Building a profitable small business requires a good business plan and the right market condition, but a recent survey found another factor may boost profitability, too: outsourcing employee management and HR functions to a professional employer organization (PEO).
Businesses that outsource HR to a PEO (a.k.a. PEO clients) were 16% more likely to report an increase of profits year over year than comparable businesses that maintained the same functions in-house or outsourced individual HR tasks to separate providers (non-PEO businesses).
The survey report, compiled by independent analytics and research firm McBassi & Company and released by NAPEO in September 2017, analyzed responses from 101 small businesses and their employees to determine key differences in the operational health of small businesses that worked with a PEO and those that didn’t. Previous surveys by the group have also indicated a positive relationship between working with a PEO and lower turnover rates for small businesses, as well as higher rates of business growth.
Additional findings from the NAPEO survey, which was conducted between April and June 2017, include:
- 2x higher average revenue growth reported by PEO clients businesses vs. non-PEO businesses between 2015 and 2016
- 45% of non-PEO businesses stated that raising capital was a moderate or major concern, while only 18% of PEO clients stated the same
- Employee hiring was a moderate or major concern for more non-PEO businesses (70%) than for PEO clients (45%)
PEO clients also scored higher than non-PEO businesses among their own employees when questioned about HR, employee satisfaction, business growth and other employment-related factors. Specific employee responses include the following:
Said the report’s authors, Laurie Bassi and Dan McMurrer, “The analysis finds that working with PEOs yields a broad range of positive effects for PEO clients. These findings are consistent with the expectation that business owners who are PEO clients do not need to spend as much time dealing with ‘people issues,’ and therefore have more time to focus on their core businesses, making them better able to take steps to position their businesses to be competitive and successful.”
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