Buying An Employment Agency - Now May Be The Time

This can be a good time to buy an employment agency for sale, as there is a growing need for services that match workers with jobs. California's unemployment rate declined to 7.4% last summer, the lowest level in several years. That means more companies looking to hire and job seekers finding employment more quickly than in the past. But before beginning the search for a suitable employment services company to purchase, it's important to understand a bit about the industry and how to evaluate business opportunities serving the market.

Someone without a background in this business can be successful after acquiring the right enterprise. But there are at least three key things the buyer should understand when examining business for sale opportunities in the employment agency industry.  

1. Types of Businesses

The term employment agency often is used to describe different kinds of businesses. The prospective buyer who wants to invest in this industry should understand the distinction. Most companies called employment agencies receive listings of job opening which they then try to match with job applicants--people they have interviewed to determine their skills and suitability for employment. These companies might even test some applicants to learn who is able to use what kind of software, for example, or to find out if a job seeker has the knowledge necessary for specific technical positions.

Instead of the practice of Employment Agencies, known for matching as many individuals with job openings as they can, Placement Firms put their emphasis on seeking out specific candidates for positions the firms' clients want to fill. Ordinarily, these are orders for a professional, technical or highly skilled worker in a specific job description that is more difficult to fill than many of the jobs associated with Employment Agencies. One form of placement firm is the recruitment company which may not have a suitable applicant in its files and must find individuals whose work experience is a good match with the client company's needs. Sometimes that means trying to persuade someone to leave their current employer and go to work for the recruiting firm's client.

Temp Agencies focus on placing people with particular capabilities into temporary positions available for a limited time to complete a specific task or to replace an employee who is on leave from the company. Firms providing this service usually have an understanding with the companies they serve that if the company wants to offer a permanent job to a temp worker, there will be a commission paid to the temp agency for obtaining the client company's new employee.

2. Cautions

Many of the businesses in this industry rely on strong professional relationships between owners or employees of the company and those involved in hiring at the client firms. There is a risk involved in the purchase of a business in this industry that once the seller/owner is no longer involved, or if key employees leave when the business changes hands, clients may seek services from other companies to provide full, part-time or temporary workers.

Another concern has to do with whether the industries or professions that may  have had a substantial need for employees in the past but have significantly reduced their hiring in recent months or years. Causes for this can be the practice of outsourcing their labor needs or being able to replace individuals with technology. Secretarial staffing companies, for example, have seen a decline in that market sector because fewer people are being hired to fill secretarial positions.

A third cautionary suggestion is about employment companies in industries with strong unions. In some parts of the state, auto repair workers, professional restaurant staff and nursing professionals, as examples, are able to find jobs through unions to which they belong, and there is little demand for services of an employment firm.

3. Protections:

It is strongly suggested that the buyer of a company serving the employment market negotiate a transaction which includes seller financing. Even buyers who have enough cash to meet the selling price are usually in a better position when the seller has a financial incentive connected with the buyer's success with the business. It also is important to have a covenant not to compete included in the agreement. That means the seller is being paid, as part of the selling price, to agree not to participate in the type of business conducted by the company for a specific number of years and in a specific geographic area.

An excellent way for a buyer to be protected is to arrange for an earn-out provision in the sales agreement. The purpose of this approach is to postpone final determination of the selling price for a few years following close of escrow and to tie the price of the business to its performance. The mechanism for adjusting the price usually is the amount of the payments made by buyer to seller on a promissory note used as part of the payment. Parties are advised to seek help in drafting an earn out agreement from a knowledgeable business sales intermediary or legal professional.

Yes, this can be a good time to buy an employment service. The smart buyer focuses on the most appealing type of business in the industry, and understands these basic cautions and follows these protections to insure success with his or her new business.

Info For Those Looking To Buy Or Sell A California Employment Or Staffing Agency:

* Employment Agency Business Brokers And Agents That Assist Buyers And Sellers

* Excellent Resources / Contacts For Employment Agency Sellers And Buyers

* Today's List Of Employment Agencies For Sale & Wanted To Buy In California

* Recent Employment Agency Articles, Blog Posts, Interviews Related To This Topic

#photo#About The Author:  Peter Siegel, MBA is the Founder And Director of BizBen.com and coordinates the ProBuy / ProSell Programs on BizBen. Peter Siegel can be reached direct at 925-785-3118 to discuss getting resources for selling a employment agency, financing a employment agency purchase, or buying California employment agencies. Make sure you check out BizBen's list of employment agency postings (for sale/availabale & wanted requests) - this list of postings is updated daily!


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Peter Siegel, MBA - Founder Of BizBen.com & SBALoanAdvisors.com for over 25 years. I consult with buyers, sellers, brokers, agents in all industries. Contact me direct at 925-785-3118 (call/text) for Nationwide assistance with buying, selling, evaluating, or financing (the purchase) of a business.

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