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It’s The Profit, Stupid

business value for recruitment

If I can paraphrase Bill Clinton’s successful presidential campaign slogan of 1992 “It’s the economy, stupid,” we can focus more on profit when asked about how to measure and improve business value.

HHMC writes and talks a lot about the drivers of business value. We talk about factors that make your recruitment agency more attractive, such as sectors, productivity and clean accounts; factors that will result in a discount such as lack of temps, poor branding, or poor technology; and the benefits of business longevity. There are also factors that add value to a business including size, corporate capability, performance, and management strength.

But at the end of the day, you are going to be rewarded on a multiple of the profit you make.

I’ve become a recent reader of Scott Adams blogs and books.  He is well known for the Dilbert cartoon series and carries these sharp observations on the workplace to discussions on life, business and politics in an interesting and thoughtful manner.  From his book “How to Fail at Almost Everything and Still Win Big”:

Related: Know Your Real Profit

“I am a professional simplifier… The best example of the power of simplicity is capitalism. The central genius of capitalism is that all of its complexities, all of the differences across companies, all of the challenges, decisions, successes, and failures can be boiled down into one number: profits.  That simplicity allows capitalism to work. The underlying complexity still exists in business, but creating a clear and simple measure of progress makes capitalism work.  No smart investor would buy stock in a company without knowing its past and projected profits. Profits tell management when they are doing something right and when they need to do something different.  That one simplification – the idea of profit – sits atop the engine of capitalism and largely steers it, albeit sometimes in the wrong direction. You can debate the morality of viewing profits as the top priority in business, but you can’t argue that it doesn’t work. At most, you can argue that some companies take it too far.”

Sometime it seems business owners need to simplify their approach to business so there is an overarching objective that allows clear and unambiguous decisions to be made. Is concentrating on profit that simplification?

dt131114When a staff member pushes you for additional benefits or greater commission, when a client pushes you on margin or payment terms, when a staff member fails performance targets again, when you review your marketing spend – how clear and objective is your decision making.

 How recruitment industry changes have impacted agency valuations. Learn More

eBook - Business Valuations in the Recruitment Industry

Getting back to basics and just concentrating on profit might be the answer.

Categories: M&A

Tags: Strategy, Acquire, Divest, Recruitment, Staffing, Business for Sale, Buy a Business, Business Valuation

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Rod Hore

Rod is a 35-year veteran of Australian and international IT and corporate advisory organisations. His executive-level credentials traverse many segments of the staffing and recruitment industry and include corporate advisory assignments, mergers and acquisitions mandates, and C-level advisory to multinational and other public and private organizations. Located in Perth, Rod founded HHMC to provide local industry acumen and global knowledge to Asia Pacific recruitment agencies. HHMC’s innovative business strategies and well-grounded guidance result in clients realising their personal and corporate goals.

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