If you’re thinking of buying or selling a recruitment business, one of the first questions you’ll ask is: “How much is this agency worth?”
Valuing a recruitment agency isn’t always straightforward. Unlike property or stock, recruitment businesses rely heavily on client relationships, cash flow, and future contracts. This guide explains the key methods of valuing a recruitment agency in the UK, and what buyers and sellers should consider.
1. The Multiple of Profits Method
One of the most common approaches is to value the agency as a multiple of its profits. Typically, this involves:
- Taking the agency’s EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation).
- Applying an industry multiple, usually between 2–5x, depending on size, specialism, and market conditions.
Agencies with long-term contracts, strong client bases, and niche specialisms often command higher multiples.
2. Turnover-Based Valuation
Some smaller or start-up agencies are valued based on turnover rather than profit, particularly if profits are inconsistent. A percentage of annual turnover (often 0.5x – 1x) may be used.
This method is less common for established businesses, but can be relevant where the buyer sees potential to improve margins.
3. Contract vs. Permanent Placements
Valuation is influenced by whether your agency focuses on:
- Contract/temporary placements — valued highly due to recurring revenue and predictable cash flow.
- Permanent placements — less predictable, so often valued significantly lower unless client relationships are very strong.
4. Other Key Factors Affecting Valuation
- Client concentration — Do revenues depend on one or two big clients, or is income spread more widely?
- Sector specialism — Agencies in high-demand sectors (IT, healthcare, finance) often command stronger valuations.
- Systems and compliance — Buyers pay more for agencies with strong processes, compliance, and clean financials.
- Geographic footprint — London and South East agencies may attract higher valuations, but regional specialists can also command a premium.
- Standalone operations – does the agency operate independently of any owners and other businesses?
5. Using Professional Valuation Advice
Every business is different. At Recruitment Agency Sales, we provide confidential advice and guidance to agency owners across the UK who are considering a sale.
We help:
- Buyers assess opportunities.
- Sellers prepare their agencies for market.
- Both sides understand realistic valuations in the current climate.
👉 Contact us today for a confidential discussion about valuing your agency. We specialise in connecting buyers and sellers of recruitment businesses. If you’d like tailored advice on what your agency might be worth, get in touch with our team today.