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It Is Never Too Late To Sell

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HHMC positively believes that each and every business in the recruitment industry has a value and a sale process is possible even in today’s environment.

It is true that sometimes the assessment of a recruitment agency’s value or a recommended deal structure may differ from the owner’s expectations, but there is always a value and a deal structure to be discussed if you keep an open mind.

Recruitment agency owners need to plan and execute quickly to secure the future of their business, not let the situation control them. In normal circumstances this discussion might be targeted at Baby Boomers and their exit strategies, but these are not normal circumstances.

The Pandemic

The 2020 pandemic is having a dramatic impact on all industries in all countries. There is a case to say the recruitment industry is impacted more than most. This is partly because the business relies on the forward business confidence of clients (and that has been smashed), but also because such a large proportion of the industry is comprised of small to medium owner-operated businesses.

Small business owners feel the impact of downturns even more deeply as the implications are so much closer to home. Often owners have personal guarantees over leases and contracts, are likely to have the family home connected to the business in some manner and share the highs and lows of the business deeply with immediate family. Small business is very personal. For some, if the business fails everything is gone.

Even if the business fails and the owners can walk away with personal assets relatively unscathed, it is a deep emotional impact. With apologies to PAYG managers who may lose their job, it is different.

Be In Control

It’s a fact that many recruitment agencies will not survive this pandemic and the economic shutdown, especially if the recovery is slow. We have already seen businesses reduced to sole trader status, or placed in administration, or have just shut the door.

The recruitment industry’s response to the crisis is excellent and there is pointed, articulate advice available for owners to consider all aspects of what they are dealing with – cashflow, staff, clients, candidates, technology, landlords, and personal health. We are also starting to see greater focus on the future – what might change in the economy, how to take advantage of the situation to reorganise internally, and how to prepare for the inevitable recovery.

The sage advice has been to take big steps and to act with haste. In the early days, that was to reduce costs deeply and quickly to meet the forecast GP levels. Now it is to stop tinkering and make bigger decisions that will have lasting impact. But always the advice is to do it now, not wait for a week or a month or to see what might evolve.

This advice carries through to the owners who are evaluating the overall position of their business. Does the business have a strategy to recover? Are the leadership and financial assets in place to drive the business out of the current situation?

Decide Early

Please do not wait until there are no options left – act early, get some advice, and openly explain the situation no matter how hard that process might be.

The benefit of acting early is that you may have options open to you that you hadn’t considered. If you act early, the value of contractors, clients, contracts, open job orders and staff will be seen by others. There is also the potential opportunity of an ongoing role for the owners if that is wanted and an arrangement can be reached.

Who knows, the next 6-12 months may reinvigorate those who have been shattered by the current circumstances, allowing a return to play a role in the rebuild.

The advantages for the smallest of businesses may be less about the financials. The pride, honour and dignity of passing on your business to another entity is worth a huge amount in these times.

For those considering retiring, especially, the final business decision should not be to close the door.

Categories: M&A

Tags: Strategy, Divestment, Recruitment and Staffing Industry, 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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