How to Sell a Recruitment Business

A recruitment business is worth what a buyer can rely on collecting after you have gone. That single idea explains almost every valuation decision a purchaser makes, and it is why two agencies with identical turnover can sell for very different prices. A desk built on recurring temporary and contractor gross profit is predictable. A desk built on one-off permanent placements is not. Get that distinction right and you understand how to sell a recruitment business for the strongest number the market will pay.

This guide covers what your agency is realistically worth, who buys recruitment businesses, the diligence traps that catch out sellers, and the tax you will pay on exit at 2026/27 rates. It is general guidance for owner-directors planning a sale, not personal advice on your specific numbers.

What a Recruitment Business Is Worth

Recruitment agencies are usually valued in one of two ways, and often both are run side by side as a cross-check:

• A multiple of net fee income (NFI). NFI, also called gross profit, is your revenue after the pay of temporary and contract workers is stripped out. It matters because a temp agency's headline turnover is inflated by contractor payroll passing straight through to workers. Buyers ignore that and look at the margin the agency actually keeps.
• A multiple of adjusted EBITDA, typically in the region of four to six times for a healthy, growing agency. The adjustments (add-backs) strip out the owner's personal earnings, one-off costs and anything that will not continue under new ownership.

Whichever basis is used, the multiple is a range, not a fixed rule, and it moves with the quality of the income beneath it. For a fuller explanation of how multiples, add-backs and adjusted earnings work across sectors, see our business valuation guide, and you can run indicative numbers with the business valuation calculator.

The temp book versus the perm desk

This is the distinguishing feature of recruitment valuations, and it is where most owners either gain or lose value. A temporary and contractor book produces recurring gross profit every week a placed worker remains on assignment. A buyer can forecast that income, see it in the management accounts, and build it into the price with confidence. It is sticky: contractors on live assignments do not disappear the day the deal completes.

A permanent desk earns one-off placement fees that reset to zero the moment each invoice is raised. Last year's perm billings tell a buyer very little about next year's, and they carry rebate risk (more on that below). The result is a real valuation gap: the same headline gross profit from a stable contractor book will attract a materially higher multiple than gross profit from perm placements. If your agency is a blend, the temp and contractor share of NFI is the part that carries the premium, and demonstrating its stability is the single best thing you can do for your price.

Who Buys Recruitment Businesses

Knowing the likely buyer shapes how you prepare, because each type values an agency differently:

• PE-backed staffing consolidators. Private-equity-backed groups building scale in a sector or region. They pay well for a clean contractor book, genuine sector specialism and consultant retention, but they run hard, professional due diligence and will discount aggressively for client concentration or key-person risk.
• Trade buyers. Larger competitors expanding into your niche, geography or client base. They look for cross-selling and cost synergies, and they understand recruitment economics, so they see through inflated turnover quickly.
• Your own management team, through a buyout. An MBO keeps the business independent and can suit agencies where the value sits with the incumbent team. If you want to understand that route, our management buyout guide explains the structure (note that we do not arrange the finance that funds a buyout).

For the wider decision on which exit route fits your goals, the sell my business guide compares trade sale, EOT and MBO side by side.

The Recruitment-Specific Diligence Traps

Recruitment deals live or die on people and cash flow. Four issues come up in almost every sale, and each can knock the price or collapse the deal if it is not handled before you go to market.

Consultant key-person risk and restrictive covenants

Buyers pay for client and candidate relationships, and in recruitment those relationships often sit inside the heads of individual consultants rather than the company. If one or two billers generate most of the gross profit, a purchaser worries the value walks out of the door the week after completion. The defence is structural: strong, enforceable restrictive covenants, notice periods and garden-leave clauses for senior staff, and locking in your top billers before the sale. Diligence will read every senior consultant's contract and ask about any history of teams moving en masse. Weak covenants are a value-killer that a buyer will price in or use to demand a large earn-out.

Contractor-book continuity

The temp book is only worth its premium if it survives the transaction. Buyers test how many contractors are on rolling assignments, how long they have been placed, whether the client would keep them under new ownership, and whether any framework or preferred-supplier agreement could be terminated on a change of control. A book with long, embedded placements and diversified clients holds its value. One propped up by a handful of large contracts, each terminable at short notice, does not.

Invoice finance and back-office novation

Almost every temp and contractor agency funds weekly payroll through invoice finance or factoring. That facility is tied to the current company, its debtor book, and often your personal guarantee. On a share sale the lender's security and terms have to be reviewed and the guarantees released or replaced; on an asset sale the facility usually cannot simply transfer at all. If you also outsource payroll, credit control or umbrella arrangements, those contracts need to novate cleanly too. Tell your funder early. A working-capital line that has to be untangled at the eleventh hour delays completion and gives the buyer a reason to reprice.

Perm placement rebates and clawback

Permanent fees typically carry a rebate: if the placed candidate leaves within a set period, you refund part or all of the fee. Buyers treat recent perm income as lower quality than temp gross profit precisely because of this clawback exposure, and diligence will review your rebate history and any provision sitting in the accounts. A high rebate rate signals poor-quality placements and drags the multiple down. A clean rebate record, on the other hand, evidences quality and supports the value of the perm side.

Tax When You Sell: CGT, BADR at 18% and the EOT Option

If you sell the company by way of its shares, the profit is subject to Capital Gains Tax. At 2026/27 rates, Business Asset Disposal Relief (BADR) can reduce the CGT rate to 18% from 6 April 2026 (it was 14% in 2025/26) on up to £1 million of lifetime qualifying gains, provided you meet the conditions: broadly, holding at least 5% of the shares and voting rights in a trading company for at least two years before the sale. Gains above the £1 million lifetime limit, or that do not qualify, are taxed at 24% for higher-rate sellers (18% within any unused basic-rate band). The annual exempt amount is £3,000 and comes off first.

We deliberately do not re-explain the full BADR mechanics here, because our selling your business CGT and BADR guide and our BADR fundamentals page already cover the qualifying conditions, the share-versus-asset distinction and the rate history in detail. The BADR 2026 rate change article explains the timing point around the 6 April 2026 increase. For a route-by-route tax comparison of a trade sale against an EOT, an MVL and a family gift, see selling a business: the tax on each exit route.

Could an EOT Work for a Recruitment Business?

An Employee Ownership Trust (EOT) lets you sell a controlling interest to a trust that holds the company on behalf of your employees. For a recruitment agency, where consultants are effectively the whole asset, an EOT can offer continuity and retention that a trade buyer cannot, and it avoids handing your client list to a competitor. Our employee ownership trust guide covers how the structure works.

The tax position, however, changed fundamentally at the Autumn Budget on 26 November 2025. The CGT relief on a disposal to an EOT was cut from 100% to 50%, with immediate effect for disposals on or after that date. Any guide that still describes a sale to an EOT as entirely CGT-free was written before the change and is now wrong. Under the new rule, 50% of the gain is your chargeable gain at the point of sale, and the other 50% is held over and becomes taxable on the trustees' future disposal of the shares. Crucially, Business Asset Disposal Relief and Investors' Relief cannot be claimed on the taxable 50%, so that slice is taxed at the ordinary CGT rate for shares.

What the change looks like in numbers

Take an owner selling 100% of a trading company to an EOT (the figures below are our standard worked example, so they stay consistent across our EOT guides):

Item	Figure
Sale value (market value to the EOT)	£4,000,000
Original base cost	£200,000
Total gain	£3,800,000
Old rule (pre-26 Nov 2025): 100% relieved	£0 CGT at sale
New rule (on/after 26 Nov 2025): chargeable now = 50% × £3,800,000	£1,900,000
Less annual exempt amount	£3,000
Taxable now	£1,897,000
CGT rate (BADR/IR not available on this slice)	24%
CGT payable now	£455,280
Remaining 50% (£1,900,000)	latent gain that bites the trustees on a future disposal

Before 26 November 2025 this exit was tax-free. The same sale today triggers roughly £455,000 of CGT and leaves a further £1.9m of latent gain sitting inside the trust. An EOT can still be the right answer for a recruitment agency, particularly where retention and independence matter more than headline price, but the decision now has to be modelled against a straight trade sale rather than assumed to be tax-free.

Getting a Recruitment Business Ready to Sell

The agencies that achieve the top of their range are the ones that look easy to diligence. Before you go to market, the priorities are specific to recruitment:

• Shift the mix toward recurring gross profit. Growing the temp and contractor book, and evidencing its stability, is the surest way to lift the multiple.
• Reduce owner and key-consultant dependence. Spread client relationships across the team and cut your own personal billing, so the value does not sit with two or three people.
• Tighten contracts and covenants. Get senior consultants onto enforceable restrictive covenants and sensible notice periods well before diligence starts.
• Clean up the invoice-finance and back-office arrangements, so the working-capital line and payroll can transfer without drama.
• Normalise the accounts with clear, defensible add-backs and a tidy rebate provision.

Our guide to preparing a business for sale sets out the wider due-diligence data room and the value-killers to fix first. Recruitment-specific accounting, from contractor payroll to rebate provisioning, is core work for an accountant who knows the sector, and it pays to have that in order long before a buyer's advisers start asking.

Bringing It Together

Selling a recruitment agency well comes down to proving that the gross profit is recurring, the people are locked in, and the cash flow will transfer cleanly. Buyers pay a premium for a stable temp and contractor book, discount a perm desk for its one-off, rebate-exposed fees, and reprice hard for consultant key-person risk or a tangled invoice-finance facility. On the tax side, plan around the BADR conditions and the 18% rate, and if an EOT is on the table, price in the post-26-November-2025 50% charge rather than assuming the old tax-free position.

Holloway Davies works with owner-directors planning an exit, from valuing the business and preparing it for sale through to modelling the Capital Gains Tax and BADR position before heads of terms are signed. For the tax-on-exit side specifically (getting the CGT modelled, checking your BADR qualifying conditions and comparing routes) that is core accountant work and the single most valuable thing to get right early. To talk through your recruitment business sale, get in touch.

This page is general information, not personal tax or financial advice, and your own position may differ. We provide unregulated exit and succession advisory, which is exempt under Article 70 of the Regulated Activities Order. We do not arrange, source or introduce the finance that funds a buyout, as arranging that credit is regulated. Figures reflect 2026/27 rates. Authority: gov.uk Business Asset Disposal Relief, gov.uk Capital Gains Tax rates and the annual exempt amount, HMRC Capital Gains Manual CG63950 (BADR), HMRC Capital Gains Manual CG67800 (disposals to EOTs), TCGA 1992 ss.236H to 236U (inserted by Finance Act 2014, Schedule 37), and the House of Commons Library briefing CBP-10437 on Employee Ownership Trusts.