The 11 Steps of Selling a Staffing Agency - Complete Overview
Like a seasoned matchmaker or dating app, you have built up your staffing agency to be all about making connections -- connecting the right companies with the right employees at the right time.
Now that you want to sell your staffing agency, it's time to start planning.
Exitwise is a matchmaker’s matchmaker–connecting you with the team of professionals you will need to find the right buyer and accomplish the successful sale of your staffing agency. Let’s learn all about what you need and how we can help.
TL;DR - How to Sell a Staffing Agency
Selling your staffing agency doesn’t have to be as difficult as finding true love. Follow these 11 steps for success:
Business Valuation
Prepare Financial Records
Review Client Contracts and Agreements
Enhance Agency Appeal
Confidentiality Agreements for Potential Buyers
Market the Agency
Screen and Qualify Potential Buyers
Negotiate Sale Terms
Due Diligence by the Buyer
Finalize Sale and Transfer Documents
Transition Planning and Handover
You are not alone in this process! Consult with Exitwise to sell your staffing agency with value-added expertise.
Factors to Consider When Valuing a Staffing Agency
You wouldn’t marry the first person you met online, even if the best dating app in the world said you were the perfect match, right? No! So many important factors need to be considered.
It’s the same when determining the value of your staffing agency. You must look at various factors that help you assess the value of this business into which you have poured your heart and soul.
How to Determine The Value of a Staffing Agency
Staffing agencies are generally valued using a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization). This multiple is determined by how many investors and buyers want to purchase your company and what they would be willing to spend.
Multiples are determined as low as 2x for small staffing agencies but can go as high as 10x for larger, more established agencies.
In the example above, a fairly small staffing agency (with good desirability by key investors) has a multiple of 3.7x, resulting in a total value of approximately $1.35 million.
Exitwise makes determining the value of your staffing agency simple with our free valuation calculator.
Key Factors That Impact The Valuation
Many factors can impact the valuation of your staffing agency, including:
Industry: Staffing agencies specializing in tech and healthcare are valued higher than those in other industries.
Market: Do you have the ability to expand into other markets, launching from those in which you are already working? If yes, your staffing agency’s value will increase.
Contracts: Value is increased if you can prove longevity in your contracts.
Growth: Revenue and EBITDA trending upward really help to add value to your staffing agency.
Partners: Are you working with a team of professional partners to help you increase the attractiveness of your agency? Say yes to this by saying yes to working with Exitwise!
By considering and investing in these key factors, you'll get the most value from your staffing agency.
How Can an M&A Team Help With This Process?
The better question might be, how can’t an M&A team like Exitwise help you sell your staffing agency?
Selling a staffing agency can be a complex, regulated, and tedious process. This combination of factors means that you need a team of professionals, such as lawyers, financial advisors, etc., to ensure that you are making this process work for you!
An M&A team maximizes the sale of your staffing agency by taking the guesswork out of the process. They do the research, help hire the right professionals, and find all the best ways to help you get the best price for your business.
What Documents Are Needed?
You will need to prepare a packet of documents for the sale of your staffing agency, including:
Financial records
Tax returns
Contracts
Employment agreements
Customer contacts
Org charts
A successful sale of a staffing agency includes a detailed dossier of documents designed for transparency and to showcase value.
How Long Does the Process Typically Take?
Selling any business requires time, attention, and perseverance, and the sale of your staffing agency will be no different.
Selling your staffing agency can take at least six months but likely up to a year or longer. So you should plan accordingly.
At no point in this process will you be alone! Exitwise is here for you, just like we were for these businesses.
11 Steps of Selling a Staffing Agency
Follow these 11 steps for the successful sale of your staffing agency!
1. Business Valuation
To sell, you need to know how much your staffing agency is worth. Remember, factors that affect the valuation of your staffing agency include:
Industry
Market
Contracts
Growth
Partners
2. Prepare Financial Records
Your staffing agency’s financial records should be clear, transparent, and ready to share with your M&A team and, eventually, with interested buyers.
The most common financial records needed include the following documents from the past three to five years:
Federal tax returns
Profit and loss statements
Bank statements and information
Balance sheets
Cash flow statements
Accounts payable and receivable
Preparing these before your staffing agency's sale will simplify the entire process.
3. Review Client Contracts and Agreements
Other documents you will need to have for the sale of your staffing agency include client contracts and agreements.
To which companies are you currently providing your staffing services, and what do those services entail?
Remember that showing longevity in your client contracts adds mightily to the value of your staffing agency.
Remember to include historical contracts and agreements demonstrating service over time–even if you are no longer contracting with that company.
4. Enhance Agency Appeal
Enhance your staffing agency’s appeal with the following tactics:
Enhancement | Explanation |
|---|---|
Find your niche | Specialize in one industry’s staffing needs and hone your approach to meet those needs. |
Grow your profits | Both revenue and EBITDA must be trending up before you sell your staffing agency. |
Diversify your audience | While your industry tactics must be laser-focused, your client base needs to be as diversified as a stock portfolio. |
5. Confidentiality Agreements for Potential Buyers
Protect yourself and your staffing agency by developing confidentiality agreements for potential buyers. You wouldn’t share all your secrets on the first date, so don’t reveal more about your agency either!
Confidentiality agreements help keep the flow of information under your control. You’ll know exactly what is being shared and what the potential buyer has agreed to maintain a low profile as the process plays out.
6. Market the Agency
You know how people tend to choose the best pictures of themselves for their dating profiles. Marketing your staffing agency is exactly the same.
What snapshot can you provide to showcase how great a match your staffing agency will be with a potential buyer?
A few marketing strategies include:
Embracing social media
Enhancing your website
Cultivating quality clients
Targeting your audience
Put your agency’s freshest face forward and get those potential buyers swiping right!
7. Screen and Qualify Potential Buyers
Two types of buyers exist - the individual buyer and the industry buyer. These buyers will need to be screened and qualified differently.
Individual | Industry | |
|---|---|---|
Capital | Demonstrate ability to pay at least 15% down payment | Past acquisitions prove financial ability |
Location | Willing to relocate to purchase and manage the staffing agency | Geographical terms should be transparent from the point of interest |
Search length | Too long = unable to make a commitment Too short = may not be fully informed | Generally, there is no need to screen or qualify based on search length |
Think of Exitwise as the ultimate matchmaker. We help you build a team to manage this complicated vetting process to find your perfect match.
8. Negotiate Sale Terms
Knowing what your staffing agency is worth and standing by that value is the most important part of negotiating the terms of the sale of your agency. You’ll want to prepare a detailed list of terms you are unwilling to negotiate so that everyone is clear at the start of this process.
You’ll also want to be aware of what your staffing agency has to offer and potential pain points for potential buyers. You do not want to be perceived as not understanding both the positives and negatives your staffing agency brings to whoever will purchase it.
9. Due Diligence by the Buyer
After the potential buyer has signed your confidentiality agreement, they will spend two to three months performing due diligence on your staffing agency.
This is when they will gather and analyze all the data on your staffing agency that will help them choose whether to purchase it or not.
Your role during this time is to answer any follow-up questions the potential buyer may have and practice as much patience as possible.
10. Finalize Sale and Transfer Documents
You’ve found the right buyer at the right time! Now, it is time to finalize the sale and transfer documents that will regulate and guide the actual sale process.
Don’t try to do this alone! You wouldn’t plan a wedding alone, and you certainly shouldn’t attempt to plan the sale of your staffing agency by yourself, either.
We help ensure the right professionals are included throughout the process of selling your staffing agency–including at one of the most critical junctures, the actual sale!
Learn more about what happens after a buyer makes an offer on your business.
11. Transition Planning and Handover
Of course, none of these steps happen in the blink of an eye. Even when you’ve found the right buyer and all the proper documents have been signed, it will take time to transition your staffing agency to the new owners.
You don’t want this sale to crash and burn like a bad date! It takes careful planning to transition and entirely hand over the everyday activities of your staffing agency.
Include the following in your transition planning and handover steps:
Payroll and current employee transition prep
Hiring future employees
Contract negotiations and bids for new clients
Don’t put all your preparation effort into the first 10 steps. Save some prep pep for the ending, too!
Common Challenges of Selling a Staffing Agency
The five most common challenges of selling a staffing agency include:
Finding a buyer who understands the nuances of the staffing agency business
Transitioning client contracts without disrupting business
Meeting the legal and regulatory requirements of selling a staffing agency
Keeping confidentiality through the months-long (and sometimes longer) process
Managing the emotions and stress (your own and your employees) around the sale and transition of your staffing agency.
See how Exitwise meets these challenges and more through our M&A team-building process.
Frequently Asked Questions (FAQs)
Still have questions about selling your staffing agency? We aim to answer them all!
Is Owning a Staffing Agency Profitable?
Staffing agencies can be hugely profitable in this growing US labor market. IBIS reports a 3% overall total growth in revenue over the past five years in this industry. The staffing agency industry settled out in 2023 with nearly $263 million.
What is a Good Profit Margin For a Staffing Agency?
A staffing agency can see profit margins between approximately 3 and 10%, with an average profit margin of 5% after accounting for operating costs.
What Happens to Current Staff and Contracts When Selling?
While you want to ensure you get what your staffing agency is worth, you are also concerned about what happens to your employees and clients once the sale occurs.
A solid transition plan ensures that current staff and relevant contracts are preserved and/or compensated for any separation due to the sale of your staffing agency.
We can help you put together the best team of professionals who will help you from the beginning of the selling process to taking care of your team and other stakeholders even after the sale of your staffing agency is finalized.
Conclusion
You love your staffing agency, but it is time to find the best new match for it and move on with other passions. The 11 steps outlined here should make the process of selling your staffing agency much more simple.
Consult with Exitwise to get expert help with selling your staffing agency now.
