Saying No to CEO Roles, Yes to Ownership

Like I do think there is some hesitancy because you do have to really educate people on what PEO is. But and then people say, oh, I don't want to co-employ. Right. Because. Your PEO is paying your taxes for you.

And so that is a big advantage for you as a small business. But it does mean that they're going to get paid under the PEO's FEIN number, not yours. It's not as complex as it sounds.

Now, from an ownership perspective and a search perspective... it's also a great model there is a lot of opportunities to have really sticky client relationships if you take good care of them and you give them competitive pricing like they will stick around these small business owners will stick around for a very very long time um they you know they pay a premium which is called the admin fee to…

then right now they are trading in incredibly high multiples. So, you know, typically double digits EBITDA is what PEOs are being sold for right now. And so there's a real desire in the PE market is really interested.

There's a lot of PEOs in the country that are consolidating by buying smaller ones and they're using that as a growth strategy and they're really heavily backed financially and able to do that. And so, you know, I, I think that's part of it too, is that there is this buzz in the market that if you know how to run one, manage one, because it takes a lot of managing because you're doing a lot of…

Your healthcare provider, your work comp provider, your HRS system, the technology that you're using. You can manage those really well if you can have a really good team that's taking care of your clients and you can get competitive pricing for things like... you know, and you can grow that, that's where it gets really appealing for investors and, and larger PEOs to start to, to, to buy you.

So it's extremely sticky revenue. They, you really, I mean, there's a, there's a, the switching cost of a client is enormous because they really, that, that co, uh, what is it? Co-employed, co-employment thing.

Yeah.

Plus their knowledge of all of your organization and all the benefits that they're transferring to you. Just once you've got a client, they probably stick around forever. So obviously that's really appealing in recurring revenue, which usually is kind of one and the same thing. And it's quite scalable too, right?

Yes. Yes, very much so.

Okay. And all that you described that a PEO does, how is it different than... Well, spoiler, the HR consulting firm that you bought, which is not a PEO. How is a kind of an HR consulting firm different from a PEO?