We recently received a query from a recruitment agency owner asking us how our valuations differ from others, what factors we take into account and what is included in the service. This is our response:
“We avoid unrealistic valuations. We know there are national brokers out there who thrive on them to flatter business owners and get them signed up to pretty horrendous contracts they are subsequently tied into. Similarly we also know that accountancy valuations tend not to be realistic and ignore most factors that affect the saleability of the business by simply using a multiplier.
There are so many different factors involved in every recruitment agency/business sale, but broadly speaking market valuations depend on the following: size of staff team, company structure (limited company or otherwise), types of recruitment, business sectors covered, business reputation in the market, sources of work (we investigate these in some detail with you – includes whether you have personal connections eg family members, tenders, ongoing contracts, recommendations on past performance, previous clients & billing history), accreditations that generate work (eg public sector framework membership), frequency of work from the various sources, current marketing undertaken, length of time trading, consistency of turnover and profit, the profit and loss account and what’s in it exactly (not the vague ‘professional fees’ or ‘sundry expenses’), cash balances in the business (relevant for tax in particular), future potential (although this tends to be less relevant than other factors), turnover compared with input into business (especially relevant to owner managers – eg are you spending 10 hours or 75 hours a week generating £100k?) and market competition.
We suggest improvements to value and saleability, whether realistic or just possible – eg hiring a staff team to manage day to day operations – possible but also similarly unrealistic for very small firms. We don’t just give you a number – we take a detailed in-depth look at your business and circumstances – our reports are extensive and full of advice.”
Interested in finding out about your business? Visit our website to request a valuation.