How to Sell a Staffing Agency: Preparing Buyers and Their Lenders
Many buyers of a staffing agency finance part of the purchase, so a sale depends not only on finding the right buyer but also on that buyer’s lender being comfortable with the business. Owners who want to sell a staffing agency can improve their chances of a smooth closing by preparing the financial records, client contracts, payroll tax and insurance history, and recruiting team that buyers and lenders will want to review.
This article is general guidance for owners of existing, operating staffing agencies. Every sale is different, and sellers should work with qualified attorneys, accountants, tax advisors and, where appropriate, business brokers or valuation professionals. Nothing here is legal, tax or financial advice.
Start Preparing Early
Time allows an owner to clean up records, resolve open issues, reduce dependence on themselves and strengthen the team before buyers begin asking questions.
Organize the Financial Records
- Several years of tax returns and financial statements that reconcile with each other
- Revenue and gross profit by client, segment and type of placement
- Receivables aging and collection history
- Documentation for any owner expenses you expect a buyer to add back
- A complete schedule of existing debt, including any receivables arrangements
Clean, consistent records help buyers and lenders verify earnings. Our guide to staffing agency valuation explains how those earnings are evaluated.
Document Client Relationships
Organize master service agreements, rate schedules and amendments, and identify which contracts may require consent to a sale. If a few clients account for a large share of gross profit, be prepared to explain the history and strength of those relationships. See our article on staffing agency client concentration.
Get Payroll Tax and Insurance Records in Order
Buyers and lenders will ask for payroll tax filings, deposit records, unemployment account statements and workers’ compensation policies, audits and claims history. Resolving open notices or disputes before marketing the business, with help from tax and insurance professionals, can prevent delays. See our article on staffing agency payroll taxes.
Review Compliance and Licensing
Work with counsel to review worker classification, wage-and-hour practices and any state licensing or registration requirements, and to understand how a change of ownership may affect them. Licenses and registrations should not be assumed to transfer.
Reduce Owner Dependence and Strengthen the Team
Buyers place more confidence in an agency whose client and candidate relationships are spread across a capable team. Steps that may help include transferring key accounts to account managers, documenting processes and reviewing compensation plans. See our guide to staffing agency recruiter retention.
Prepare for Due Diligence
Buyers will examine financial records, receivables, contracts, payroll taxes, insurance, compliance, staff and systems. Gathering these materials in advance can reduce delays. Our staffing agency due diligence checklist shows what buyers typically request.
Understand What Lenders Need From the Seller
The buyer’s lender may ask for information only the seller can provide, such as tax returns, financial statements, receivables detail and payroll tax records. Some loan programs also have rules about the seller’s continuing involvement after closing. Plan how any existing receivables arrangement will be paid off at closing. Responding completely helps keep financing on track, though timing depends on the lender and the transaction.
Consider Deal Structure and Seller Financing
Sellers should consider whether they would accept part of the price over time or terms tied to client or gross profit retention. A seller note can help a buyer complete financing. See our article on staffing agency seller financing and earnouts.
Protect Clients and Staff During the Sale
Confidentiality matters. Premature news of a sale can unsettle recruiters, workers and clients. Many sellers share information under confidentiality agreements, announce the sale when closing is near and then personally introduce the new owner to key accounts.
US Professional Funding helps qualified buyers finance the acquisition of existing, operating staffing agencies, which can help sellers reach a closing. Learn more about our staffing agency acquisition financing.
