Thinking About Selling Your Recruiting Business?

I see lots of posts on the boards about starting a recruiting business; in fact, when you do a search on Google on “starting a recruiting business” you get 611 hits. When you do a search on “selling your recruiting business” or “selling a recruiting business” you get no hits. What’s up with that?

Many short winters ago I sold small businesses. For those of you who know me, you also know I spent 20-plus long years doing this, most of which for a company that I owned and ran.

It’s an exhausting and trying business; mostly, you’re attempting to sell “small businesses” to people who can’t get a job. Try that on for size. People “who can’t get a job” are driven by other factors than people who can get a job. People who can’t get a job are many times older; they may have lost their jobs in economy moves that their former employers made that set them out on stoops with little to no security for the future. These people sometimes are shell-shocked and bitter, and dealing with some of them can take a special set of patience and temerity mixed in with empathy.

Once in a while you get some-one who nobody will hire for legal reasons. I once had a wife tearfully call me the night before closing on a $350,000 deal to tell me (for the first time) that her husband was a jailed felon and could only receive permission to attend the closing during a certain short two-hour period and what could we do to accommodate the jailer’s schedule? YES, this actually happened. He attended and sat dutifully next to his wife (who was buying the business with HER money FOR him, a second husband after the death of her first), a broken and sad soul. I forget what he had done that landed him there and only learned of all this shame that night before the closing and learned more when I was called upon to sell the business two years later for the “arrangement” that wasn’t working out.

There are many other stories I could tell, but the reason I bring these up here is to demonstrate that your likely field of “buyers” usually comes with some “issues.”

The first thing you must do if you own your own business is PLAN, PLAN, and PLAN some more. You’re not going to live forever and, yes, it’s easy to get caught up in the 15-hour-a-day madness that it takes to own and run your own business. DO NOT overlook this component. Hire professionals to help you do this. Be careful about thinking your kids want your business; they usually don’t, so don’t burden them with it! They might, though, and the best way to equip them for the future trauma is to make sure they receive a college education beforehand followed by an internship of service that includes running every single part of the business in some capacity.

You might also consider some-one within your own business with whom you have a mentoring relationship who has expressed an interest in future ownership. People aren’t mind readers; talk to this person about this subject like a Dutch uncle (you do talk to this person in this manner anyway, right?) and set some kind of stepping-away timetable that ties the company’s performance to some kind of revenue-sharing benchmark for yourself. It’s never too early to plan.

If you have nobody lined up “internally” to act as your successor, the time will come when you want to sell. You will need to take a cold-blooded and calculatingly hard look at your business and see it for what it is. Blood, sweat, and tears have no market value, so lose them in this process. Selling a business takes time. Be prepared for at least a year’s stretch; it can take less, but in my experience a year is a pretty good benchmark.

I say one year if, in fact, you have collected everything ahead of time that you will need to sell your business. My best advice to you at this point, once again, is to hire professionals. You’ll need your financials in order, and these should include at minimum three years of tax returns and accompanying balance statements. You will also need to set a price on your business, and that can be a very tricky endeavor. Your price is impacted (usually almost wholly) by the financials you can bring to the table to “show.” Any monies “on the side” (wink, wink) are not countable, so don’t even bring it up. You’ll look like a fool. Different “multiples” are customary across different industries. Do you know what they are? Do you know what can be considered as value in the original multiple?

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You also need to look at what the selling market is like at the time you wish to sell. Is what you’re selling unique? Is it hard to duplicate? Is there a lot of inventory and equipment that needs to be addressed in the selling price? Real estate? You may need the services of a Realtor; try to find one who has business brokerage experience. Good ones are rare, but they’re out there. Does your recruiting business consist almost wholly of human capital? Can it exist without you fueling the furnace? What happens when you are gone?

Do you have contracts in place with your customers? How do they read? Will your customers stay with the business when there is a change of ownership?

You’re also going to need someone’s advice as to how to structure a sale. Your account-ant/tax person is a good one to turn to for this advice, but don’t be fooled by a shingle. Ask them if they’re knowledgeable about cur-rent tax laws in selling a business. Tax law is a tricky and moving target, changing constantly.

And last but not least, you’re going to have to decide if you want to deal with all the crazies who show up on your doorstep, wanting to “lookie-lou” your business over. “Everyone” wants to own their own business, and you’re going to be deluged with nine and a half requests out of ten by people who do not have the wherewithal (money) to buy your business. You have the energy to wade through all that? Do you understand how to ask for a confidentiality agreement? How to vet a buyer’s balance sheet? You may (and probably) want to hire a professional to do this for you. There are brokers who specialize in the sale of small (and large) businesses. They usually charge a commission on the sale (10-12% is not unusual) and, if they’re smart, will charge you some other nonrefundable fees to bring your business to market in a professional manner. Having someone between you and the crazies is priceless.

But don’t ask me to represent you. I wouldn’t go back to that nightmare for all the tea in China. I love telephone names sourcing!

Maureen Sharib (maureen @techtrak.com) is a telephone names sourcer, names sourcing since 1997. She and her husband, Bob, own the names-sourcing firm TechTrak.com, Inc. (www.techtrak.com), which helps companies fill their hard-to-place positions at a fraction of the cost of traditional recruiting venues. Maureen is the 2007-2008 Guild Guide for the newly formed Sourcers Guild, a professional organization for sourcers. Sourcers Guild: http://finance.groups. yahoo.com /group/sourcersguild/. She is also the author of the very popular “Magic in the Method,” a one-of-a-kind telephone names sourcing training course, and a frequent contributor to many online recruiting-related sites. Maureen has a BA in economics from the University of Cincinnati and lives in Morrow, Ohio, on a 12-acre paradise with Bob, their dog Buster, and three barn cats. She is most grateful to be able to do what she does.

Maureen Sharib has been a “Socratic sourcer” her entire sourcing career; from the moment she first picked up the faxed list of Silicon Valley high-tech companies that was her target list to “phone source” in 1996 to today she has instinctively followed this method of investigative sourcing using (mostly) the telephone.  She is a proponent of sourcing as a synonym for success and envisions the craft moving away from a dangerously drudgery-paced life-form existence to an exciting investigative/competitive place within organizations where practitioners co-exist within a framework of market research, human resources, and C-level future planning. She owns the phone sourcing and competitive intelligence firm TechTrak.com, Inc. You can contact her at Maureen at techtrak.com or call her at (513) 646-7306.  If she’s not on the phone she’ll pick up!

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