There is a mountain of opportunity available for the company willing to help the small business owner. Optimum Bandwidth is committed to helping small businesses scale.
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According to the SBA, Small businesses make up: 99.7 percent of U.S. employer firms, 64 percent of net new private-sector jobs, 49.2 percent of private-sector employment, 42.9 percent of private-sector payroll, 46 percent of private-sector output, 43 percent of high-tech employment
By investing in the success of small business, you can build yourself a large book of business and loyal customers. Since they account for almost 50% of private sector employment, we can grow together. The thought of the gig economy, and plugging remote workers into hosted VoIP seats is sure to be a trend that drives growth
In 2018, roughly one-third of all hosted PBX systems will be purchased by businesses with between one and nine employees.
Ask an established hosted PBX provider about its customer sweet spot and you’re likely to hear “companies with more than 500 employees, mid-market businesses, and enterprises.” With a fervor, venders court large customers. Rarely is the sweet spot single-line, SOHO, or micro businesses with up to nine employees. That shouldn’t be the case when the world’s largest and most underserved hosted PBX market for is businesses with between one and nine employees.
The Eastern Management Group is engaged in a multi-year study of the global hosted PBX market. We recently published research in a new report, “Worldwide Hosted PBX Market 2017-2022.” With market data from more than 9,900 companies surveyed, we present some of our analysis in this post.
In 2018, roughly one-third of all hosted PBX systems will be purchased by businesses with between one and nine employees. While vendors and dealers may look askance on these opportunities, the low-end market represents three times more sales than the entire market above 500 employees, the professed sweet spot of practically everyone.
What should make the one-to-nine employee market enticing to new vendors is the dearth of rabid competition. Providers like 8×8, RingCentral, Star2Star, and Vonage are typical VoIP providers in search of larger customers. Vendors such as Fuze, Mitel, and West have greater ambitions. This leaves a huge window of opportunity for new competitors. The greatest one-to-nine employee opportunities beckon to startups, mobile network operators, independent telcos, cable companies, small PBX vendors, ISPs, and CLECs just entering the UCaaS market.
What Differentiates These Buyers
Market size alone may justify vendor interest. However, several additional considerations can’t be ignored:
- Sales close quickly — Average sales of one to nine seats close within two weeks, far less time than larger UCaaS systems
- Customers pre-qualify themselves
- Established UCaaS vendors and their channel partners seek out larger customers, allowing newer vendors to fly under the radar
- Attractive test market for features, bundles, prices, and dealer training
- Ideal market for self-serve
- Large overall market naturally suited to market testing
- $40 to $50 monthly revenue per seat
- 60% plus gross margin
More Revenue Than You’d Think
At first blush, it can be easy to conclude that hosted PBX companies aren’t particularly profitable. If that’s the case, then one to nine seats might be an undesirable market. But the assumption is faulty.
First, selling, general and administrative expenses should be 25% for hosted PBX companies. But when selling cost alone is 50% of revenue, as is often the case, when it should be under 17%, it’s impossible to report attractive financial results. Second, one-to-nine user companies don’t require many PBX features, nor do they need a suite of collaboration applications, when it’s only larger businesses that need many features and rich collaboration tools. Basic or Basic Plus would be a more apt description of the features this type of business needs.
Using Eastern Management Group’s price database, we calculated the street price for a single user hosted PBX from a well-known VoIP company. The table below shows the features we entered into the model and the corresponding street prices. The model is representative of the U.S. hosted PBX market. List prices, though not shown here, are 50% to 100% more for most features presented in the table.
Depending on platform (e.g., softswitch, CPaaS, application platform) and infrastructure vendor, it’s possible to build a large business in the one-to-nine employee market.
All the positive aspects of this market make it a compelling market entry point for a new generation of hosted PBX providers.
This article is based on Eastern Management Group’s service provider consulting experience and the company’s exhaustive “Worldwide Hosted PBX Market 2017-2022” report.
Article Source: No Jitter