Part 1 of 2
Where are 78% of new jobs created?
Who hires 40% of high tech workers?
Who employs more than 52% of the U.S. workforce?
The answer: Small businesses!
So why do staffing firms virtually ignore small business?
In the past year, we worked with more than 250 staffing firms. And with just a few exceptions, they told us that they focused on selling to small to mid-sized employers.
But when we dug a little deeper, we consistently found that sales reps and recruiters focus their time on companies with 100 or more employees—companies that have historically used staffing. And it makes sense. Larger employers tend to staff more strategically. They understand the value of contract staffing, and they have the resources to afford direct hire services.
For the past 20 years, staffing firms were most successful by “following the money” and focusing their sales efforts on larger “A and B accounts” that offered the greatest financial potential.
But the times have changed.
Large employers are experiencing net declines in employment that are likely to last for the next several years. Their use of temporary labor has already declined by more than 30%, and things may get far worse before they get better.
In his book The Great Depression Ahead, author Harry Dent projects that are entering a generational downturn that will last until 2023, with the deepest declines likely to occur in 2012 and 2013. The labor market will likely hit unemployment rates over 13 percent and possibly as high as 15 percent. And even massive government spending cannot counteract the influence of several long term trends: the bursting of the bubble in the financial and real estate markets, a peak in oil and commodity prices, and reduced consumer spending as the baby boomers pass their peak spending years.
In the past, we had the luxury of ignoring small employers because they were low volume prospects. For the next 10 years, those C and D accounts may be the key to our survival.
The Good News: Small businesses are BIG business
Did you know that companies that employee less than 500 people represent 52% of the workforce? And those with less than 20 employees account for 21 million people (or about 18% of the workforce). More importantly, for the past decade small business has created between 60 and 80 percent of all new jobs each year.
While the overall trend of the economy may be down, and the labor market is likely to remain in turmoil, jobs will still be created and some businesses with thrive. When it comes to staffing over the next decade, the industry must learn to embrace—and efficiently serve—small business.
You can’t hunt rabbit with an elephant gun!
While small business represents the future for many staffing firms, today’s sales and service models simply will not work. Most small business can’t afford—and won’t pay a 20% or 25% placement fees. They don’t think of using contract staffing to get their projects done, and they see the hourly rates staffing firms charge as cost prohibitive.
To sell staffing services to small business, you’re going to have to reinvent your services. You will have to find ways to reduce costs, improve efficiency, and demonstrate the economic value of using staffing.
Just as significantly, you can’t sell to a small business the same way you do to a large employer. Cold calling is too inefficient and too expensive. While careful planning, research, and direct selling may work for low volume, high transaction value sales, it will not work in a high volume, low transaction value market.
Next week we will discuss ideas for making staffing services more appealing to small businesses.
Read Part 2 - David Searns
David Searns is president of Haley Marketing Group. For more ideas for growing your staffing firm, visit www.haleymarketing.com.