A Guide To Growing your early stage recruitment business and creating A business of significant value

Jan 16, 2019

The UK Recruitment Marketplace is made up of thousands of small recruitment businesses – in fact 70% of all recruitment businesses never grow to more than 10 people and 40% never even reach their 5th anniversary.

So how do you build a scalable recruitment business? The following is a simple guide to some of the crucial areas you will need to address in order to grow and scale your business:

Business Investment

In order to grow your business, you will need to make sure you have adequate funding levels in place. Continued growth requires substantial investment and rapid expansion can be a risky business which will certainly require a robust and healthy cashflow. Make sure your 3-year financial forecasts are realistic and achievable and that they are sensitivity tested to allow for any unexpected shortfalls in sales.

Strategy and planning

A clear strategy and business plan are vital to the success of growing and scaling your business. Your strategy and plan not only needs to be clear but it also needs to be communicated to and understood by all levels of staff. Growing a scalable business requires you to stand back from the day to day billing which in turn will allow you to allocate much more of your time to planning and strategy

Management Team

To grow and scale your business you will need to put in place an effective and successful management team who can run the day to day activities of your business. This team needs to be trusted to deliver, whilst you ‘work on’ and ‘not in’ the business. As an entrepreneur in a growing business the majority of your time should be spent attracting, coaching and mentoring the talent within your own team.

Client Acquisition and Retention

Look to grow your business by expanding into compatible and fast-growing market sectors, particularly those compatible sectors which possess a strong technology bias – the introduction of new technology continues to dominate the business landscape and in turn is driving recruitment growth to exceptionally high levels. The more guaranteed business and visible revenue streams you can develop, the more attractive and valuable your business will be, to any potential buyer. Buyers will be looking for the future visibility of your revenue streams and therefore a large number of ongoing Preferred Supplier Lists, high levels of repeat business, retainers, highly prestigious and well-known clients will all add to your business valuation and worth.

Appoint an experienced Recruitment Industry Non-Executive Director or partner with a Specialist Recruitment Investor

As an early stage recruitment business, you can benefit immensely from the advice of a highly experienced industry operator in the shape of either a Non-Executive Director or a Specialist Recruitment Investor who also provides expert industry support. Partnering with such an individual or organisation will ensure that you receive the expert support you require as your business continues to grow.

Contract business and International expansion will enhance your business value

Recruitment businesses with a strong Contract Recruitment bias often attract higher valuations. The Contract and Temporary Recruitment market continues to grow and provides potential buyers with guaranteed and more visible revenue streams. It also weathers downturns in the economy much better and represents three quarters of the total UK Recruitment Industry value.

Potential buyers also often have a preference for recruitment businesses with a significant European/International element to their business revenues as this helps to spread and diversify future business risks. Asia Pacific and Europe are currently the standout regions as they continue to deliver outstanding growth and profit in contrast to the more muted growth currently experienced in the UK.

Consider partnering with other compatible niche recruiters

As a standalone niche recruitment business, opportunities for expansion and potential exit values could be limited. By partnering with other compatible niche recruiters your potential to grow and diversify will be significantly enhanced especially where each niche recruiter is incorporated within one overall Group structure. Such a structure will almost inevitably help you to achieve enhanced exit multiples.

TAG Capital Partners provides start-up funding and growth capital to specialist recruitment entrepreneurs and early stage recruitment businesses throughout the UK. We back individuals and teams with proven sector specialisms who can demonstrate the potential to achieve successful and significant future business growth.

To find out more about how TAG Capital Partners can help you grow your business, please get in touch.

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