Best Practices for Selling Your Staffing Agency
If it’s time to sell your business before the next recession or market correction hits, here are some practical steps you can take to prepare your company for sale.
What to do before you sell your company
1. Get a partner to help in the process
Look for experienced partners in the legal, finance, or investment banking fields. Whomever you end up choosing, just make sure it’s someone who has executed a staffing merger or acquisition before. When in doubt, ask industry peers who have been through the process.
2. Have employment agreements in place
Having the right people in the right roles will help you in the M&A process. If your executive team, key managers, and top sales people are all high performers, your company becomes more attractive. Also make sure you have employment agreements with your key staff members – including non-competes - which can then be transferred to the new owner.
3. Audit your financials
Making your financials easy to understand is key. Consider hiring an outside firm to audit your financials and make sure they are as clean and easy to read as possible.
4. Choose the right valuation method
There are several valuation methods you can use, depending on your industry. Just make sure that your valuation includes key value drivers including your sales growth rate, revenue concentration, net profit margin, and the quality and depth of the leadership team. We discuss valuation in more detail in the Valuation section.
5. Consider tax consequences
In advance of going to market, think about tax consequences. The IRS treats the sale of a business not as a single asset, but all of the individual assets. Will your assets be taxed at capital gains or ordinary income? Can you sell assets? Do you need to sell stock? It pays to think of this beforehand.
6. Price realistically
If your offer sounds too good to be true, it probably is. Buyers are going to be wary of pitfalls if you price too low, and ignore you outright if you price too high.
What buyers look for in Staffing M&A
Strong performance and future outlook
Successful, profitable companies are always in demand. If you feel like there is room for improvement from an operational standpoint, make changes now to increase your future value. Does your team need improvement? What areas are most profitable, and what’s not? These are some questions to ask yourself.
Market and market position
Buyers want to acquire competitive staffing companies within in-demand markets. It’s important to know where you are positioned within your industry to make the case for why your market share is desirable. Do you see growth potential in your verticals? How are other staffing firms in my area doing?
Clean financials and good record keeping
Buyers want to acquire competitive staffing companies within in-demand markets. It’s important to know where you are positioned within your industry to make the case for why your market share is desirable. Do you see growth potential in your verticals? How are other staffing firms in my area doing?
Legal or compliance issues
It is best to address any ongoing legal issues your company has head-on rather than waiting for them to be uncovered in discovery. Do what you can to limit damage and come to agreements before starting the selling process.