Hishem AzzouzHost Of Recruitment Mentors Podcast

How does a recruitment businesses get valued?

Name: How does a recruitment businesses get valued?
Uploaded: 2022-11-09T12:37:56+00:00
Duration: 1 min 26 s
Channel: Hishem Azzouz
Description: In this podcast excerpt, the speaker explains that buyers of recruitment firms base their valuation on the company's future profit potential rather than…

9 Nov 2022 · 1 min

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1:26

In this podcast excerpt, the speaker explains that buyers of recruitment firms base their valuation on the company's future profit potential rather than its historical performance. To attract enough interest and achieve a meaningful valuation multiple, a recruitment business must reach a sufficient scale, specifically around £3 million (approximately €3 million) in EBITDA. Below this threshold, the business is unlikely to generate competitive bidding that would drive up the multiple, meaning owners' expectations of value may be unrealistic. The segment concludes with a brief sponsor mention.

Chapters

When people are looking to buy your recruitment business, they're not buying what your business has done historically. What they're doing is they're buying your future profits. So first and foremost, they're buying your future profits, not what you've done historically. You have to reach a certain level of scale from a profitability perspective where you're going to be able to interest enough people to look at and be interested in buying your business to justify a large enough multiple, which would make it probably worthwhile for you to sell that business. So just to be a little bit more definitive with that, I would suggest to you that unless you can reach €3 million EBITDA, your business probably isn't going to be worth what you think it is or what you would like it to be from a multiple perspective. And again, without going into lots and lots of detail around that, I think that's important for people to understand because there's a lot of people out there who have got great recruitment businesses, but the reality is they're just not at the sort of scale that would attract a large enough number of buyers to be interested, who would then create the competition amongst themselves to be able to drive up the multiple to sell that business at a valuation which you probably think your business is worth. And I would suggest your starting point is about £3 million.
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