Recruitment businesses can help companies find and hire the right candidates. If you have a growing recruitment business or you’re thinking about starting one, it’s a good idea to know your business’s value.
This guide will cover how to value a recruitment business, including:
- Why to value your recruitment business
- Valuing your business using assets, profits, and reputation
- How to improve your business value
Why to value your recruitment business
You may want to keep track of your recruitment’s financial strength and growth potential. In other words, a business valuation allows you to understand the success of your business and how much it might be worth to a buyer. It can also help you secure funding to grow your business.
It also helps to create business plans with short-term and long-term goals. For example, if you want to have twenty recruitment clients by the end of the first year, outline a plan to earn those clients so you can easily follow your progress. If you track the success of these goals, you will better understand if your business value is growing.
Valuing your recruitment business
Knowing how to value your recruitment business comes down to organising your business’s assets, profits, and reputation. Keep track of earnings and expenses to help you understand your business’s success.
This guide will outline how to value your recruitment business, but you can get a more detailed guide to valuing small businesses in general here.
Calculate your assets
You can first calculate the assets of your recruitment business to start to determine its value. Your business assets are things that you own or use to conduct your business. They are things that, when added together or liquidated, create financial value.
Your recruitment business may not require many startup costs, but your assets may include technology, digital tools, and recruiting software. Start by adding up the office equipment, tools, and software you own or pay for. For example, if you use a laptop to search for candidates and communicate with clients, that is an asset.
There are different types of assets, including current and fixed assets as well as tangible and intangible assets. You can learn more about assets here.
Once you determine your businesses assets, put them together to see how many you have and what they’re worth altogether.
Track your profits
Another major aspect of how to value a recruitment business is knowing the amount of money that your business earns. Your revenue minus your expenses equal your business income. You’ll have to pay some of this income towards taxes.
It’s helpful to store and keep track of invoices to know how much money you’re bringing in. You will need to figure out your price to earnings ratio. Consider how much you make with each person you recruit for a client. Then consider how much you spend on each recruitment. This will help you determine if your fees and client base bring a profit into your business.
Also, consider how much your client base has grown since you started the business or within the last year. If you see a steady percentage of profit and client growth, that suggests a growing business value.
Know your reputation
A good reputation will help you maintain business value. In the case of your recruiting business, this means a strong track record of successful recruiting. If you have a steady stream of clients and good reviews, this good reputation will help your business grow.
Consider how you can keep track of your recruiting business reputation. If you can pair your clients with great job candidates and keep track of those employees’ retention, that’s a good way to measure your success.
Consider keeping track of any reviews from clients as well as responding to complaints respectfully and constructively. You could also request feedback from clients to keep track of your reputation.
How to improve your business value
Once you understand how to value a recruitment business, you may wonder how to increase your business value.
Market yourself and grow your client base
To improve your recruitment business value, you may want to consider how to market your business. You could design a website or establish social media accounts to promote your recruitment services. Hiring-focused platforms like Indeed or LinkedIn are good places to seek recruiting clients.
You can also engage with your clients and build strong relationships. If you satisfy and maintain these client relationships, this will sustain your reputation and business value.
You may want to diversify your client base to decrease the risk of revenue loss. For example, if you rely heavily on one client, losing that client will hurt your business. But if you have five smaller clients, your revenue is more diverse.
Organise your business for maximum value
Keep your business well organised to keep track of your business value and set goals to increase it. You can use a business current account to separate your business earnings and expenses from your personal ones.
Keep a close eye on your client lists, new clients, as well as contracts and sales. Be sure to organise your business expenses and invoices so that you can properly value your business.
Save time organising your finances with Countingup
To sustain good business value, you’ll want to organise the finances of your recruitment business. Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier.
Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are.
You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward!
Find out more here.