How Outsourcing Could Increase Your Firm's Valuation

Staffing and recruiting firms are in high demand, thanks in part to the Great Resignation and the pandemic. As a result, many staffing firms are considering an acquisition while their firms are experiencing rapid growth. 

Preparing for a sale can take years, so you’ll want to start planning now. Staffing firm valuations have a lot of factors that play into the final number, including growth rate and opportunities for growth, market fragmentation, unique services and offerings, client lists, recurring revenue, strength of management team, employee skill sets, and patented technologies to name a few. Put simply, higher valuations are awarded to those with predictable growth and meaningful differentiation.  

Another key factor to consider is your ability to generate revenue and maintain high margins. Staffing firms can increase their profitability by focusing on efficiency and productivity. Instead of just keeping busy, employees should be focused on activities that generate revenue. Successful staffing and recruiting firms use smart outsourcing for time consuming administrative tasks so they can focus on what they do best—building their roster of quality talent and improving their core client services. For small to medium-sized businesses, smart outsourcing can make the difference between floundering and flourishing.

 

Higher Productivity at Lower Costs

As a staffing firm, your greatest value is your ability to successfully place candidates with your clients as quickly and efficiently as possible. This is what you want to focus most of your energy and resources on. When your to-do list is overloaded with onboarding, payroll, legal compliance, classification concerns, contracts, and invoicing tasks, it may be time to start outsourcing the critical administrative functions of your business. 

Many people think of outsourcing as an added expense, but the reality is that companies that supply back-office functions are extremely efficient at what they do. Outsourcing companies also have the capacity to scale, so you won’t have to worry about the added expense of hiring additional in-house staff. The long-term benefits of outsourcing your back-office can reduce your operating costs, improve your productivity, and bring you peace of mind knowing critical tasks are being handled by experts who will deliver what you need.

Back-Office Outsourcing: Make Time for What Matters Most

Back-office functionality is imperative to getting candidates onboarded quickly and efficiently. The sooner they complete onboarding, the faster they can start the job. While these are critical business functions, they are not directly revenue-producing tasks.    

Calling on your clients to ensure they’re satisfied with the placement and asking about project continuation are revenue-generating activities that directly impact the business’s profit margins. By focusing your staff on revenue-generating activities, you can increase your margins and your firm’s valuation by ensuring that you’re using your in-house resources as effectively as possible. 

When thinking about outsourcing, take a look at your daily, weekly, and monthly tasks and ask yourself these questions: 

  1. Which activities are revenue generating? 
  2. Which activities are critical to the business? 
  3. Can someone else do this for less? 

Smart outsourcing of administrative business functions frees your team to focus on sales, talent placement, and client services. 

Get an International Advantage

With the rise of the remote workforce, staffing firms have had to shift from a hyper-local focus to a global talent ecosystem. Having a distributed workforce allows you to increase your pool of potential candidates and may allow your clients to reduce expenses. 

While global expansion strategies for staffing agencies are becoming imperative, it’s important to maintain global compliance. This can feel daunting with more than 180 countries to source from. Partnering with a global back-office solutions company that has expertise in multiple countries can make the transition to international recruiting seamless. 

Making the Decision to Sell

Whether you’re taking advantage of the explosive growth rate in the staffing and recruiting industry or you’re ready to move into another stage of life, now is the time to increase your valuation. 

Smart outsourcing can help lower your costs for non-revenue producing activities, mitigate risk, and allow for operational scaling. By outsourcing administrative functions to a cost-effective provider, you’ll be able to lean into your team’s proficiencies: finding talent, placing candidates, and servicing clients to ensure a long placement. 

Get in touch to learn more about how outsourcing your back-office functions to People2.0 can mitigate your risks and fuel your growth.  

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