Starting a PEO? Great You’ve Come to the Right Place 

By James Tehrani

From the laundromat down the street to the convenience store on the corner to the cellphone repair shop in the mall, small businesses comprise 99.9% of the companies in this country and employ almost 62 million workers.

Not every small-business owner can go from a one-person company to a behemoth organization that employs 1.5 million people like Amazon.com’s Jeff Bezos did when he served as CEO, but that doesn’t mean those people don’t have a dream to be successful on their own by creating a useful organization that benefits the community with their products and services—and perhaps even bringing fresh, innovative ideas to the table.

As someone thinking about how to start a PEO, we applaud you. 👏

Professional Employer Organizations help small and medium-sized businesses (SMBs) compete with much larger organizations for talent. The PEO concept traces its roots back to the 1960s, but it has really gained steam in recent years.

Today, there are roughly 500 PEOs in the country that handle HR-related tasks for 4 million worksite employees (WSEs) with a combined payroll of more than $200 billion, according to the National Association of Professional Employer Organizations (NAPEO). The PEO industry has grown substantially over the years, of course, but that doesn’t mean there isn’t plenty of room in the pool for more startup PEOs to dive into.

One of the issues SMBs have, of course, when it comes to attracting talent is that they just can’t afford to offer the same benefits that larger companies can. That’s why the co-employment model that PEOs champion is so valuable to helping SMBs attract and retain the talent they need to compete.

That’s where you, as a potential startup PEO, come in and help relieve them of the HR-related headaches they have so they can focus on their business.

We’re not saying starting a PEO is easy by any means, but with proven strategies, you can get off the ground running much faster. And if it’s tips you need, you’ve come to the right place. As with any undertaking, it’s best to start with the mindset of “You don’t know what you don’t know.”

To get you started, here are three tips from our new guide: Starting a PEO: How to Make a Big Splash.

3 Tips on Starting a New PEO 

1. Ask Around (Conduct Market Research)

You have to figure out who your customers could be before you move forward. You have friends? You have families? You have people you know from your LinkedIn community? We thought so.  

It’s time to feel out your network to see who is running a smaller business, what kind of payroll and HR-related headaches they have, how many worksite employees (WSEs) they have on staff, etc. Then it’s time to broach the idea of whether they would be interested in, you know, working with you if you started a PEO. 

2. Ask Away 

Before starting a PEO, here are some of the questions you need to answer: 

  • What industries do I wish to serve? 
  • Can I raise the money to start a PEO and how much will I need? 
  • Which bank(s) will do business with me? 
  • What’s my pricing model going to look like? 

3. Tech Talk 

While the origin of PEOs might be able to be tracked back to the humble beginnings of yesteryear, today’s technology has advanced the way PEOs operate. And who knows what will come next as the technology gets better and better? So here are a couple of strategies to evaluate a tech provider: 

  • Do your homework! Enough said there.  
  • Evaluate the Software Solution’s Experience and Reputation: Look for a technology provider with a proven track record in the PEO industry. Consider their years of experience, the number of clients they serve and their reputation among industry peers. Request references and testimonials from existing clients to gauge their satisfaction and experience.  
  • Determine the Software Solution’s Commitment to the PEO Industry: Verify the software solution’s commitment and dedication to the PEO industry by evaluating their involvement in industry associations, such as NAPEO, conferences and events. A provider that actively engages with the industry demonstrates a commitment to staying informed about industry trends and regulations. 

We invite you to learn more by downloading our new PEO startup guide today! 

James Tehrani is PrismHR’s digital content marketing manager. He is an award-winning writer and editor based in the Chicago area.