Is Your Small or Medium-Sized Answering Service the Right Size?
June 27, 2018
Trying to operate in answering service that is the wrong size is a quick way to lose money
Most answering service owners want to grow their business. One way to grow is by acquiring an answering service, but the more common method is organic growth through sales and marketing. In this way an answering service grows one account at a time. It’s methodical, it’s controllable, and it’s predictable.
However, just because the growth ramps up at a controllable rate, the infrastructure to support that growth doesn’t increase smoothly. Instead it resembles a stairstep; when a service reaches a certain traffic threshold, an investment in technology, staffing, or processes must occur. This takes time and costs money. Unfortunately these jumps in infrastructure cost more than the revenue provided by the one account that pushed the answering service to this new level.
As a result, an answering service that is an ideal size for its revenue and cost structure, can grow to a point where it becomes the wrong size. Then its revenue struggles to support its costs. It stays that way until it can add enough new accounts to offset the increase in expenses.
Here are some examples.
Staffing Schedule: A very small answering service schedules one person to work each shift. Though it’s hard to generalize, this might be under eighty to one hundred average-sized accounts. With continued growth, at some point one person will no longer be able to handle the call traffic. Then you add a second person to the schedule. At that point, payroll takes a huge jump. As a result the answering service that was once at the right size and profitable now becomes the wrong size and is unprofitable.
Management Levels: As small answering services continue to grow, what was once manageable by one person, eventually ceases to be. At some point, a manager can no longer handle all customer service calls, account programming, and sales and marketing, along with tech support, human resources, and billing. Eventually, you need to hire a second person, usually full-time, to cover everything. Again the answering service jumps from having one full-time management person to having two. The management payroll effectively doubles, and this represents a huge hit to the bottom line.
Facility Size: Imagine a medium-sized answering service that has enough space for four operator stations—and no more. What happens when you need a fifth? Since there’s no room to squeeze in another workstation, the answering service must move to a larger facility or add a second location. Both are expensive undertakings and increase operational costs but with little increase in revenue to offset them.
Conclusion: These examples show how an answering service can go from right sized and profitable to wrong sized and less profitable or even unprofitable. Hitting these growth thresholds are hard to deal with and can overwhelm an otherwise well-functioning answering service.
If your answering service is currently at its right size given your staffing, management, and facilities situation, be aware of what happens if you grow too much. You might be better off to maintain the size of your current client base and not grow it beyond what your current cost structure can handle.
Conversely, your answering service could be at the wrong size, where your cost structure outpaces your client revenue. We’ll discuss how to address this in a future post. Until then look at the size of your answering service and the costs associated with it to determine if you’re at the right size or the wrong size.
Peter DeHaan is a freelance writer from Southwest Michigan. Call Center Sales Pro, a premier sales and marketing service provider for the call center and telephone answering service industry, which helps clients grow their revenue. Contact Janet at firstname.lastname@example.org or 800-901-7706.
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