Overview

What is your value proposition?  If it’s not your people, it’s your offering.  If it’s not your offering, it’s your tech platform.  If it’s not your tech platform, it’s your insurance offering.  If it’s not your insurance offering, it’s your price. If you’re weak in all of the above, it’s your ass.  The PEO industry is in a state of consolidation.  Too often the PEOs with economy of scale are able to deliver cost savings and increased options to their prospective clientele.

So what does this mean to the local and regional PEOs? Simply put, it means they need to own their value proposition and consistently execute upon their deliverables.  A smaller or regional PEO has the ability to redirect more quickly than a national player.  This ability to be more nimble in the marketplace should allow the smaller players to react to market conditions more quickly and implement offering/tech innovations with a shorter turnaround time than their larger counterparts.  Especially today, with the “plug and play” tech options, a smaller PEO has a better shot at holding their own in this area than ever before.

The two profiles

There are two types of smaller PEOs. Those that have been small for a long time and will remain small and those whom are up and coming with a solid growth curve.

The stagnant PEO, unless change occurs, will remain small and their best long-term option for competing in a consolidating marketplace is to look for comparable sized PEOs to merge with and/or to be assimilated into a larger PEO via acquisition.   In contrast, the emerging PEO has shown a propensity for growth.  This means that they have shown value in some or many capacities that has allowed their PEO to capture market share at a solid growth clip in a shorter amount of time.

A smaller PEO has advantages, highlight them.

A smaller PEO has advantages to its larger counterparts.  Start discussing these benefits with your prospective clientele.

• Local leadership: Business owners like dealing with business owners. A local PEO will have local ownership.  This peer to peer connection will provide a leg up on the competition.
• Personal service: Tech platforms, while important, do not replace superior personal service. A smaller PEO should not have internal division divides.  This means that a close knit group of talented professionals should provide a more effective collaborative solution to local clientele.
• Customization: This is an excellent advantage if the decisions are made intelligently. You cannot customize your offering for every client.  Doing so would inhibit efficiency and court poor staff to WSE ratios.  However, when you allow for platform and offering customization for key accounts, it will pay dividends in cash flow and retention.
• Consultative Approach: Customization allows for an increased consultative approach. This is true both in sales and service. When talent is uninhibited to drive solutions, the client and your PEO are better for it.
• Branding: large PEOs work tirelessly on branding. Often, they have teams whom focus solely on brand management and marketing.  While this may seem like an advantage, I would argue that a well-run smaller PEO has the advantage in this area.   Even though a large PEO has a team dedicated to this purpose, they have ton more employees and divisions than a smaller PEO.  This means that they have increased exposure for negative branding through poor customer experience.  A smaller PEO has the ability to control and manage their client’s experience more efficiently.  As a result, a smaller PEO can create a positive brand more quickly in regional settings.  Ambrose was a good example of this type of brand control for the financial and investment community in the Northeast.
• Hire the right talent and pay for it: A smaller PEO doesn’t generally have a positional pay scale. This means that when superior talent in the marketplace is identified, a smaller PEO can up the ante to get the talent on board without going through a chain of appropriations.  Remember, every large PEO started as a small PEO.  Talent drives business forward. Don’t skimp on the pay for the right person.  The ROI of talent has no equal to the positive impact to your PEO’s bottom-line.
• Private not Public: Some larger PEOs are publicly traded. As a result, they have shareholders to answer to.  This can affect the decision making process of the company.  A privately held PEO does not have this pressure on their executive team and therefore can make a move that may financially appear to be a step back in order to position more appropriately for growth in the future.  A privately held company’s “shareholders” are its employees and they answer solely to their clientele.

Conclusion

There is a reason that we have large PEOs in the market today.  They were once superior smaller PEOs on a growth curve.  As a smaller PEO, you have the ability to interact with your clientele on a more intimate level than you may be able to do when you become larger. Capitalize on that privilege.

It is also recommended that you have strategic planning meetings more frequently than once a year.  To be nimble in the marketplace and take advantage of innovation, you need to be collaborative and keep abreast of tools that will allow your talent to be more effective for your clientele.

Finally, expertise trumps convenience in this industry.  A business is one of the largest investments an owner will ever make, both financially and with their time.  If your PEO has expert talent that can guide business owners, this will resonate better than a convenience model.  If your PEO doesn’t have superior talent, go get it.