Scaling Profits & Enterprise Value in Recruitment
Strategies that high-performing recruitment firms are using to drive profitability, increase enterprise value, and future-proof their businesses.
Date:
27th February 2025
Time:
6:30pm
Location:
Scott's Mayfair
Typically, recruitment businesses fall into 3 categories when it comes to technology use:
Tech-led recruitment business
A Tech-Led Recruitment Agency leverages AI and automation to operate at a scale impossible for human teams alone. These agencies remove inefficiencies, disrupt traditional hiring models, and outperform competitors by harnessing data, AI-driven candidate engagement, and automated sourcing, often securing top talent before competitors even know they exist. They seek to rewrite the rules by being smarter, leaner, and built for unstoppable growth.
Tech-enabled recruitment business
Recruitment firms that use technology to streamline hiring processes, improve efficiency, save time and enhance decision-making.
Traditional recruitment business
Traditional recruitment primarily relies on manual processes, human networking, and personal outreach for hiring, with the use of technology limited to communications and a system of record.
Over dinner, we engaged in a thought-provoking discussion on moving from 'Traditional' towards 'Tech-led'.
Our Hosts
Chris Kendrick, Mercury
Since leaving agency recruitment to start Mercury in 2014, Chris has built a business with 160 employees servicing agency clients of all sizes. Chris' passion for transformational change in hiring has led him to develop tools that make people more effective and give them the capacity to work at scale and achieve more.
Philip Ellis, Optima Corporate Finance
Philip Ellis, Owner of Optima and Chartered Account has worked within the recruitment industry for over 29 years. Since transitioning to corporate finance in 1991 and pioneering his first recruitment deal in 1996, he founded, floated and developed Staffing Ventures in 2001, through which he acquired and guided recruitment, support service and care businesses, consistently advising their strategic moves. Since 2006, Philip positioned his focus exclusively on recruitment and the wider human capital market, more recently incorporating HR Technology and Future of Work. He is known for his industry insights and innovative thinking in the changing landscape of recruitment.
Recruitment does not scale.
Costs: Traditional headcount growth drives unsustainable fixed expenses. Market Fragility: Reliance on human capital exposes to downturn risks. Profit Squeeze: Increased recruitment during slowdowns hits EBITDA margins. Scalability Limits: Incremental hires fail to scale revenue efficiently.
Evolving from traditional recruitment
Valuations of tech-led versus traditional recruitment businesses.
Remarks from Philip - Key Value Driver: ARR vs EBITDA
SaaS technology businesses are valued as a multiple of ARR (Annual Recurring Revenue) whereas recruitment businesses are valued as a multiple of EBITDA. Why? The business models are entirely different and the key reasons in my view are predictability of cashflow and scalability. What is the difference:
- SaaS businesses develop software which can be deployed to customers virtually anywhere in the world with no (or little) customisation, meaning that cost of sales is very low. The software can therefore be sold on a recurring / subscription basis to different customers making it highly scalable and producing stable, predictable cashflow.
- For a traditional recruitment business to scale its revenue, it has to hire staff. This is therefore a limiting factor – staff are expensive, have varying degrees of capability, they come and go and good quality employees are hard to attract and retain
So better predictability and scalability results in a different, more favourable valuation metric.
Investing in technology to help automate and scale a recruitment business will not result in it being valued as a SaaS business, but will help to improve the EBITDA multiple an acquirer will attribute to that business.
You've heard the theory, now for the Tech
Tech Event London
Make your move from 'Traditional' towards 'Tech-led'. Join our expert-led workshop where we will walk you through every step of acquiring and implementing tech the right way, ensuring maximum ROI and long-term success.
Avoid costly mistakes, streamline adoption, and set your business up for success.
Thanks for joining us for dinner, we look forward to seeing you again soon.
