If you have an established office staffing agency, then you may be able to sell for as much as three times your SDE plus inventory. Due to the simple business model and relatively low risk associated with the industry, there is an excellent demand for office staffing agencies, and the industry is expected to grow over the next five years. This review discusses how you can value and sell your office staffing agency for fair market value.
About The Office Staffing Industry
Office staffing agencies, many of which are called temporary agencies, supply workers for their clients’ businesses. This can be on a temporary, indefinite or long-term basis. Most office staffing agencies do not provide supervision services, however. The industry has performed well over the past decade, growing by nearly 3% in the past five years alone. Here are the most recent industry numbers and projections:
- There are approximately 42,000 advertising agencies in the U.S.
- There was a 2.9% annual growth for the advertising industry from 2018 to 2023
- The advertising industry generates $235.9 billion in annual revenue
- The annual profit for the advertising industry is $12.3 billion
- Experts predict a sizable increase in annual growth (1.3%) from 2023 to 2028
How to Value an Office Staffing Agency
Your business broker will calculate your EBITDA and SDE after reviewing your financial documents. This information is then applied to the rule of thumb data for the office staffing industry, which is as follows:
- Advertising agencies sold between 2.05 and 2.73 times the Seller’s Discretionary Earnings (SDE)
- Advertising agencies sold between 3.18 and 6.25 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Advertising agencies sold between 0.29 and 0.51 times the annual net sales
Of course, there are also non-financial considerations that impact your value. For instance, you may receive a higher or lower value based on your location, workforce quality, unique competitive advantage, customer concentration, and growth potential.
6 Steps to Selling an Office Staffing Agency
There are no cookie-cutter approaches to selling an office staffing agency; every process should be personalized and may face unique obstacles and challenges. However, there is a general process you can expect. Notably, the steps include:
- Determine your value and asking price
- Prepare for the sale process
- Market your company in a confidential manner
- Assist the buyer through the due diligence roadmap
- Schedule a time to close the sale and sign the purchase agreement
- Transfer ownership and begin the training program
Step 1: Determine Your Value and Asking Price
Your valuation plays an integral role in determining your overall sales strategy. For this reason, your first step should be to receive a market-based business valuation from a reputable business broker. This allows you to formulate a justifiable asking price and helps you determine your negotiating power. Moreover, if you are not entirely satisfied with your value, then the professional valuation can reveal ways to improve your office staffing agency’s value before you hit the market.
Step 2: Prepare for The Sale Process
There are several tasks you will need to complete before your broker brings your office staffing agency to the market. First, you should prepare your legal, financial, and operational documents. These documents include but may not be limited to:
- Federal tax returns
- Profit and loss (P&L) statements
- Cash flow statements
- List of clients
- List of employees
- Insurance policies
You will also need to develop your confidential information memorandum (CIM). This displays the most important information about your company that a buyer will want to know. Your broker (or attorney) should also draft a non-disclosure agreement (NDA). Otherwise, the confidentiality of the sale could become compromised. Lastly, we recommend creating a video interview that involves you (the owner) answering questions and providing a tour of your office staffing agency. This will allow you to “meet” with more potential buyers during the negotiation process.
Step 3: Market Your Company in a Confidential Manner
Now that everything is in place for a smooth sale process, you can begin seeking a buyer for your office staffing agency. Your business broker may use a range of channels to find potential buyers, all of which should be entirely private and confidential. Notably, the sales channels may include private databases, networks, connections, and contacts. They may also have buyers sign an NDA before they view your company information. This protects you well in the event competitors view your information (which is common during the sales process).
Initial offers will come in. Remember, the buyer wants to secure the best deal possible, so the initial offers may not be as generous as you desire. This is where your business broker comes in. They are able to negotiate (along with your input and guidance) and facilitate a deal that is much more favorable for you. The goal is to find a fair deal that allows you to sell for maximum value and reach your non-financial goals for the agency. Ultimately, a deal is secured once a buyer signs a letter of intent (LOI).
Step 4: Assist The Buyer Through The Due Diligence Roadmap
A due diligence roadmap outlines the steps the buyer, seller, and other involved members of the sale should take to complete the due diligence process in a thorough and efficient manner. The seller has a range of tasks that must complete during this step, such as providing the buyer with company documents and allowing them to see your office staffing agency’s office. Of course, your broker should be there to ensure due diligence moves along smoothly. In fact, we recommend weekly cadence calls to help ensure both sides stay up-to-date every step of the way.
Step 5: Schedule a time to close the sale and sign the purchase agreement
After due diligence, you are now ready to close the sale. Your business broker and attorney will draft your purchase agreement. This often uses the LOI as a template unless changes to the purchase terms were made as a result of due diligence. During closing, you can expect the following:
- Review the purchase agreement with your attorney
- Sign the purchase agreement (the buyer will sign as well)
- Confirm that you have received the payment from the buyer (either direct payment or via an escrow agent )
- Begin the transfer of the agency’s ownership and training program (see below)
Step 6: Transfer Ownership and Begin The Training Program
You may begin transferring ownership of your office staffing agency to the buyer during closing (or soon after). This entails updating business licenses, changing utilities into the buyer’s name, etc. You may also notify your agency’s employees and your clients that the sale is complete, along with introducing them to the new owner.
Most sales involve some training as well, where the seller trains the buyer to help ensure a smooth transition. The extent to which training is required depends on the buyer’s experience level with office staffing agencies and how effective your existing staff is at taking over your daily operations. In some cases, the seller is not much involved at all. In other cases, they may remain on stuff for up to a year.
Sell Confidently With Sigma Mergers and Acquisitions
You can sell your office staffing agency with confidence by choosing Sigma Mergers and Acquisitions for your business brokerage team. With more than 600 businesses sold and 20+ years of experience in the industry, we understand how to navigate the unique complexities and challenges that business owners face. Contact us today to get started with a free, no-obligation business valuation.