2021 is off and racing for much of the recruitment industry but not all sectors and geographies are recovering equally.
After last year’s dramatic decline the past few months has seen the market recover strongly.
Some deals happened in 2020 but a lot less than normal. Most buyers remained in the market, but the number of sellers reduced significantly. Some companies failed, and some others faded away.
Recovering markets bring both winners and losers. While a new crop of winners emerge, some existing companies stagnate.
Based on what we saw during the recovery from the Global Financial Crisis, and after the tech crash of 2001, we expect a gradual increase in business sales over the next 12-18 months, and assuming no new external disruptions, heaven forbid, a few years of strong growth and positive deals for Australian agencies.
When people ask us how to prepare a business for sale we usually say that “a great business is always ready for sale” but this past year was so complex that we had to highlight some specific items that would determine when they might be ready.
In particular, it has been so difficult to confidently forecast revenue and expenses that valuations were weakened. The key word here is “confidently”. Business confidence and the quality of forecasts rise and fall together. To be able to enter a sale negotiation from a position of strength, you need to show healthy forecasts for the next 2 years.
To satisfy a potential buyer, today’s recruitment agency also needs to show they have strength in today’s environment. That requires, but is not limited to, an engaged team, services that clients want and, now, the ability to handle “remote” (staff, candidates, sales and delivery).
You might not think your business model has changed all that much, but the lens through which you are viewed sure has.
HHMC Global provides an external review and market valuation service for recruitment agency owners that will be beneficial to your strategy. Contact Us to discuss further.
Article initially published in APSCo Australia's magazine "Recruitment & Co", March 2021.
