Benchmarking for Staffing and Recruiting Firms
Business Description
Staffing and recruiting firms specialize in matching employers with suitable candidates for various job roles. These firms provide temporary, permanent, and contract staffing solutions across a range of industries. They often handle the entire recruitment process, from sourcing and interviewing candidates to conducting background checks and facilitating onboarding.
Industry Classification
- NAICS Code: 5613 – Employment Services
- SIC Code: 7361 – Employment Agencies
Breakdown in the USA by Employee Count
Here’s a detailed table representing the distribution of firms in the Staffing and Recruiting industry by employee count, showcasing the estimated number of firms by size:
| Employee Count Range | Estimated Number of Firms |
|---|---|
| 1 - 4 employees | 10,000 |
| 5 - 9 employees | 6,000 |
| 10 - 19 employees | 4,500 |
| 20 - 99 employees | 6,000 |
| 100+ employees | 2,000 |
Industry Benchmarks
Gross Margin: Typically ranges between 20% to 40%. Margins vary based on the types of placements (temporary vs. permanent) and the industries served.
Revenue per Employee: Generally ranges from $150,000 to $250,000, reflecting the value added by recruitment and placement services.
SDE Margin (Seller’s Discretionary Earnings Margin): Commonly between 10% to 25%, depending on the company’s operational efficiencies and client contracts.
Valuation
Typical Valuation Multiples
- EBITDA Multiple: 4x to 6x
- Revenue Multiple: 0.5x to 1.5x
- EBITDA Multiple to SDE Multiple: Multiply the EBITDA multiple by a factor typically ranging from 0.7 to 0.8, depending on the proportion of the owner’s compensation and discretionary expenses relative to EBITDA.
Standard multiples serve as a general guide and should not be seen as a definitive calculation of a specific company’s value, as numerous factors can influence the final valuation.
Key Valuation Drivers:
- Long-term client relationships and recurring business.
- Strong candidate database and efficient sourcing processes.
- Specialized niches or industry expertise that differentiates the firm.
- Robust technology platforms that enhance recruitment efficiency.
- Skilled and experienced recruitment consultants.
Buyers of Staffing and Recruiting Firms
Types of Buyers
- Strategic Buyers: Larger staffing firms or companies in related industries looking to expand their market share or enter new geographic regions.
- Financial Buyers: Private equity firms and investors interested in stable cash flows and growth opportunities.
- Individual Entrepreneurs: Professionals with experience in HR or recruitment looking to acquire and grow an established firm.
Target Company Sizes
Small to Medium: Typically, firms with $1 million to $20 million in annual revenue are targeted for their client base and growth potential.
Large Firms: Attracting buyers looking for significant market presence and diversified service offerings.
This document provides a detailed overview of the staffing and recruiting industry, highlighting operational metrics, financial benchmarks, and acquisition interests. This framework aids in evaluating the performance and strategic positioning of staffing firms within the broader market.
