Recruitment firms with contractor revenue models command higher valuations than perm-only shops because they generate predictable recurring income from long-term client contracts. Perm-only businesses rely on one-off placement fees, making future cash flow uncertain and limiting buyer interest. Contractor-led firms are also less vulnerable when key consultants leave.
Chapters
Um, and again, that comes back to risk, you know, because if, if I've got, um, if I've got a perm-only recruitment business, um, and I want to sell it, well, there are, there are a few, a few buyers that I know of that will buy perm-only recruitment businesses, but they're not going to pay a lot for them. Um, and the reason being is, you know, it's that age-old, it's that age-old sort of consideration of, you know, there's no recurring revenue. So I buy that business and it's got, you know, £150 grand on the board this month but there's nothing on the board for next month. And then, so that immediately that's high risk. If I get a couple of the key consultants who decide as the new owner, they don't like me very much and they're going to go off and do something else, then, you know, I'm left with not a lot, aren't I, after a little while. Whereas if I buy a business and it's almost exclusively contractor-led, you know, whether that's temp, PAYE, or contractor, you know, business, And there's a good number of contractors out there on long-term contracts with creditworthy businesses that are, that, you know, we've got exclusivity with and we can see that actually we've got consistency there. Then, you know, look, that's obviously, that's worth a lot more because there's recurring revenue. And if I buy that business today and two of the consultants go for whatever reason, I'm probably still going to be making a similar amount of revenue. Next month and maybe the month after that, you know, come to think of it. So that it just reduces the risk.
