Staffing Agency Business Valuation Benchmarks

Business owners, prospective buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating staffing and recruiting agencies relative to industry standards.

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Highlights of Staffing Agencies Sold on BizBuySell

Staffing agency businesses listed and sold on BizBuySell are local small businesses engaging in temporary and permanent job placement for their business customers. These businesses are often franchised brands, though independent businesses with specialized industry expertise are also included in the data set. The B2B nature of these businesses lends itself to fairly stable sales, though they are at risk of economic downturns.

Staffing Agency Business Transaction Trends

Sales prices of staffing agencies listed and sold on BizBuySell had been fairly consistent with steady growth each year until 2024, when the median sale price dropped over 50%. Primarily caused by a slump in financial performance, it's likely that a slowing labor market is impacting staffing and recruiting agencies.

Staffing Agency Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of sales and income. They represent the sales price of a business relative to its financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic growth. Valuation multiples for staffing agencies dipped during the height of the pandemic, but quickly rose again, tapering off with higher interest rates in 2023, before falling again in 2024.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most valuations will hinge on a reasonable earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall annual sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its top line sales.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of staffing agency businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are usually higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses. When current listing multiples are lower, that signifies decreasing values or previously inflated values of sold businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high volume, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Smaller businesses with thinner profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of staffing agencies are valued and sold between 2 and 3.25 times their annual seller discretionary earnings, with 25% of higher-volume, fast-growing businesses trading above this range, and 25% of smaller, less desirable businesses trading below.

Staffing Agency Business Financial Benchmarks

To determine how a business compares in terms of revenue and earnings performance relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated staffing agency business financials useful for comparing an individual business to the broader industry.

Staffing Agency Business Revenue and Earnings Trends

Median revenue of staffing agency businesses sold on BizBuySell had been fairly flat with increasing profit margins until 2024, when median revenue and earnings fell 27% and 42%, respectively. A souring labor market and slowdown in hiring is the most likely contributor.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to similar businesses traded on the market. Below you will find discretionary earnings ranges of staffing agency businesses sold over the past five years, as well as recent business for sale listings.

Revenue Ranges

Sales volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue. The table below includes revenue ranges of staffing agency businesses sold over the past five years and recent businesses listed for sale.

How Revenue and Earnings Level Affects Business Values

Clearly higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Successful staffing agencies that generate higher sales (and maintain industry profit margins) tend to sell for earnings multiples on the higher end. So, a staffing agency with sales over $2.5MM may sell for an earnings multiple of 3.25 or higher, where a smaller agency with sales below $800k may trade below 2 times its annual seller's discretionary earnings.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Higher volume businesses give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable return on the acquisition cost.

Service Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader service sector when benchmarking staffing agency businesses. The chart and table below include key metrics from sales of select service businesses on BizBuySell between 2020 and 2024.

Compared to other types of businesses in the service sector, staffing agencies tend to be discounted relative to their average sales volumes. Staffing agency owners rely on maintaining relationships with business customers who are routinely courted by competitors, the barriers to entry are relatively low, and they are more sensitive to macroeconomic winds. Even so, these businesses have proven to consistently produce significant earnings for their owners.

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