Addressing PEOs Declining Operating Income

According to a recent NAPEO market survey, almost one-third of PEOS who participated in the survey said they were experiencing a decline in operating income. Operating income is an accounting term that measures the profit associated with the business operations after deducting expenses like wages, depreciation, and the cost associated with acquiring new clients.

There are two sides to the equation of operating new income: revenue and expenses. There’s one business function that has an impact on both sides of the equation — and that’s marketing.

Stop Cutting Marketing Expenses Without Replacing Them

When faced with declining operating income, the natural reaction for many business owners is to cut expenses. They’re looking for ways to increase their operating income profit by decreasing the expenses that are going into that equation. One of the first expenses they look at cutting is marketing.

That would make a lot of sense—if you’re cutting the right type of marketing expenses. If you have marketing tactics that are underperforming or not performing, meaning they’re not driving or producing revenue, then it makes sense to cut these expenses.

However, you should not just cut those marketing expenses and be done. You should cut those and look to replace them with marketing tactics that are actually going to produce revenue and that are going to impact the other side of the equation.

Marketing Should Never Be Done for Marketing’s Sake

You never want to produce an attractive website and neat content that people like to read if it’s not impacting the results and driving revenue.

Look for marketing that you can measure where you can see the impact that it’s having. When done right, marketing will track and produce a meaningful and measurable return on your investment. What does this mean? You should have visibility and early key performance indicators (KPIs) like:

• Is my marketing driving traffic to my website?
• Is my marketing help convert leads?
• Is it producing opportunities that the sales team wants to pursue?
• Are we preparing and presenting proposals for these opportunities?
• Are these proposals closing?
• Are we getting new clients and are we driving revenue?

The ultimate KPI to measure for your marketing efforts is revenue. If your marketing tactics aren’t giving you the ability to do that, then you’re not doing marketing right. And, you’re possibly one of these PEO companies experience declining operating income.

If you want to turn that equation around and see the operating income numbers rise, take a fresh look at your marketing. Are you able to close the loop on your marketing investment? Are you able to track its performance? Is it producing what you need it to produce?