The October 2023 Issue of TAS Trader

Pulsar360: full circle solutions

The Allure of Hosted Systems

Say Goodbye to Your Premise-Based System and Move into the Future

By Peter Lyle DeHaan, PhD

Hosted telephone answering service systems have been around for a long time. Though many operations have praised the benefits of using a hosted system and switched to them, other services have been resistant to make the change.

In contrast to a premise-based system, which you buy, install, and maintain in your office, a hosted system lives off-site and accessed remotely via the internet. This requires a mental mind shift from how things have always been to a new way of doing business, but it may be time to embrace that change.

Author Peter Lyle DeHaan

Here are some benefits to consider when looking at a hosted platform to replace your premise-based system.

Financial Advantages: With a premise-based system, you have a sizable capital investment to make, which is a balance sheet item. You must deal with financing and depreciation. A hosted system is a monthly expense, which occurs on your income statement. Check with your tax consultant for details, but most services realize a financial advantage by going with a hosted system.

Always Up-to-Date: When you buy an answering service system, it’s expensive to keep it current and running on the latest version. Though some upgrades come at no cost, others may carry an expense. And even with a maintenance agreement, some upgrades may not be covered. Contrast this to a hosted system, which is always up-to-date and running the latest software.

Save on Maintenance Costs: System maintenance on a hosted system is covered by a monthly service fee. There is no need for a maintenance contract or hiring expensive IT personnel. Though you will still have operator terminals to deal with, the room full of equipment and the need to keep it running at all times is gone.

Improved Reliability: With real-time backup systems and the fault-tolerant infrastructure inherent with the hosted system, the threat of downtime is greatly reduced compared to an on-site system. This isn’t to say downtime will never occur, because it’s a reality with any technology, but it’s much less likely than with a premise-based system.

Free Up Facility Space: How large is your equipment room? Imagine freeing up that space for other uses. Yes, you will still have some equipment in your office, but it’s more likely to fit on a shelf in the closet than take up a full room.

Eliminate Parts Inventory: To minimize downtime with your on-site system, you must maintain an inventory of all critical parts. This is a costly investment that offers no benefit other than to give you peace of mind, with the potential to decrease the length of system downtime.

Slash Telco Costs: With a hosted TAS system, you also cut your telephone costs, as most of that shifts to your provider and is covered by your monthly invoice. Yes, you may still have some office phone lines or an emergency backup landline, but that’s minimal compared to your current telephone answering service expenses.

Reduce Utility Expenses: A premise-based system consumes a lot of electricity to run 24/7. When you remove that equipment from your office, you also eliminate that expense. A parallel issue is backup power in the form of a UPS system and generator. With a hosted system, these can be much smaller and may not be needed at all.

Something that’s often overlooked, however, is that your premise-based system generates a lot of heat. This carries with it an air conditioning cost to dissipate that heat. If you don’t keep your equipment room cool, your system will overheat, causing increased downtime and reducing system life expectancy.

Conclusion: For all these many benefits, a hosted system deserves thoughtful consideration for your telephone answering service. If you’re still not sure about this, just ask someone who’s already made the switch.

Peter Lyle DeHaan, PhD, is the publisher and editor-in-chief of TAS Trader. Check out his latest book, Healthcare Call Center Essentials, ideal for medical answering services.

Recession Resilience
Why Telephone Answering Services Attract Private Equity and How Owners Can Maximize Valuation

By Michael C. McMillan

Telephone answering services have long been an attractive acquisition target for private equity (PE) firms, particularly during recessions. The resilience and profitability of these businesses make them a stable investment in uncertain times. This article explores the reasons behind the interest of PE firms in telephone answering services during economic downturns and outlines five steps owners can take to maximize their company’s valuation before potential acquisition.

Why Telephone Answering Services Attract Private Equity during Recessions

1. Recession-Resistant Demand: Despite economic downturns, businesses still require customer support services. Telephone answering services provide a cost-effective solution for companies looking to maintain or enhance their customer service without incurring the expense of hiring additional in-house staff (Brown & Katz, 2004).

2. Scalability: Telephone answering services are highly scalable, allowing businesses to easily adapt to fluctuating demand. During a recession, this scalability is particularly attractive to PE firms, as it enables the acquired company to expand or contract its operations as needed (Gompers & Lerner, 2001).

3. High Cash Flow: Telephone answering services typically generate high cash flow due to their subscription-based revenue model. This consistent revenue stream is appealing to PE firms, especially during recessions when other investment opportunities may be less reliable (Kaplan & Stromberg, 2009).

4. Fragmented Industry: The telephone answering service industry is highly fragmented, with numerous small- to medium-sized providers. This fragmentation allows PE firms to consolidate businesses, create economies of scale, and streamline operations to enhance profitability (Ljungqvist & Richardson, 2003).

5. Technology and Automation Potential: The potential for integrating technology and automation within telephone answering services presents an opportunity for PE firms to invest in the digital transformation of acquired companies, thus driving efficiency and reducing costs (Zhang & Wallace, 2017).

Five Steps to Maximize Valuation Before Acquisition

1. Invest in Technology: To increase company valuation, invest in AI and automation technologies that streamline operations, enhance efficiency, and reduce costs. Implementing intelligent virtual assistants and integrating systems with popular CRM platforms can significantly increase the company’s attractiveness to potential acquirers (Grand View Research, 2019).

2. Enhance Data Security: Strengthen data security measures and ensure compliance with industry regulations such as GDPR and HIPAA. Demonstrating robust data security practices and regulatory compliance can increase a company’s valuation and attract PE firms (Whitman & Mattord, 2018, “Principles of Information Security”).

3. Diversify Clientele: A diverse client base can make a company more resilient to economic downturns. Servicing clients across various industries reduces the risk of revenue loss due to a decline in a specific sector, making the company more appealing to PE firms (Brown & Katz, 2004).

4. Improve Financial Management: Streamline financial management processes to ensure accurate record-keeping, efficient cash flow management, and timely financial reporting. A strong financial management system signals to potential acquirers that the company is well-managed and has a solid financial foundation (Gompers & Lerner, 2001).

5. Develop A Growth Strategy: Develop and implement a comprehensive growth strategy that outlines plans for expanding services, entering new markets, and acquiring competitors. A well-defined growth strategy demonstrates the company’s potential for future success, increasing its valuation and attractiveness to PE firms (Kaplan & Stromberg, 2009).

By investing in technology, enhancing data security, diversifying clientele, improving financial management, and developing a growth strategy, owners of telephone answering services can maximize their company’s valuation and attract the attention of potential acquirers. In doing so, they can ensure that their business remains an attractive investment opportunity for private equity firms, even during challenging economic times.

Michael McMillan, an influential thought leader, and keynote speaker, specializes in innovation in customer experience (CX) and Business Process Outsourcing (BPO). With expertise in various industries and critical specialization in technology and call center outsourcing, Michael uniquely understands just how vital the customer journey is for a business. His TEDx speech on empathy and human connection demonstrates his passion for meaningful relationships and strong support networks, making him a sought-after speaker and author.

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Send us your TAS articles and news for consideration in the next issue.

Quotes for Consideration

“A person may cause evil to others not only by his actions but by his inaction, and in either case, he is justly accountable to them for the injury.” –John Stuart Mill

“Always laugh when you can. It is cheap medicine.” –Lord Byron

“I can’t believe I got fired from the calendar factory. All I did was take a day off.”–Unknown