Recruitment businesses typically provide temporary recruitment or permanent recruitment services, or some combination of both. The precise split is often referred to as the temp to perm mix.
And whilst other recruitment services can feature – such as RPO, Head Hunting and Exec search, etc. – at its core, recruitment is usually defined by either being temporary or permanent.
Individuals and businesses can prioritise each for different reasons, and there’s no one right approach. However, in terms of valuing a business, there’s a perceived higher value associated with temporary recruitment.
Yes, permanent recruitment can deliver strong cash flows and there’s no need necessarily for invoice discounting or factoring, but equally the gross margin dial is reset ever month and there’s little foundation from which to build.
External investors therefore appear to prefer (and hence typically attribute higher valuations/multiples to) contract recruitment agencies, with their gross margin run rate and ability to generate an ongoing revenue stream.
Bluestones Group’s balanced portfolio of established core recruitment and staffing services businesses aim for a mix with around 80-90% temporary focus. This naturally follows through to our investment division and where we look for investment opportunities with our annual investment funds. If this reflects your existing business and you’re looking for investment to scale, or you’re an experienced recruiter looking for investment and support to launch your own agency, then speak to us or start your investment enquiry today.