Despite a strong global economic cycle pushing beyond 10 years, many business owners and managers have entered 2020 with a sense of trepidation and uncertainty.
Across ANZ confidence was shaken in the past two quarters as both perm and temp/contract revenue fell, albeit with some recovery in the 4th quarter. Staffing Industry Metrics financial benchmarking and HHMC Global’s latest Business Intentions Survey Report show a decline in revenue in the last half and falling confidence towards the immediate future.
None of this indicates a recession is imminent, or that continued strong results won't be achieved by many in the industry. This could be just a market softening after the wonderful growth achieved over the past 1-2 years.
It is however a timely reminder for owners and managers that business always needs to be in a robust position to best deal with an uncertain future. This is especially true if you have a short to medium view of your business as a shareholder and maybe considering an equity event.
Gaining an external perspective of your business and its position in the market is a valuable way to benchmark aspects of the business as well as identify strengths and weaknesses.
Most recruitment businesses do not have an independent Advisory Board or a non-executive director on the Board. Most recruitment business boards consist of owners and senior managers who operationally work in the business. As a result, they tend to believe that the assumptions about their own business are correct and that the business model they operate is contemporary with today’s market. There is plenty of evidence that we tend to get used to our own conversations and stop being brutally honest with ourselves.
HHMC Global’s Business Review, which includes an equity valuation, is a valuable way to use an external voice to see how your business is perceived from an outside perspective, to review its operations, and to clarify shareholder positions and value.
This short and sharp review with written report has many benefits for the shareholders and the organization’s leaders. What are the strengths and risks? How flexible is your business for a changing future? What decisions can be made to reduce risks and increase the value of your business? How prepared are you for a corporate event (when that elusive buyer knocks on the door)?
With over 20 years of M&A advisory in the recruitment industry and with around 100 years collective experience in operating, managing and advising recruitment businesses, HHMC Global has the capability and capacity to conduct a highly objective external review of your recruitment business.
HHMC Global’s Business Review commences with an operational performance review before looking at some of the more strategic issues that will have a larger bearing on the value that may be achieved by your company in today’s market.
Operational Review
There are four key areas to review in understanding operational performance and comparison to industry benchmarks.
- Financial Performance - how do you perform compared to your peers?
- People – how well are your consultants and support teams performing, and what is the best model for servicing clients needs while controlling profits
- The Market – how do your products and services meet global trends and forecast market conditions.
- Support Services – are your systems and support structures current, relevant and fit for purpose while adding to profitability
Shareholder Value
HHMC describes the value of a recruitment business as the risk associated with earning future profits. The better the sustainability and the greater the strategic advantages, the higher the value of the business in an open market.
Issues that would be investigated to understand this value include:
- The quality of management and leadership teams
- Key person dependency
- Client concentration risk
- Sustainability of revenue flows
- Growth-oriented client base
- Balance Sheet fitness and strength
- Shareholder strategy
- Corporate transaction readiness
HHMC’s Business Intentions Survey Report Version 5 released 27th January 2020.
It is time to have an honest conversation about your recruitment business.
