A guest blog from Mike Ames, Scalability Consultant for recruitment company owners who want upscale their business. Host of the livestreamed weekly Mike Ames Recruitment Show.
How to Become Wealthy Without Selling Your Recruitment Business
Why would you bother when you could build and sell your recruitment company for big money?
The answer can be found in the data. There are around 34,000 recruitment companies in the UK. But in 2022 only 106 recruitment companies were sold, 92 in 2021 and a measly 47 in 2020. Approximately 0.3% of the total. This is because it’s really hard to grow a recruitment company that somebody will want to buy. There’s plenty of investment money available, there just aren’t enough valuable recruitment companies out there worth buying.
Interestingly, I’ve built and sold two recruitment firms: the first sold for a headline price of £24m and the second £15m. So, I’m either very talented or very lucky. Turns out I’m lucky, but not how you might think.
If your company ticks 12 boxes (as mine did by accident) you’re 100% sure to sell it for a lot of money. Explaining these checks would require more space than I have in this post, but we have a free guide that explains what they are. To get your copy, and check your company, just email “Selling Checks” to mike@flair.co.uk and I’ll send it to you.
What are your options, if you can’t sell though?
Your best way forward is to build a Profit and Lifestyle business, which does what it says on the tin. It maxes out your profits but reduces the dependence on the owner, leaving them with more time and less stress. The first step to building a P&L recruitment company is for the owner to define what they want from it.
We call this their Core Mission, and it has three parts: –
Income: the annual income they need to live well, and pay off all their debts over 10 years.
Freedom: their ideal working/not working pattern, and a list of activities they do now, but want to get rid of.
Wealth: what they need to be worth before they can retire in style, and how much they need to invest each year to build that fund.
This is what your P&L company needs to deliver for its owner, which brings us to the second step.
Create a blueprint business that can deliver your Core Mission.
The easiest way to do this is take your current figures and extrapolate them up, e.g. if you have 5 consultants making £300k net profit, but need £600k then you need 10 consultants. Since P&L companies are more efficient than traditional firms, you will probably only need 7 or 8 consultants.
Now the fun begins. The two things you need are high profits and a stable and empowered team. The profit will give you the income and the wealth (eventually), and the team will give you the freedom. Measure your profitability in terms of pennies of profit for each pound of salary. Your job is to increase those pennies by boosting revenues without lifting costs. Do this and 80% of the additional revenue drops to the bottom line as profit. Boom!
There are 10 ways to do this, which are described in this YouTube video.
With more profit, you can pay your people more, making them more stable, and invest more in tools and training to make them even more productive (profitable). You can also draw out the surplus profit and invest it in your retirement fund, so each year you’ll become even more wealthy.
So now you have a business that’s focused on profit, is stable and doesn’t need you all the time.
Mmmm, that sounds like a company somebody might want to buy ……”
Mike has grown and sold two multi-million-pound recruitment companies from scratch. He started his first business, a recruitment company called Software Knowledge, in April 1989. With his business partner, the business grew to a group turnover of £40 million adding a software house and facilities management company along the way. He sold Software Knowledge in 1998. Mike then joined two former Software Knowledge colleagues in the formation of Crimson, where he currently is a director and major shareholder. Whilst still supporting this successful venture he now spends the majority of his time running the Flair Business Growth Consultancy.
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