Small Business Will Buy 33% of Hosted PBX Systems in 2018

In 2018, roughly one-third of all hosted PBX systems will be purchased by businesses with between one and nine employees, according to Eastern Management Group.

Of course, that opportunity has to be qualified. Most supplier of hosted business phone systems likely would say the sweet spot is organizations with 500 or so employees at any single location.

There are reasons for that belief. Sales volumes and profits arguably are highest, and sales channels clearest, in that range. Bigger enterprises almost always find their large sites do better with a premises switch. Small customers often cannot be sold directly, so sales move through channel partners, in lowish volumes.

On the other hand, Eastern Management argues, the low-end market represents three times more sales than the entire market above 500 employees.

Among the advantages of sales to very-small businesses and organizations are closing times. Typically, a very-small organization can make a decision and close a sale inside of two weeks.

Eastern Management also argues that sales prospecting is easier, since “customers pre-qualify themselves.”

There arguably is less competition, as the leading unified communications as a service suppliers are focused on larger account.

At recurring revenue rates between $40 to $50 monthly, gross margins can reach 60 percent.

Though many channel partners in the very-small-business segment might disagree, Eastern Management argues that sales costs in the very-small-business segment are lower than faced by sellers of systems targeting the mid-market.

Also, sales to such small firms are less technical, and arguably easier, since such buyers need few features and unified communications apps. That means a less-complex sale.

Admittedly, I no longer follow this space closely, but sales in this part of the market would seem to lean in the direction of self service, as it is hard to justify any direct sales model, or even a channel partner strategy, when selling into this part of the market.

There is a reason tier-one telcos, to the extent they even try to sell into this segment of the market, are forced to use a “consumer” model (advertising, web sales, channel partners), for the most part.  It is hard to justify much “live sales force” cost, and still earn a profit.

The problem seems always to be that, as big as the potential buyer base might be, it is frightfully difficult to make a profitable sale unless the whole process is web-based and self-directed. Also, since the emergence of lower-cost retailers such as cable TV companies, much of the former market opportunity for some channel partners has diminished.

Cable modem service, for example, has largely destroyed the old T1 business access market, for example. That has harmed other sales partners (information technology resellers, telecom channel partners and independent telcos focusing on the business customer).

Opportunity might be substantial, but are sales obstacles.