by Joe Caulfield
It is generally accepted that Professional Employer Organization - PEO market share is 3%. Now we also hear the number 3 to 5% now and again, but that seems like a little bit of fudging.
Perhaps we should look at the actual number using census bureau data. As of 2008 there were 2,203,513 companies that had employee counts from 5 to 99. I think most would agree that this covers the average size of a PEO client business.
Now if we took 3% of that total we would have 66,105. Most have reported that PEO currently services 50,000 businesses, so what’s happened to the other 16,105? Oddly that can be answered by using a more realistic number on the “average size of a PEO client company” – that number is 14. That knocks out 526,307 businesses. 1,677,206 is a more real number. Now we get 50,316.18.
I personally have tried to justify the low market penetration by saying that there are a lot more businesses now than there used to be, so it would be 3% of a lot larger number. The truth is that is only somewhat true, but not by a huge number.
As an example here is the census bureau data on number of companies with employees numbering 5 – 99:
• 2008 = 2,203,513 businesses
• 2001 = 2,153,427 businesses
• 1998 = 2,106,373 businesses
We are growing for sure, but the net increase in ten years is a scant 97,140 businesses.
SO WHAT’S THE ANSWER?
I decided that the number one problem with PEO was the lack of great closing ratio percentage. We simply were not closing enough of the companies that we did see. This sends PEO companies into panic mode to “see more prospects” – This can work, short term.
My solution was to come up with a very modern, killer presentation that addressed newly empowered markets that had been created by the Internet. These empowered markets could easily Google PEO, and they read books on sales. This meant they knew about the PEO industry, and they had our sales playbook.
What I called a normal presentation is features, benefits and incentives, and it can be taught rather easily. I saw this at Administaff/Insperity, where for a long time product knowledge tried to; pass itself off as sales technology. Finally, John Orth, and others stepped in and had an actual sales class. Our turnover of sales people, however, was atrocious in that first 18 months. When I worked with the sales people that could not seem to get a sale they had a handle on the FBI (Feature, Benefit, Incentive) components, and they were congenial enough, so what was the problem?
The central problem is that it was the buyer. They had changed and we were not addressing the changes. In other words, we had missed a paradigm shift in the buyer. A lot of trial and error led to two, and only two (major) sales problems. When those problems were corrected closing ratios went from a low of 5% to over 25%. Peak performance PEO sales people did a lot better than that.
The two problems were:
1. Inability to get appointments
2. Lack of a newer type of presentation that addressed real issues that increased the close ratio
Joe Caulfield has been in and around the PEO business since 1994. He is the author of a PEO sales book entitled “Rapid Sales Success”. To find out more, visit Joe’s website at www.rapidsalessuccess.com.