13th May 2022

Up the value chain – Increasing agency returns through deal-making

Recruitment

Embodying the entrepreneurial spirit of recruitment

The true entrepreneurial spirit that characterises much of the recruitment sector is embodied by deal-making. When your recruiters hit a purple patch of client sales, they may be signing deals to supply temps and contractors at great speed.

Signing up more new business tends to produce steady, manageable growth. Contrast that with growth that is uncontrolled and unmanageable; many a company has been sunk, overextending by signing up new business that it just couldn’t really handle.

However, some recruitment entrepreneurs have ambitions to build bigger and faster than steady growth allows. To that end, some agency owners have exploited a different type of deal-making as a growth engine that generates greater value as well as profitability.

A faster way to increase owner and shareholder value

The entrepreneurs behind such businesses have made higher level deals. One type of deal-making in this class is in M&A. Merging with other complementary businesses, or acquiring them, is one of the fastest ways to generate increased value for recruitment business owners and shareholders. However, there’s more than one way to cook potatoes!

Another type of deal-making has seen agencies alter the standard agency model by positioning themselves as outsourced HR service providers, and then going on to sign deals to either completely replace or supplement a client’s in-house HR function.

Such deals may extend beyond supplying individual employees or specific HR functions. Some models involve providing entire teams to deliver a specific organisational function or business capability. This could be a specific branch of IT, say cyber security, or it could be a marketing specialism, such as social media management or enterprise marketing management.

The biggest deals of this type, where clients are major corporate entities, may be valued at a magnitude of £millions, providing a fixed income that supports predictable budgeting.

Strong financial management and a shrewd approach may enable such deals to be highly lucrative. However, it is critical to deliver against the targets that outsourced HR clients set, as failing to perform is likely to see the rug pulled out from under the SP in short order.

Cutting a deal to attract investors

Visionary leadership combined with performance and ambition may also allow a recruitment business to cultivate relationships with those looking for returns, attracting significant investment. With angels, hedges, VCs and institutional investors all looking for a better return, there is no shortage of investment capital.

Part of the game in courting such suitors is undoubtedly making sure that your agency looks the part. That means having a strong handle on key elements such as financials (preferably tidy!), a standout brand, and mastery of tech across all areas, especially website marketing and social media.

Moving up the value chain with ETZ

Should your recruitment business be looking to cut deals with corporate organisations, or attract direct investment, then one area of tech where you will need to exhibit strong credentials is in your agency’s back office function.

ETZ eliminates labour intensive paper based processes, streamlining activity and promoting efficiency. Our software simplifies timesheets, invoicing and payments. Our complementary solutions, ETZ Comply for onboarding and Caspian for business intelligence give agencies the competitive advantage that is so vital to success today.

Make ETZ your RecTech partner of choice, and we’ll help you obtain excellent value from technology. To find out more, call us on 0800 311 2266 or book a demo.



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