14 Characteristics That Staffing Companies & Employment Agencies Should Have to Be Attractive to Buyers 

In the highly fragmented staffing industry, companies offering staffing and placement services are in high demand by buyers. If you’re considering the sale of your staffing company, it’s important to understand the characteristics that influence valuation.

Whether you own a company that focuses on healthcare staffing, IT staffing, clerical and administrative staffing, finance and accounting staffing, legal staffing, engineering staffing, industrial staffing or other forms of talent placement, consider how your company performs in regards to the following characteristics in order to maximize the potential valuation of your staffing firm.

• Customer diversity: When evaluating staffing companies, buyers generally like to see low customer concentration. Generally, no single customer should contribute to more than 10-15% of total revenue. 
• EBITDA: In order to be a good acquisition target for many buyers, your staffing company should have at least $5m of EBITDA. In general, higher EBITDA also contributes to higher valuation multiples.
• Long-term customer relationships: Long-term customer relationships are an indicator of customer satisfaction and the quality of your company’s service offerings, two important factors to buyers interested in staffing companies.
• Revenue growth: To maximize your staffing company’s potential sale price, your company should have both a history of revenue growth as well as further revenue growth anticipated in the future.
• Low employee churn: Employee retention is a good sign of a thriving culture and productive employee base.
• Differentiating value proposition: Like every industry, having a unique value proposition that resonates with customers is imperative to making your company stand out in the M&A market.
• Strong brand reputation: A strong, recognizable and respected brand that resonates with both enterprise customers and recruited candidates can further differentiate your staffing company in the eyes of potential buyers.
• Effective use of technology and data: Staffing companies that have robust databases and embrace technology, data and automation in order to improve their processes and increase margins are more attractive to potential buyers.
• Ability to capitalize on market trends: Staffing firms that demonstrate an ability to capitalize on shifting trends, customer preferences and emerging technologies and processes will likely garner higher valuations.
• Customer mix: A customer base which includes enterprise customers and customers who have high credit ratings leads to lower repayment risk, which is attractive to buyers. 
• Contribution margin by recruiter: Contribution margin, a measure of profit after subtracting variable costs, is an important metric to understand and demonstrate when selling a staffing company.
• Gross profit margins: Healthy gross profit margins, relative to the type(s) of staffing services provided, is another important financial metric considered by potential buyers. 
• G&A costs: General and administrative costs, which usually includes some expenses such as rent, utilities, insurance, certain salaries and benefits, office supplies, and other administrative costs, should be at a reasonable and controlled level in proportion to revenue and EBITDA margins. 
• Working capital: Your company should measure and be able to demonstrate working capital metrics such as days sales outstanding (DSO) and days payable outstanding (DPO).

“The staffing market will continue to see large, traditional staffing firms buying up smaller competitors. When clients can demonstrate these characteristics, it can have a profound impact on their proceeds from a sale,” explains Chad Gardiner, Bridgepoint Director and Staffing Sector Lead.

In the highly-fragmented world of staffing, several companies are executing on roll-up strategies. Combined with select interest from financial buyers and the uniquely favorable M&A climate, now may be the perfect time to sell your staffing company. If you are exploring the sale of your staffing company, it’s important to consider how your company performs in regards to these characteristics.

Every staffing company is different, so the list above is not comprehensive. When you’re ready to sell your staffing company, it’s important to have deeply-connected staffing M&A advisors advocating for your company. Bridgepoint has extensive experience helping staffing firms grow and sell their companies. You can learn about our most recent staffing experience arranging growth capital for healthcare staffing firm Atlas MedStaff here.

To stay up to date on the latest staffing M&A news, download our latest Staffing M&A Quarterly Update here. Bridgepoint also publishes a free Staffing M&A News and Market Outlook email newsletter, to which you can subscribe in the footer of our website.