Payroll processing is a massive industry, predicted to reach $45 billion by 2020. Payroll is a service for employers—and that makes it a natural complement to other employer services businesses: merchant services (credit card processing), group health insurance, banking and such.
If you’re thinking of starting a payroll processing firm, here are the five core elements you’ll need.
1. Processing software
Processing software automates the task of running payroll. There are many choices of payroll processing engines, each with its own advantages and quirks. A trusted consultant in the payroll space can help you choose one. The Ephor Group has also published quality reports on processing platforms.
We suggest that you only consider platforms that offer “integrated human capital management”—timekeeping, HR databases, HR services, and even ACA compliance tools. Your customers will be able to log into a secure web portal to submit payroll data and use the platform’s other services.
These types of integrated services are now standard. If you only offer payroll processing, your clients will be easy targets for the competition.
Be sure to ask any potential vendor about their platform’s API. How developed is it? Will you be able to easily transfer data in and out of the system? This capability can give you a big operational advantage as you grow your firm.
2. Processing team
It’s not hard to find reliable, detail-oriented people to operate your payroll processing software, as long as you’re willing to train them. Plan on supporting approximately $250,000 revenue per employee (maybe more, maybe less).
If you can find experienced people, even better. Consider people leaving the “big name” payroll firms, accounting firms, or banks. Also consider people who have been processing payroll in-house for a sizeable company. People with an accounting or process management background are also a good choice.
Ideally, your payroll processing vendor will help you and your team learn the processing software (rather than just throwing an 800-page PDF manual at you).
3. Sales engine
Your sales engine should include basic contact management (CRM), pricing, proposals, and customer onboarding. You can connect standalone systems and customize them to your needs, but that can get expensive.
Be especially careful about how you create quotes. Your first instinct may be to create an Excel pricing sheet–beware. Quoting with Excel will bury your most important sales data in dozens of individual spreadsheets and email attachments. It’s better to use a CPQ (configure price quote) system to manage all of your quoting activity.
Your sales software should support your sales team, management, customer service team, and your external referral sources, described next.
4. Referral Sources
Done right, this will give you a free sales team of CPAs, benefits brokers, bankers and other centers of influence. They’ll help you scale fast in exchange for referral commissions. Commissions can range from 25% to 50% or more, depending on how much sales effort the referral source provides.
As you choose your sales engine, make sure you’ll be able to effectively collect leads and fact finder questionnaires from your referral sources. In the best case scenario, you also want to give them the ability to price and quote your services on their own. This may require a bit of training, but a good guided sales system will do much of the work for you.
This is the most important element, but it’s last in this list for a reason. If you bring on clients without a solid team and a service plan, your customers will be disappointed and they won’t stick around.
Different payroll firms need different numbers of clients to break even. For some it’s 250 clients, for others it’s 400—it all depends on your pricing strategy. A sales engine like PayrollCRM will help you get to profitability fast with fewer clients—because PayrollCRM is built to help you create the most profitable mix of services for each client.
Think about which segment of customers you want to target. What is a natural fit? Remember that the federal cutoff for the Affordable Care Act is 50 employees. Groups of 1 to 49 will have different needs than 50+. And once you go over 100 employees, sales cycles can be long.
Also consider what type of clients your referral sources will bring in. Are they small groups? Even if you want big groups, you may have to accept a series of small clients before your sources refer a big group.
This is just a start
Once you have these five figured out, there are other ideas to consider as you launch your business. Will you grow through direct sales or referrals? Will you sell health insurance? (If so, you’ll have a lot of flexibility with your pricing due to the insurance commissions you’ll be receiving.)
Whatever questions you have about starting your firm, let us know. We’ve been there before, and we built PayrollCRM to help you scale.
PayrollCRM is a payroll sales engine built to manage all aspects of the payroll sales process, from needs analysis to quoting to client onboarding and e-signatures. It includes CRM, CPQ (configure-price-quote), and web-based forms management services. Using the numbers above, it’s #3 (sales engine), not #1 (payroll processing software / HCM platform).
PayrollCRM gives you a cloud-based pricing database and online quote builder for faster price quotes. These quotes can be shared and analyzed any time. With a quick glance at your quoting dashboard, you know who quoted what, when they quoted it, and for how much (plus a bunch of other data…). Request a demo here!
The days of selling “just payroll” are over.
The Affordable Care Act has fused payroll, benefits, time keeping and HR records into one big clump of data. Employers expect you to deliver integrated HCM services that tie everything together: payroll, HRIS, timekeeping, benefits administration, time clocks and more.
Trouble is, before you can deliver these integrated services, you have to price them out and deliver a quote. You have to understand the cost of each element, know what the customer is willing to pay, and tie it all together in a profitable package. And your quote has to be simple enough that it doesn’t confuse the person who reads it.
So what goes into the quote?
A lot – Payroll and HCM services are a mix of one-time and recurring services, plus products. Some companies simplify their quotes by offering “base fee + per employee” pricing. But one-size-fits-all pricing hurts profitability, because the mega-billion dollar client can afford to pay more than the shoestring nonprofit. One-size pricing also tends to work only for smaller, simple companies who don’t need many services.
Once a company has more than, say, 100 employees, they usually need a mix of weekly/biweekly, monthly, quarterly, and yearly services. They also might need hardware, setup fees, training, support contracts, and blocks of consulting hours. Each of these products and services probably has its own pricing formula. So to make a quote, most people turn to Excel.
You could quote in Excel, but that’s risky
You can put all of your pricing formulas into Excel. But the more formulas that you add, the more fragile the Sacred Quoting Spreadsheet becomes.
PayrollCRM is a configure-price-quote software platform that’s designed for quoting payroll and HR services—and then using that information to speed up implementation.
A few things that can go wrong when you quote in Excel:
• Somebody deletes a formula, or a reference cell, and “breaks” the sheet.
• Somebody quotes using an outdated sheet, and you have to backpedal on your promise to the customer and increase your pricing.
• Four different versions of the quote float through email, quote.xlsx, quote1b.xlsx, quote1b-final.xlsx, quote-2-use-this-one.xlsx – which one is the right one again?
• You get fed up with complex spreadsheets and water down your pricing, quote everybody a simple “$x per employee per month”, and leave piles of money on the table.
PayrollCRM makes it easy to quote any mix of payroll and HR services—fast.
PayrollCRM gives you a point-and-click, “shopping cart” quoting engine. It speeds up experienced sales people, and it reduces training time for new recruits.
We talk to employers about the importance of a “single employee record” and a single database underpinning all of their Human Capital Management. PayrollCRM is the same thing for your pricing—it is your single pricing database that feeds the sales channels you choose: inside/outside sales, referral sources, web pricing and quoting, and other distribution channels like PayrollMart.com.
What’s the first step?
After we talk, all you have to do is send us your pricing materials – imagine we’re a new salesperson on the first day of work. For most companies, this is a set of pricing spreadsheets and PDFs. (We always sign NDAs, by the way.)
It usually takes us a day or two to load your pricing into your secure PayrollCRM instance. It will be in the form of: https://yourcompany.payrollcrm.com.
Next, we ask you a few questions about your team, create your users, and set their permissions. This takes another couple of days.
Once you’re set up in PayrollCRM, your salespeople and your referral sources (CPAs, brokers, etc.) can sell faster and easier. The hand-off from sales to implementation is more efficient, and management has 100% transparent insight into the sales pipeline.
Send us a note here to find out how PayrollCRM can help your payroll/HCM company.
1. Identify the top insurance brokers/agents, bookkeepers and CPA’s in your area
These people are already spending time with your prospects every day. They have long-standing, trusted relationships. In exchange for selling your services, offer them a new way to help their clients, protect their relationships and diversify their monthly income.
Find the people who want to be more than just a broker or an accountant — find the ones who want to be a total business advisor for their clients. These are the people who get the big picture — who understand how workforce management and benefits are tightly woven together.
2. Give them a question based fact-finder and quoting tool so they can quickly create detailed, accurate quotes for your services
Use a question-based quoting and proposal tool like PayrollCRM to make it easy for your referral sources to sell your services. PayrollCRM cuts the learning time of selling payroll and related services down to just a few hours. Now your referral sources can produce detailed payroll quotes during their usual conversations with clients.
3. Establish a favorable revenue sharing program which allows the broker/agent to manage their margins
Your referral sources want control over their income, so your quoting tool needs to give them control over pricing. Make sure your tool lets you establish floor pricing so you lock in profitability, then let your referral sources price your services as high as the market will bear. Find a way to split the markup and you both win.
On the other hand, some referral sources won’t want to get into the details of pricing. Fine — have them only collect fact finders, you handle the pricing and quoting, and pay them an agreed commission or one-time payment if the lead becomes a client.
PayrollCRM makes both of these approaches to referral business easy. It standardizes the quoting process and gets referral sources selling fast. No more emailing spreadsheets around and making sure everyone’s in sync with the same version of the same document.
4. Assign a dedicated manager to the clients they refer
Insurance brokers are used to this arrangement from working with insurance carriers. The dedicated manager keeps clients happy by answering all of their questions with expert knowledge. They also keep the broker happy — and selling for you — by taking on the responsibility of ongoing customer service.
5. Provide a platform that allows the broker’s staff to easily onboard new customers.
The hardest — and most expensive — part of selling workforce management services through a referral source is the hand-off from sales to implementation. It’s all too common for sales to promise one set of services only to have the implementation team build out a different set.
PayrollCRM is a single platform for selling workforce managment services that takes prospects from fact finder to pricing to quote to implementation. Sales, implementation and the client can always see exactly which services were promised and which were accepted.
And because implementation flows directly from the quoting process, big chunks of implementation can be accomplished by the broker — and the client — through a self-service website. PayrollCRM handles all of this in order to speed up your new client onboarding and to reduce your cost of implementation.
As a payroll company, you probably collect referrals from a network of influencers, like CPAs and benefits brokers. But when was the last time you thought about how they talk about your company?
Are you a commodity shop, a place that they send references when someone needs payroll? Are you the payroll fixer who swoops in when people have a problem with their current payroll provider? Are you the local go-to payroll company when businesses want to replace an outdated in-house system?
If so, congratulations – you’re obviously doing something right. But what about when people need more than payroll?
Would a referral source still mention your name if their client needed time tracking, HR consulting, and employee benefits administration? Are you known as an expert in all areas of workforce management, or have you been pigeonholed as “just payroll”?
Why you need to offer more than “just payroll”
The workforce services world has changed – primarily due to ACA regulations – and payroll alone isn’t the answer for most clients anymore. It’s critical for you to be able to offer the full range of workforce management services: time tracking, HR consulting and technology, and benefits expertise along with payroll services.
The government requires more records and communications. Employees expect comprehensive benefits and online benefits management. And employers know that the right workforce management technology can give them data that will show them how to become more profitable.
I’m sure you already know this. But here’s the second thing to consider – do you have a way to consistently package, price and sell these workforce services?
How to easily sell more than basic payroll
PayrollCRM is the easiest way to sell payroll and workforce services — especially if you already have a CRM system in place. From pricing to sales to implementation, everything is managed in a transparent web-based system. Your prospect, your sales team, and your implementation specialists always know exactly what’s been promised, accepted, and delivered.
Want to learn more about how PayrollCRM can take your company beyond “just payroll”? Click here to send us a message.
If you’re shopping for payroll & HR services, how much time will you spend looking around? You can easily spend 40 hours meeting with individual sales agents, sitting through demos, asking the same questions to each person, going back and forth…you get the idea.
Creating an RFP takes a long time, especially if multiple people are involved. Then, despite the effort you put into requesting proposals, too often you’ll receive generic quotes in return — but you need something that’s tailored to your unique needs.
If you manage to get a detailed proposal, often it will clobber you over the head with technical jargon. This forces you to ask the direct sales person to explain the very thing they’re trying to sell to you.
There’s a better way to approach shopping for payroll and HR services. PayrollCRM helps you…
- Figure out your payroll and HR needs upfront, before you talk to any salesperson. Then you can put these into your RFP or let us shop the market for you.
- Collect and review custom proposals tailored to your company’s unique employer/employee structure.
- Understand the technical guts of each proposal, so you get the right services and don’t pay for anything you don’t need.
Want to improve your payroll and HR purchasing process? Click here to get started. We’ll help you get better services for a better price.