Streamlining operations, driving efficiencies, and freeing up budgets are top priorities for most Small and Medium Enterprises (SMEs). This should encourage them to seek Professional Employer Organization (PEO) partnerships. Yet, many PEOs are experiencing a slump in new business sign-ups.
Surprisingly, new research from The National Association of Professional Employer Organizations (NAPEO) reveals that it is not the lack of interest holding back new PEO partnerships and suggests significant untapped opportunities for the PEO industry.
Understanding the gap: From PEO consideration to proposal
Based on NAPEO’s Annual Tracking Survey, which surveyed 500 SME business owners and key decision makers:
70% SMEs do not currently utilize the services of a PEO.
Of these, 60% have considered the prospect of using PEO services.
And further, 35% have taken the initial steps to engage with PEO providers.
Yet, when it comes to formal proposals, there's a noticeable drop-off; only 22% of surveyed companies have proceeded to this stage. This 13% gap between discussion and proposal suggests that while interest exists, conversion into actionable engagements remains a hurdle. In another blog, we explore Why Most Companies Considering PEOs, Never See a Proposal.
Of those companies that did receive a proposal, cost emerges as the primary barrier, cited by 41% of the respondents as the reason for not proceeding with a PEO proposal. It is clear, there is an opportunity for PEOs to reshape their offering and showcase real value.
Utilizing partnerships to tackle challenges
Addressing cost concerns and perceptions needs to be the primary focus of PEOs looking to win more SME business. There are two parts to doing this.
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Firstly, PEOs need to review the costs of their operations to ensure they are offering market-competitive rates. For example, PEOs can lower operational expenses by outsourcing processes and functions to specialist providers with operations in low-cost locations.
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Working with an outsourcing partner with multi-shore operations enables PEOs to implement a right-shore strategy, allocating tasks to the most suitable locations based on cost, expertise, and efficiency. This optimizes operations, reduces expenses, and enhances service quality. A right-shore strategy also provides flexibility and scalability, allowing PEOs to adapt to changing business needs, improving overall performance and client satisfaction.
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Additionally, outsourcing frees up core team members from working on time-consuming yet not mission critical tasks, enabling them to focus on value-adding activities such as customer service and research and development.
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Secondly, PEO providers can address cost concerns of SMEs by clearly demonstrating the added value and savings their services deliver in the long term. This can be done by highlighting how PEO solutions streamline HR operations, ensure compliance, and enable scalability.
Conclusion
In conclusion, while SMEs show significant interest in PEO partnerships, the transition from consideration to formal proposal remains a challenge. By addressing cost concerns through strategic outsourcing and clearly demonstrating the value and long-term benefits, PEOs can better convert interest into actionable engagements. Emphasizing operational efficiency, compliance, and scalability will be key for PEOs to attract and retain SME clients effectively. For insights on how to convert interest into contracts, read our blog on closing the gap with value and pricing, PEO Sales: Closing the Gap Between Interest and Contracts with Value & Pricing.
ADEC USA is an outsourcing partner for PEO organizations. Drawing on decades of expertise in outsourced operations across the PEO industry and providing a range of onshore and offshore solutions. Contact us to discover how our services can benefit your organization.
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