment buyer market and expectations have moved on. Here are 10 things to consider, reflecting the latest thinking from real life conversations with buyers of recruitment businesses:

1. Forget everything you have heard or know about selling your recruitment business. Have an open mind and be prepared to think differently. Talk to recruitment specialist M&A people to ensure you’re given the right guidance.

2. Document who you are as a business and what you stand for. Ask yourself what your identity is as a business? What is the culture like? What is your eventual vision for the business? Having a strong brand identity and ethos as a business, shows how bound your staff are to those stated values over time. Demonstrate and measure this using cultural engagement companies which can provide information on everything from productivity to staff motivation levels. The more real data you can provide will put you in better stead when it comes to sale.

3. How good is your business plan? Is it air tight? When was the last time you revised or updated it? Do you even have one? Plan to the nth degree and make sure every eventuality is considered. The main areas to perfect are your key markets and how to reach them. Conversely, you should also spend time deciphering which markets to spend more time, money and resources developing. An honest take on your competitors is also important – find out what they are doing well and what they could improve. Learn from their mistakes and successes just as much as your own.

4. Make sure all your financials are in order from the beginning. Before proceeding, you should have a detailed three to five-year financial plan. It should identify target head counts, target net fee income (NFI) and splitting NFI into quartiles, breaking down revenues and cost of sales by office and market. If you don’t have this in place, why not? If you do, can you demonstrate and measure how your progress is along that plan, and have you revised targets and budgets on a rolling basis? For example, providing a 3-year plan which is updated and rolled forward annually.

5. Record your customer stickiness for each key market, contract or perm, and each key sector e.g. IT or Engineering. Ask yourself how many are repeat clients, and how do you stay on top of the account management of that client beyond what the individual recruiter does? CRM systems and databases are vitally important as they provide you with data which gives potential buyers an idea of everything from client relationships and retention levels through to staff turnover and contract length. Gross margins on placements are also important to measure and report on.

6. Document and measure your induction of new consultants; measure how long it takes them to get first deal done, then 2nd, 3rd, 4th. What is the average break-even period for each consultant, or batch of consultants?

7. Carefully record and track churn rate or attrition of your consultants. Work out how many fail as new inductees and how many leave as experienced consultants. Ideally you should be able to define and stratify levels of experience of your consultant base, everything from less than 12 month, 12 to 24 months and so on.

8. Do you have independent surveys of your customers, both candidates and clients? If not start to put some in place in order to build a more three-dimensional, balanced view of your business. If surveys within your business already exist, analyse the feedback and re-measure to show progress.

9. Analyse the software you use as a business and assess its overall effectiveness. What size appropriate technology or software do you use in your recruitment business and why? Has the implementation and adoption been a success? What could be done better, what is really key and what is unnecessary or simply ‘nice to have’?

10. With specialist sector advice from your accountants, you should consider producing a monthly pack, no longer than 6-pages long detailing key financial and non-financial data that summarises the performance of the business in terms of Year to Date, in the Month and against Budget.

Selling a business is never easy, but with the right preparation and deal team it can become a much more streamlined process with the desired outcome.