The Opportunistic World Beyond Payroll – Strategically Expanding for Long-term Growth

By Josh Davisopportunistic

As the annual conference for the Independent Payroll Providers’ Association nears and I prepare to present one of the general sessions “The Opportunistic World Beyond Payroll”, I think about how so many vendors vie for the attention and business of payroll service bureaus. For payroll companies like yours, it’s easy to lose focus on the importance of developing a long term strategy or plan for continued success due to the constant onslaught of shiny objects being dangled in front of them.

In reality, service bureaus have the power because they hold the payroll-related data for hundreds or thousands of clients – it’s the employee record that is absolutely, positively required with any company that has employees. Yet, payroll companies will have trouble surviving in the next five years by only providing payroll and a few ancillary, disconnected services. This is especially true when you look at companies like ZenPayroll and Zenefits turning the traditional payroll model on its head. Payroll companies need to react before it’s too late and these newcomers start eating their proverbial lunch.

By strategically expanding into human capital management within areas like workforce management, recruitment, core HR, learning, performance, and compensation, the payroll service bureau industry as a whole can position itself for long-term success and growth.

However, service bureaus don’t just want to hop on the bandwagon, there’s more to this shiny object then you may initially think. Here are seven considerations the traditional payroll company will want to think about when evaluating how they’ll build their product and service offering of the future.

Target Market
What is the impact these new products or services will have on the market they target, and is it something they’re already asking for or something the payroll company will have to educate them about? How can the ROI or business impact of the product or service you’re looking to expand with be proved, and how is that positioned to your target market?

Employee Skill Sets
The skillsets that service bureaus hired their employees for or trained them in after they were hired are not necessarily the skillsets needed for the products or services being expanded to. A more diverse set of skills based on HR and human capital management solutions will need to be learned by existing employees or attained through new employees.

The Service Bureau Network
If a service bureau doesn’t have the bandwidth or expertise to cover these services internally, and there aren’t resources available to expand, a strong network needs to be put in place with companies that specialize in these various types of services. And for those services that are taken on, a strong referral network can be instrumental in getting these services to market.

Client Relations
Service bureaus have a network of engaged listeners – their existing clients. Revenue can be generated from them a LOT easier than completely new clients. In fact, the probability of upselling an existing customer is 60-70 percent when compared to a new prospect which is only 5-20 percent. Yet, very few service bureaus have any dedicated account managers or sales people that focus on account management… or even have a compensation plan for upselling clients.

When we look at studies by firms like NelsonHall, there is a continuing trend downward in the average price charged by payroll companies per pay statement. One of the reasons for this sort of commoditization taking place in payroll is that technology is becoming more powerful and the efficiencies in that are improving margins. As payroll companies expand their products and services, how will these new offerings be priced, and how does it impact the price for payroll when they’re able to offer it as a connected “bundle”?

Payroll has always been the golden goose for the typical service bureau, and their sales team. It’s what has traditionally been lead with and was the goal with all clients – to provide them with payroll. This should still be the goal because the goal is to manage that payroll data and the employee record, but the service a prospect needs may not always initially be payroll. So service bureaus need to ask themselves “How do these expanded services change my sales process?”

If the payroll company isn’t always leading with payroll, and it’s not the main differentiator anymore, what does that mean for the company’s brand? They’re growing beyond a payroll company to the go to resource to solve business issues and challenges. Should their company still be known as Payroll Profs, Payroll Experts, Payroll People, etc.? Or should they start branding themselves as Human Capital Profs, Workforce Experts, Employer Solutions, etc.

Overall, payroll companies should build a long-term plan depicting what their offering looks like and how their organization will change over time in the areas mentioned above as a result of what they definitely will and will not offer.

I look forward to getting into more detail at the IPPA Annual Conference later this week, but until then, let me know what some challenges you’ve had or anticipate having in expanding your offering beyond payroll.

About Josh Davis:

Josh is the Marketing Manager at SaaShr responsible for increasing the growth of existing channel partners and the recruitment of new channel partners while positioning the SaaShr brand in the market through the development of both traditional and digital marketing endeavors.


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