Key takeaways:
- Begin with your reporting. In 2025, EBITDA discrepancies that failed quality of earnings reviews accounted for 21% of broken deals.
- Address gross margin next, as it’s your biggest operational lever and provides essential baseline metrics for further adjustments.
- Save founder dependency for last, since part of the payout depends on business performance after the sale.
The right fix in the wrong order is costly
Consider a firm whose largest client accounts for a third of its gross profit. The owner knows a buyer will flag it, so they direct recruiters toward smaller accounts and stop offering concessions to retain the large one.
Six months later, revenue has declined. Its books can’t break out gross margin by client clearly enough to show that the smaller accounts are more profitable. The owner identified the right problem but acted on it before the results could be measured.
Our analysis of Korn Ferry’s AMS acquisition identified five traits buyers pay for. This article lays out the order in which to build them over two years. Each step creates the evidence the next one requires, and it’s a valuable plan whether or not you ever sell.
Mid-size firms sell for four to seven times EBITDA, with part of the price deferred
Investment bank Griffin Financial Group tracks multiples for staffing firms with $3 million to $4 million in EBITDA. According to its Q1 2026 market report, light industrial firms in that range typically trade at 4.0 to 4.5x. Professional staffing firms trade at 5.0 to 6.0x, and high-growth IT niches at 5.5 to 7.0x. While healthcare overall isn’t as strong, locum tenens is an exception, falling within the 10 to 15x EBITDA range.
The multiple is only part of the payout. Sellers in marketed deals usually receive 70% to 80% of the price in cash at closing, according to Griffin. The remainder is paid later through deferred payments.
Earnouts are one common structure, and their use is growing. SRS Acquiom found earnouts in 30% of 2025 deals valued at $50 million or less. That’s up from 23% in 2014 through 2022, across industries outside life sciences. When those smaller deals paid any portion of the earnout, sellers received a median of 43 cents on the dollar.
Your proceeds depend on how much of your EBITDA a buyer accepts as reliable. They also depend on how much of it holds up after your exit.
Quarter one: build reporting that withstands a buyer’s review
Every subsequent fix needs a reliable number to demonstrate results. That makes accurate monthly reporting the first priority.
Buyers scrutinize these numbers closely. Axial, an M&A deal platform, analyzed 75 deals that broke after a signed letter of intent in 2025. EBITDA discrepancies found in a quality of earnings (QoE) review caused 21.3% of those failed transactions. That share more than doubled from 10.6% in 2023. A QoE is an independent accounting review of whether a company’s earnings are accurate and repeatable.
For staffing firms, that review draws on data from your applicant tracking system (ATS), payroll, and billing. Reconcile all three so they report the same gross profit by client, desk, and recruiter. Close your books on a fixed date each month, and document owner add-backs as they occur.
Automate the monthly margin and concentration report from that data. You’ll then have it ready for any lender or buyer without rebuilding it.
A buyer will request monthly financials showing gross profit by client that ties to your general ledger. This step is complete when your ATS and P&L reconcile each month without manual adjustments.
Quarters two to four: stabilize gross margin
Of the five traits, gross margin is the one most within your control. You can improve it without adding clients or staff, through pricing discipline and the data from quarter one.
Market conditions add difficulty, however. SIA reviewed 14 publicly traded staffing firms in North America. Their average gross margin declined to 26.2% in 2025, down from a pandemic-era high of 28.1% in 2022. Margins fell at 13 of the 14 firms. SIA’s economist attributed a meaningful share of the decline to client pricing concessions. Those concessions kept wage increases from fully reaching bill rates. Managed service providers (MSPs) and vendor management systems (VMS) have also compressed margins over time.
Pricing floors remain within your control. Set minimum markups by segment. Include wage pass-through provisions in renewals. Use your new reports to identify the accounts and desks where margin is declining, then reprice or reassign them.
Some clients will resist, and you may lose orders. Your margin data will tell you which losses are acceptable.
Buyers will review quarterly gross margin by client and segment and ask you to explain significant variances. You’ll know you’re making progress if the gap between your strongest and weakest quarters is narrowing.
Year two, first half: reduce client concentration using margin data
With margin data in place, you can address concentration based on evidence. Reducing reliance on a large account often means accepting less volume from it or repricing it. You’ll be able to see whether that trade-off improves the business in your margin data.
Buyers examine this closely. In the Axial sample, diligence findings outside the QoE were the leading cause of terminated deals, at 25.3%. Customer concentration concerns were among the issues cited.
Track your top five clients’ share of gross profit each quarter. Set a ceiling appropriate to your segment, since an MSP-heavy industrial book will differ from an IT practice. Direct new business development toward accounts with stronger margins, and use renewal dates to reprice your largest client.
Expect a buyer to request top-client share of gross profit over time, along with renewal dates and terms. The target is a declining top-client share while total gross profit remains steady.
Year two, midpoint: formalize your most reliable repeat business
Concentration discussions create a natural opening for the next step. Some clients place orders every month without a master service agreement (MSA) in place. That revenue is worth less to a buyer than it is to you. A signed agreement is easier to underwrite than an informal arrangement.
Begin with clients who already treat your firm as a partner. Some will decline, and pressing a long-standing account too much comes with its own risk.
Diligence will call for a contract roster with terms, rate cards, and renewal dates. Keep track of the share of gross profit under written agreement and aim to increase it steadily.
Year two, second half: transition client relationships once reporting runs without you
Founder dependency comes last for a practical reason. You can’t step back from client relationships until your reporting gives you full visibility without direct involvement. By this point in the plan, it should.
It also directly affects the deferred portion of your price. If key clients are likely to leave with you, a buyer will protect itself through the deal structure. Griffin’s report notes that buyers are placing greater weight on durable client relationships.
Begin transition planning early, since relationships take time to transfer. Assign a second point of contact to every major account. Give a sales leader ownership of the pipeline, and record client communications in your CRM. Have your managers lead the weekly performance review.
A buyer will want an account coverage map and a management team with a proven record of running the business. Measure the share of gross profit from accounts where you’re the primary contact, and work to reduce it each quarter.
This process also makes your firm easier to finance and grow
Most of this plan applies even if you aren’t preparing for a sale. Lenders request the same monthly reporting. Stable margins improve forecasting, and a diversified client base keeps the loss of one account from disrupting a quarter. Stepping back from account management also gives you time to focus on strategy, such as which segment to enter next.
This work competes with billable time, so assign each step an owner and a quarterly review. If a buyer approaches you early, you’ll be prepared with the information they need.
