Top tips for selling your recruitment business

Selling your recruitment business is like selling your house: to get the best price you need to give it some attention and make it attractive to potential buyers.

You should be able to demonstrate a few years of steady growth and profit but you also want to be able to show that you have created something of wider value.  Buyers will want to see that you’ve built a strong brand and reputation, have a loyal client base and candidate database, and have the necessary infrastructure in place.

All recruitment companies should be built to be saleable. So, whether you set up your company as a lifestyle business or with a view to growing and offloading it at a strategic point in time, here are some things you should bear in mind when thinking of selling your business.

  1. Clearly state why you are selling you are selling and how much you want to sell

    • Buyers will want to see sensible reasons for why you’re selling, so make sure all of your objectives are clear.
    • For example, does the business need capital to expand, enter a new geographical market, or launch a new product?
  2. Find the right adviser

    • Appoint someone you absolutely trust. Selling your business will probably be one of the biggest decisions of your life. There are so many legal, financial and regulatory issues involved; it is crucial for you to get this right.
    • A corporate advisor will help you to prepare all the necessary information that will facilitate the marketing and sales process, including a business plan, due diligence materials showing current and historical trading, and financial records.
    • A corporate advisor will also identify potential deal-breaking issues before approaching potential buyers, e.g. succession planning and ongoing leadership; contingent liabilities (e.g. company pension deficits); and legal issues.
  3. Find the right buyer

    • Consider whether to sell to a strategic trade buyer, or to a private equity firm. A corporate advisor with the relevant sector specialism will help provide access to the right buyers.
    • Your corporate advisor can also help you market your business for the optimal outcome by tailoring the message to each potential buyer to focus on the most relevant aspects of the business. They should also give a stamp of authority to buyers, which will help to facilitate good buyer behaviour throughout the sale process.
  4. Get you valuation and timing right

    • Market conditions will ultimately decide how much your company is worth. The availability of finance may crucially impact on a buyer’s leverage and what they are prepared to pay.
    • Are you being realistic? Your corporate adviser will help you to gauge the mood of the M&A market, and time accordingly.
  5. Get your house in order

    • Cut out any unnecessary costs. Buyers will want to see a lean and efficient business, not one which is squandering cash. Scrutinise your expenses and get rid of anything pointless, flashy or excessive. A potential buyer may be put off by the prospect of having to come in and cut costs themselves.
    • Look objectively at every aspect of the business through the eyes of a prospective buyer: your website, offices, position in the market, branding, marketing materials, and staff. Just as in selling a house, it is often the little things that could scupper a sale.
    • Get all of your paperwork in order. Every prospective buyer will want to see up-to-date accounts and cash flow statements. They will not want to see anomalies, one off payments or exceptional charges cropping up in your financial records.
    • Make sure your business is properly registered under the Data Protection Act. If the value of your business is based on your client and candidate database, and it’s not properly registered, then the whole database could be unsaleable.
    • Make sure you have workable systems, and keep your staff happy! The recruitment industry is a ‘people-business’, so investing in your staff’s professional development will increase your returns.
  6. Think about tax

    • You must pay special attention to your existing and future tax position.
    • If you are planning on taking advantage of Entrepreneurs’ Relief, make sure you meet the criteria (e.g. being an officer, and holding the requisite percentage of shares/voting rights for at least 12 months).
  7. Keep it a secret

    • Confidentiality is essential: employees will probably be very unsettled by a prospective sale.
    • If at all possible, don’t tell your staff, customers or suppliers that the business is up for sale until you have found a buyer and done a deal, because uncertainty can seriously damage a business. It’s far better to announce that you are selling because you were made an offer you couldn’t refuse, than to have to admit that you put the business up for sale but couldn’t find a buyer.