Category Archives: Articles

Controlling Absenteeism

Courtesy of ATSI

There are many reasons why employees don’t come to work. They have the flu. Their cousin got married. The car wouldn’t start. The baby-sitter quit. The cat died. The moon is full.

Of course, most sick leave is legitimate; people stay home because they are sick. But abuses do occur. Fred is absent once a month, usually on Friday or Monday. Matilda is deathly ill one day and back to work the next, looking fit as a fiddle. Harry jokes about taking “Mental Health Days” and then proceeds to get sick when the crunch is on.

Many things that keep people from coming to work are beyond your control as an ordinary mortal who happens to be a supervisor or owner. You can’t regulate the phases of the moon, nor can you reschedule this year’s influenza epidemic for a more convenient time.

This does not mean, however, that there is nothing you can do about absenteeism. The fact that people are more likely to call in sick when they don’t feel their attendance really matters, when they find their working conditions unpleasant or stressful, or when they feel taken for granted. Anything you can do to prevent or offset such feelings will have a positive effect on attendance. Here are some guidelines.

1. Make sure that everyone knows the sick leave policy and that you always stick to it. Is sick leave unpaid if it comes directly before or after a paid vacation? Is a doctor’s statement required after three days’ leave?

2. Ask that employees who call in sick talk directly to you. When you get their calls, ask what the problem is and how long they expect to be away from work. Tell them that they will be missed and that you hope they get well quickly.

If you are sincere, your comments will have a positive effect on attendance. People will miss fewer days because they will return to work sooner. It’s also a fact that an employee who has to tell the owner he or she can’t come in is more likely to have a good reason for doing so.

3. Keep an eye out for patterns in the absences that do occur. Is an employee taking sick leave every Friday during hunting season? Is someone else gone one Wednesday afternoon every month? If you do find a pattern, see if it is related to a recurring job duty. The employee may have a particular responsibility that he or she doesn’t like or is trying to avoid.

4. Stay informed about what is happening in each person’s job. If you do, you’ll be better able to arrange to have their duties covered if they get sick. More important, you won’t be caught unaware if some work-related problem is about to cause an absence.

On this point, don’t overlook the value of “supervising by walking around.” Get on your feet and visit every work area – every employee- every day. It’s important to make contact and show that you are interested. People are much more likely to feel responsible for their jobs – and to minimize sick leave – if they know you’re genuinely interested in their work and how they feel about it.

5. Make it a point to welcome back each person who’s been gone. Greet them in the morning or at the beginning of the shift. Shake their hand and tell them you are glad to see them back and well. Ask how they are feeling and listen if they want to tell you about being sick. Listening says you care.

[From Connection Magazine, May 1995]

Automated Dispatch

By Jim Tabb

Dispatch operations vary widely from company to company. Some companies only dispatch messages (telephone answering services for example), but most dispatch people. These include repair and equipment services, sales teams, delivery or pickup services, courier services, alarm services, ATM services, police, fire and emergency services, and many others.

Automated vs. Live Dispatch: The most significant cost in operating any type of dispatch center has, until recently, always been the labor because the typical center has been “live”, meaning operators or clerks take the calls and deliver the messages. In recent years, more and more dispatch operations have been moving toward “lights out” (in business, but no people), through automation of the dispatch processes.

When properly applied, automated dispatch centers significantly improve service while saving enormous sums through reduced labor. To understand what automation means, lets examine the way live and automated centers differ. Live Dispatch & Operators or dispatch clerks receive calls and take messages or orders over the telephone. Then a second call is made to complete the dispatch. This may require calling a paging tower and sending a digital or alpha page, calling another person by telephone or using a mobile radio to contact a driver.

In some cases the person taking the call also delivers the message. In larger operations, the persons working the phone banks specialize in taking calls, then pass messages to others (dispatchers) who specialize in delivering the messages.

Typical Live Dispatch:

  1. Dispatcher takes order
  2. Dispatcher pages out
  3. Service person calls in
  4. Dispatcher delivers order
  5. Service person calls from site
  6. Dispatcher closes out order

In one dispatch, the dispatcher takes calls in Steps 1, 3, and 5, calls out in Step 2, and is involved in all six operations. Each operation is subject to interruption by other calls from customers or from drivers demanding attention.

Live Dispatch Problems; Often the dispatcher can’t reach the service person in the first call, so Step 2 is repeated multiple times. Sometimes a dispatch is rejected due to a problem. This results in a repeat of Steps 2, 3 and 4 until an alternate is found. As a customer base grows, dispatch problems grow on an exponential curve. At some point, more people must be added to maintain growth because as many frustrated customers leave as are added.

Semi-Automated Dispatch: The first step in reducing costs and improving overall operations is a simple one that significantly reduces costs while overcoming the problem most owners have with “customers talking to machines.” In the semi-automated approach, live operators or clerk stake calls from customers for messages or orders which are keyed into the order-entry system. All or part of the call is recorded.

When the caller hangs up, the automated dispatch system does the rest. The operator is only involved in Step 1 of the semi-automated operation, talking to customers, while steps 2 through 6 are completely automated. The best of both worlds!

Fully Automated Dispatch: Some dispatch operations are already fully automated. Many large corporations use a company-wide voice mail system to take and deliver messages, including service dispatch. Many other dispatch operations lend themselves to a full “lights out” operation, such as those that have service contracts with customers for equipment maintenance and/or telephone support. These companies can usually improve service while significantly reducing costs by fully automating.

Each customer is given a personal account number. When they call for service, they are greeted by name, and given options, such as:

  • A selection of topics or information to be faxed immediately.
  • Self help on frequently asked questions or problems.
  • Options to have someone call back with the answer.

Service people are instructed to listen to the recorded problem, look up the service history, research the problem and dedicate themselves to fixing the problem in one call-back. The customer soon appreciates that their calls are answered on the first ring. They can receive information without being put on hold, and when they do get a call back, the right person is on the line who is dedicated to their call without interruption.

A second category suitable for total automation includes companies where the dispatch operations are primarily employee-to-employee. These include medium and large corporations with internal service, message and/or dispatch centers. When one employee is holding up another employee, the entire company suffers. Automated message and dispatch centers make it easy to communicate across time zones and across shift changes.

Messages can be taken while out of the office, during meetings, and while on the telephone, then delivered and responded to without ever talking directly to the caller.

Automated dispatch problems are usually caused by the attempted use of systems not specifically designed for automated dispatch. Short comings of this system include:

  • Insufficient levels or queues
  • Inability to select alternates
  • No automatic escalation
  • Inflexible dialing options
  • Lack of paging ability
  • No reporting ability
  • Calls, dial-outs are not logged

The minimum system should be capable of multiple choices, have the ability to change menus and announcements by time of day and day of week. Features should include order entry, 8 or more levels of dispatch per account, automatic selection of dispatch by zone or time, automatic escalation of dispatch and complete call logging.

The complete system: It should include a full featured voice mail system with capability to selectively transfer calls to an employee. In addition, it should have wake-up or reminder capability and a means to automate job completion and time keeping.

[From Connection Magazine, May 1995]

Time Sensitive Billing

By Peter Lyle DeHaan, PhD

Author Peter Lyle DeHaan

For the Telephone Answering Service industry there are likely as many pricing philosophies as there are companies to implement them. In general, however, all pricing schemes fall into one of two classes: flat-rate and measured-rate strategies. Historically, the industry started with the former. Over time, in the pursuit of objectivity and fairness, rates were made more reflective of the service rendered and the effort imparted to provide that rendering. It was this pursuit that caused a migration to more sophisticated flat-rate structures and ultimately measured-rate arrangements. (The pragmatic desire to increase revenue also played a significant role in this evolution). This general shift in pricing stratagems also follows and parallels the development of and improvements in the capabilities of systems to capture, report, and analyze statistical data.

Flat-rate pricing, as the name implies, produces bills that are at a fixed rate and which have no variable charges. There are, however, two variations of the flat-rate pricing approach. The first and earliest implementation is the simplest to quote, bill, explain, and understand. It is, quite simply, that every one pays exactly the same rate every billing cycle, regardless of their usage. For this approach no statistics are needed to calculate a bill and there are no variations on each invoice, save the client’s name and address. While logistically simple (and sometimes a necessity – due to equipment limitations or manpower restrictions) this approach is the most inequitable as everyone pays what is essentially the average usage of all clients. That is, half of the client base is subsidizing the other half who in turn are not paying their fair share. Also, while flat-rate pricing protects your revenue stream during times of low traffic, it leaves your expenses vulnerable during times of high traffic. This variation of flat-rate pricing is the universal flat-rate pricing approach.

The second iteration of flat-rate pricing is flexible flat-rate pricing. In this scenario each client is still charged a fixed rate each month with no variable charges. However, the amount of this fixed rate varies from client to client based on their historical patterns of need and usage. This approach is more equitable than the universal flat-rate discussed above since the charges are theoretically proportionate to usage. However, there are two situations in which this approach tends to be problematic. The first is what do you charge a new client? There is no track record on which to base the charges. Additionally, experience tells us that a client’s own estimate of usage will be grossly inaccurate. The second is, what happens when a client’s amount of usage deviates significantly from historical patterns? If their traffic increases ten-fold, you are no longer being adequately compensated for your work. Conversely, should their usage drop to a small fraction of the historic norm, the client will suddenly find themselves paying too much for what they are receiving. These problems with flexible flat-rate pricing, as well as the in equities of universal flat-rate pricing, can only be corrected by adopting a usage-sensitive billing strategy.

(An interesting enhancement to the flexible flat-rate pricing scheme is to implement something comparable to the Utility industry’s “equal payment plan” whereby you make flat-rate payments all year and at year’s end your account is reconciled with your actual consumption for the year. But this scenario is in actuality a measured-rate approach dressed in flat-rate clothing.)

As mentioned above, the other major type of pricing philosophy is measured-rate. Quite simply, each bill is a reflection of some measurement of how much was used. (Typical implementations have abase-rate which provides for a threshold of usage; additional usage appears as a variable charge in each invoice). Just as with the fixed-rate plans, there are also two versions of the measured-rate arrangements. The first is unit-sensitive and the second is time-sensitive. Both are the same in implementation, the only difference being their system of measurement. The perspective of unit-sensitive is a tally of the number of occurrences (the number of calls answered, messages taken, dial outs made, patches connected, etc.). Whereas the point of reference for the advocates of time-sensitive billing is a measurement of time spent doing billable activities (the time spent taking a message, giving out information, placing a call, patching a caller, etc.).

The unit-sensitive approach is a definite improvement over either flat-rate philosophy since answering more calls (doing more units of work) increases the variable charges and hence the total bill. The variable nature of this pricing scheme (if properly conceived) protects the answering service’s expenses during times when high staffing levels are required to appropriately service client needs. If the scheme has a base rate component, revenue is also protected during times of low call traffic.

The unit-sensitive approach to billing is significantly more equitable to clients than the universal flat-rate approach discussed earlier since the greater the usage the greater the charges. It is also an improvement over the flexible fixed-rate philosophy as it corrects the two weaknesses stated previously when dealing with new clients with no track record and clients whose usage makes an unexpected change. Even so, unit-sensitive billing is not with out limitations. Its chief shortcoming is the realization that not all calls are equal. Some calls (or messages) last only a few seconds, while others can continue for several minutes. Yet in a unit-sensitive approach, both will be billed exactly the same amount– one at a profit and the other at a loss. While initial attempts at computer automation for the industry produced equipment only capable of supporting the most basic form of unit-sensitive billing, later improvements tracked the time spent on these activities as well. This technological development paved the way for the most equitable billing approach: time-sensitive.

Time-sensitive billing is the most adept at protecting an answering services’ expenses during times of heavy usage. Your staff is paid by the hour (time); if you bill your clients also based on time (so much per minute or hour), simply insure that the rate billed to your clients covers the rate paid to your staff (taking into account idle time and burden) and your expenses are covered. From a client stand point time-sensitive billing is the most objective (but not always the most accepted), as they only pay for what they use and don’t have to worry about subsidizing other clients.

Both measured-rate plans (the unit-sensitive and the time-sensitive approaches) can be expanded to offer a pricing tier of various combinations of base-rate, included service, and rate per additional element. These different options, if properly developed, will all be profitable to the answering service, however, each will have a specific appeal to a particular client based on their anticipated usage, seasonal fluctuations, and tolerance for the unexpected (that is, high variable charges).

By way of analogy, consider applying these pricing philosophies to selling gasoline:

The universal flat-rate approach would result in the following price posted at the station: “Gas, $50 a month.”

The flexible flat-rate approach would say: “Gas, starting at $50 a month.” (But since you use more gas than the average person, your rate for gas is $75 a month).

Similarly unrealistic would be the unit-sensitive implementation. In this case the sign would read: “Gas $10 per fill-up.”
Finally, we have the time-sensitive example (or more correctly, the “gallon-sensitive” example): “Gas 98 cents a gallon.”

If these first three examples strike you as impractical, unfair, and inequitable, than the point of this article has been made. Clearly, it is only through the last example that a reasonable, practical business can be operated.

In the real world, examples of a universal flat-rate are hard to identify. But an example of flexible flat-rate pricing might be trash removal. It is generally billed at a fixed-rate, regardless of how full or empty the container is. The amount of the fixed-rate, however, depends on the size of the container you selected.

An example of unit-sensitive pricing is the cost to mail a first class letter in the United States; it is 32 cents regardless of where its destination or the amount of effort required for delivery.

For time-sensitive billing, examples abound. Cellular air-time comes to mind as does sitting in your attorney’s office.

Analogies also exist in the telecommunications field. Basic phone service, which once was and in many cases still is billed at a fixed rate, is an example of universal fixed-rate. When telcos realized that businesses use a disproportionate amount of phone service when compared to residences, flexible fixed-rate kicked in, with businesses paying a higher rate than residences for monthly service. Next in the progression, but which is not yet implemented in all areas, is measured rate service, where local calls are billed at a unit-sensitive basis. For some locations, the trend in local calling is moving towards time-sensitive billing, which as earlier discussed is the most equitable approach. Long distance has always been billed in a time-sensitive manner.

With an implementation of a time-sensitive billing philosophy, it appears that our billing is the most equitable, progressive, and enlightened as it can be. Does this mean that no further pricing enhancements are to be expected? Hardly.

The future may hold many options. One possibility is market-based pricing as opposed to cost-based pricing (which is the basis for all of the above pricing schemes). This will require that we take our sales and marketing to a higher level. Positioning ourselves as out sourcing experts of telephone services might be the first step to reaching a market-based pricing strategy.

Another, less esoteric option would be to further fine-tune the time-sensitive approach. One possibility (though certainly not advocated by this author) can be anticipated by looking at the long distance market. When switched 800 service first became available, it cost $125 a month, plus installation, plus usage. Over time the monthly cost, as well as the installation cost, have decreased. Today, you can generally obtain switched 800 service where you only pay for usage and have no install or monthly fees. The implication is that a similar transformation could happen in the Answering Service Industry. However, before we rush to boldly embrace this philosophy, let us remind ourselves that without a base rate, we lose all revenue protection during times of low traffic.

Lastly, a value-based approach could be used. As we automate, streamline and upgrade (to intelligent systems), we will find ourselves doing things faster, better, and more efficiently. Therefore, billing by time produces less and less revenue. May be through technology, we can reduce a 60 second activity down to a 30 second activity. Do we then bill on time for 30 seconds of work or do will we bill on value for 60 seconds of results?

In conclusion, we have discussed the elements of major pricing philosophies in our industry, exposing their limitations, and in some cases, the foolish and out-dated reasoning. Only the time-sensitive approach stands beyond reproach, offering fairness, equity, and pragmatism for both provider and client.

Peter Lyle DeHaan, PhD, is the publisher and editor-in-chief of Connections Magazine. He’s a passionate wordsmith whose goal is to change the world one word at a time.  Read more of his articles at PeterDeHaanPublishing.com.

[From Connection Magazine, March 1995]

The New Communications Company

By Roy Emmett

It’s a good time to take stock of what the business world needs, so that you can provide for a whole new world of business.

I don’t care what kind of communications company you are, it’s time to diversify. Everybody go outside. Get out of your office. Go for a walk, a drive or better yet, make an appointment to visit a prospect. Talk to someone not involved in your business. Look at the world of business communications as well as personal, non-business related services. Gather in a whole new perspective on what’s about to happen. “It ain’t at all gonna be like it ever wuz..”

We’re about to be shaken to the rafters in terms of what is going to hit the communications industry over these next couple years and every year from here on out.

Business Week Magazine published its 65th Anniversary issue on October 17 this year. The cover story, with huge letters emblazoned on the cover said, “Rethinking Work.” It noted as a subhead, “The Economy is Changing, Jobs Are Changing, The Work force is Changing. Is America Ready?”

Business Week used this anniversary to announce what they called their “metaphoric rebirth.” Already perhaps the most helpful weekly national business journal for anyone interested in what the world is up to in telecommunications and information processing (from a layman’s perspective), Business Week has bolstered itself as a publication preparing for the new age of business bubbling up around us. In fact, they have added sections titled: “Technology and You,” “Science and Technology” and “Information Processing.” It seems that virtually every issue has a focus article on some aspect of telecommunications in the corporate world and a release or two on some new communication or computer development.

You will also be able to get Business Week on CD-ROM and via America On-line, weekly. This, to join the Information Revolution now taking place worldwide.

In this special issue, Business Week devoted a 34-page special feature to defining the twin forces of technology and globalization and how they are rapidly changing the way we work, indeed the very notion of work itself.

This is not a commercial for Business Week, though it well could be. We need to absorb the perspective that the business world itself is suggesting so we don’t continue to exist in a vacuum. There isn’t any other vehicle dwelling on the changes in business which will define for us just what the business world will want so we can better prepare to sell it to them.

You may not personally deal with Fortune 500 companies, but you do deal with the trickle-down of businesses that are, out of necessity, transforming themselves into a part of the business world that serves them. The global marketplace includes regional areas of the globe to an even greater degree than it does the entire globe. Expansion beyond the borders of your local market, even if it’s only to the next county or to another state, will represent a shift not only just for you, but for the customers you hope to serve. We need to be thinking globally, not just focusing on the beaten paths of our own back yards.

I preface this article with this thought because it is apparent that those of us with entrepreneurial communications companies, are not used to such expansive thinking. And yet it is we who can make it possible for other businesses to actually operate more on a global scale, and get outside of the well worn rut of the past. We must stop thinking of ourselves as either local or limited in our ability to build our client bases.

Is it time for a make-over?: There are perhaps 3,700 independent phone companies, maybe 6,100 answering services, 5,500 paging companies and resellers, zillions of interconnect companies, vast numbers of cellular agents and resellers, and an incalculable number of independent communications companies of some miscellaneous single focus orientation.

Guess what? The business world hasn’t got a clue as to what is available to them in terms of the latest in business communications services. And there’s virtually no place to turn to find out. Most people don’t even look for new ideas because they don’t understand technology or they are afraid of stepping off into the great unknown. And nobody’s there to fill the void.

You may not be interested in becoming more than you already are in your present communications business, but somebody’s got to do it! Somebody’s got to meet the new marketplace at least half way if they expect to tap this ultra rich vein of potential new business.

Two kinds of people are reading this article: those who expected to find a checklist of ideas that would help define the profile of the communication companies of the immediate future, to be able to move in that direction; and, those who are prepared to start something new that is designed to take a major role in what Business Week has assured us is happening now is ” the changing work world.”

A cosmetic make over won’t do, we’ve got to change the guts. We’ve got to bring on a whole new creature, something to attract the imagination of the business world. A good answering service can become a great answering service. But it’s still just an answering service as far as the public is concerned. God bless ’em, they’re needed.

A paging reseller is a commodity seller. Price is the chief arbitrator of a sale in paging. Interconnect companies sell and install phone systems and perhaps computer networks. They aren’t geared to move in these new circles with their image as interconnects. More power to them. The good ones will prosper.

Cellular agents are almost always something else first, with cellular phones as an adjunct. That makes them convenient, but not diversified communications companies. Phone companies are just that- phone companies, institutions. When was the last time you ever got sound advice on developing a specialized communication arrangement from an order taker? Right about now we’re running out of communications companies to take up the banner for the new “Communication Revolution.” They simply don’t exist in any known category that the topical human being can locate. I don’t think a make-over will do.

A Lunar Landing on Earth: We need to come out of the primeval dark and land our sleek new ship smack into the middle of the gray-tone world of yesterday’s technology. The business world needs to know that we have arrived and we brought the beer! At least that’s the way the brewing industry would portray it. Right now there’s more excitement in the beer commercials than there is in the sum total of the business communications service industry.

Of course the services need to be practical, down-to-earth and relevant for the day-to-day aspects of business. But the business world is changing radically! The merging together of computer, telephone and television into a mind-boggling new era of instantaneous information, communications, and entertainment are out dating everything you have on the shelf. New ideas are traveling at warp speed and there isn’t currently an identifiable outlet to bring these revolutionary ideas to the marketplace in bite-size pieces that the average business person can chew on.

If I were to portray what this new business entity were to look like, it would look something like this:

  1. It would be designed for customer inter activity. The very space this business would occupy would have an air of excitement as it relates to communications technology. Customers should look at it as an on-ramp to the information super highway.
  2. It should be a well known resource for the business community. The latest in voice, fax, electronic mail, on-line service and specialized operator services should be available.
  3. Professional communications consultants would be available to assist clients either in person or on the phone, to help assemble bundled service programs custom-tailored to the individual client’s unique needs.
  4. The client would experience new concepts in communications, on their own via video, computer or telephone, right in the reception area.
  5. Signing up for service would automatically outfit the client with 800-number service, long distance service, and a special billing art voice card to relieve the company of billing and collection, but would provide a good commission on all traffic.
  6. The heartbeat of the operation would be a state-of-the-art voice/fax processing system to provide information services, sophisticated messaging, fax on demand, and a wealth of specialized services available from this technology.
  7. Highly trained and personable telesecretaries would be available for quality services where real people are crucial for effective communication.
  8. Access to the latest communication hardware could be found in the “New Technology Display” in the reception area. It would be available directly from the communications consultant for rent or purchase.
  9. Internal facilities would be available for use by customers for video teleconferencing, private meetings using various communications options, and other on-site services.
  10. Overall, the communications company would need to position itself as a source for all the latest ideas in business communications services, regardless of where they come from. More importantly, the company should take the lead in introducing such new services to make sure they maintain a leadership position.

You will need to be versed in the new wireless technologies, provide paging services via the Internet, access on-line services for your customers, offer specialized computer services in support of operator services, and be prepared to help businesses explore the most relevant options specifically for them.

That is obviously an oversimplified outline of some of the high points that need to be fine-tuned to create this new style company. What you would call such a company, how you would present it and promote it are all crucial to its success. It needs to arrive on the scene with all the fanfare it can possibly get. It needs to be, more than anything, on the market now and it needs to encompass a feeling that it will provide the service options not available from traditional sources.

The people who will run such a center will need to be well versed in the computer applications and in telecommunications overall. We need to develop a true sense of professionalism in the field. After all, the industry is one of the most vital in the world today. Those who specialize in it, will truly become invaluable resources. Why is this the TAS of the Immediate Future?

We can no longer expect to build a business by just hanging out a shingle, sticking an ad in the yellow pages and loading up on operators and DID lines. We can’t expect scores of people to come to us for pagers when thousands and thousands of multi level marketers started selling pagers door-to-door in 1995. We can’t expect to be installing cellular phones when they’re all portable. We can’t expect to make money by simply answering phones for people who now have dozens of options for handling incoming calls. We can’t expect businesses to need us at all if we aren’t in tune with what the rest of the world wants and needs.

But we can expect to develop into unmitigated successes if we provide SERVICE. If we bring the ideas to the people we choose to serve, ideas that make absolute sense and can truly be of help.

Inter activity at your place of business will be more and more important, just like it has become important in the computer world. By inter activity, I mean the ability of the prospect to sit down and experience the service concepts you’re trying to sell. Without obligation, people want to know the details of what you’re suggesting and specifically how it relates to them. In short, the new communications company will be more diverse in many aspects, more personal in service and sales, and more in touch with the day-to-day changes in communications technology.

We’ll be more visually stimulating and more retail orientated. You will also be significantly more automated, perhaps as much as 80% of your business in totally automated services.

There it is. Take it or leave it. I don’t have a crystal ball any more than you do. But I can,, with a degree of accuracy, predict that this opportunity to develop a new style of communications company with an automated approach will bring lots of new entrepreneurs into the business. There’s too much of a vacuum out there for it not to be filled with those who will bring about the fulfillment of the ideas that are designed to make money for the entrepreneurs who introduce them.

[From Connection Magazine, January 1995]

Postcard Power

By Frankie Kangas

Small is beautiful: For its size, the postcard packs the biggest wallop of any mailing device. Why? It has instant visibility because it’s out there to be seen and read immediately. No envelope to fuss with or hide your real message.

Most people find postcards irresistible, and will look them over even if they eventually throw them away. This means prospects get your message and then decide, where as an envelope all too often deprives you of that chance.

Because the postcard requires so little effort, it is more likely to generate action: it is read and acted upon immediately, rather than being shelved along with the other mail for possible later action.

More bank for your buck: The postcard is much more cost-effective than other marketing tools for many uses. For example, compared with a direct mail package, the postcard is cheaper to produce, to stuff, and to mail.

A postcard-sized display ad in a metropolitan daily newspaper will normally cost several times as much as a postcard mailing. And the postcard, handled properly, will provide a much greater return on investment, because it is more precisely targeted, and not wasted on non-prospects like the majority of a newspaper’s readers.

Unlike an ad, the postcard competes with only a few other items in the mailbox that day, rather than with the 350 ads in a typical daily newspaper. And if the postcard is a ” keeper,” if it has a coupon or some valuable information, it will be around to repeat the sales message long after the newspaper is discarded.

For many small business, a postcard can be more effective than a brochure, at about half the price, or less. Used as a “mini-brochure,” it offers the added benefit of forcing you to focus your marketing message to fit in a small space. As a postcard, your mini-brochure is much cheaper to mail, and more likely to be read.

Postcards can have a wide variety of uses, but they are most effective for three marketing tasks:

  1. Prospecting for leads
  2. Reselling current customers
  3. Maintaining customer contact.

Prospecting by postcard: The postcard is a cheap and effective method for generating leads, often as the first step of a two-step sales effort. Such a postcard will offer recipients a free incentive, or invite them to send for more information. This inexpensive first step qualifies prospects for the next, more expensive, step of the sales effort.

We have seen two-step selling with postcards work for products and services as varied as computer software, bookkeeping and tax services, marketing services, and computers to name only a handful.

Reselling current customers: We often quote a study by Fortune Magazine which found it is five times easier to sell to current customers than to acquire new ones. To reap the benefits of your investment in current customers, you should be continually soliciting business from them. Postcards are one of the most cost-effective ways of doing so.

Franklin Quest illustrates this use with a postcard notice of upcoming seminars for customers who use their Franklin Day Planner. A jazz band in our area uses postcards to notify fans of their schedule of appearances. A shoe store sends postcards to its customers with a color photo of a new line of shoes they’re selling. A carpet store notifies preferred customers of a private sale event with a postcard.

Maintaining customer contact: It has been estimated that you should contact each customer at least eight times a year to retain them as active customers. This means the customer must see your advertising, visit your business, get a phone call, receive a mailing, or have some other form of contact from you.

A postcard is an ideal way to keep your name current with customers at a low cost: You can find dozens of reasons to contact your customers during the year. If you move, acquire a new line of merchandise, hire a new chef or a new sales representative, or have some other news worthy change in your business, you have a solid reason to make contact. If you don’t have a reason, invent one.

A good example of this kind of postcard use is the Mini-Marketing Newsletter, a new postcard-newsletter we have developed for business-to-business customers. One side of the card provides marketing tips developed by Win-Win Marketing, and highlights your company as the sponsor. The other side is blank for addressing, and also allows space for printing or writing your sales message.

This type of contact is especially effective because it provides valuable, interesting information which the customer will want to keep for reference. That means your company’s sales message will be repeated every time the customer looks at the postcard.

Good postcard markets: Postcards are an easy and cost-effective way to reach a market that is confined to a small geographic area. It has been estimated that the majority of customers for a typical retail sole proprietorship are within a quarter mile area of the business. For franchises, the estimate is three quarters of a mile. When you can locate your market this closely, it pays to use the mail to solicit business, and the cheapest form of direct mail is a postcard.

The same holds true for markets which are geographically widespread, but small and highly specialized. Buyers of American Indian artifact and owners of pot-bellied pigs are good examples. With a good list, you can reach your highly targeted market without the waste of advertising in a newspaper or magazine whose circulation includes people who aren’t interested in your product.

It costs less to be creative: Postcards are a versatile marketing tool that can be used in an infinite variety of ways by small businesses. We’ve received postcards selling everything from computers to bed & breakfast inns; in designs ranging from a pink telephone message to a $5 discount coupon for a lube job.

Because they are so low in cost, postcards let you be creative without breaking the bank.

Postcards – they’re small, fast, cheap, and effective. With a little thought, they’ll probably be a winner for you.

Postal Regulation for Postcards: To qualify for the postcard postage rate, the maximum dimensions are 4-1/4″ x 6″. Postcards outside of the maximum allowable dimensions are processed either manually or mechanically. That means slower mail.

Precise information of postal regulations can be found in “A Guide to Business Mail Preparation” (publication 25), available free from: U.S. Postal Service Headquarters, Marketing Dept. Regular Mail Services Div. 475, L Enfant Plz SW, Rm 5541 Washington DC 20260-6336.

Other Postcard Uses

  1. Appointment reminder
  2. Address change
  3. Introduce new employee
  4. Gift certificate
  5. Personal notes
  6. Thank you note
  7. Clean your mailing list
  8. Sale announcement
  9. Valuable information

Frankie Kangas is president of Win-Win Marketing, a marketing firm which specializes in small business. She is also publisher of the Win-Win Marketing Newsletter For Small Business. For a free sample issue of the newsletter, call 800-292-8625.

[From Connection Magazine, November 1994]

ISDN: Integrated Services Digital Network

By Rose Anne Hurd

Integrated Services Digital Network are some of those “buzz” words used in out industry for years. An unsuccessful search for ISDN information as it relates to the telemessaging industry has prompted this interpretation of the telephone company’s jargon into a layman’s primer.

ISDN Defined: Southern Bell defines ISDN as “a revolutionary communications architecture that integrates voice, data and video transmission into a single access line. It enables a single telephone line to carry voice, data and video information simultaneously.”

Those of us at the elementary level of digital communications may relate to Gary Kessler’s explanation from his book, ISDN, Second Edition: “ISDN is merely an enhancement to the telephone local loop that will allow both voice and data to be carried over the same twisted pair. It is a fully digital network, where all devices and applications present themselves in a digital form. That is, information from the telephone, personal computer, stereo, television, PBX, main frame and ISDN coffee pot are all seen as bit streams by the network switch. “1

Analog Defined: It might be helpful to review analog (sometimes referred to as broadband) voice transmission and digital transmission (also called base band.) An excellent description of analog is found in an article, “The ABC’s of ISDN” written by Lea Meadows, a staff manager for Bell South Telecommunications: “In the beginning, there was analog. Alexander Graham Bell created a means for transmitting voice signals between separate locations. The three parts of transmitting this voice signal were the transmitter, which converts sound waves to a continuous electrical signal: a transmission path, consisting of a pair of wires (or cable pair) to carry the signal to its destination; and a receiver that turned the electrical signal back into sound. A pair of wires for every telephone and a telephone for every pair of wires.”2

Digital Transmission: To carry human voice in a digital form, the analog wave is transmitted into an equivalent digital mode. PCM measures the amplitude of each voice sample as an 8 bit-byte. If each 8 bit-byte requires 8000 samples per second, then it takes 64,000 bits per second to digitize the human voice. When the digital code reaches its destination, a reverse process produces analog voice sound.

Your PC talks in “bits” and to communicate with another PC, the use of a modem is required for the conversion to an analog signal. ISDN will bring the digital signal to your (digital) equipment including your PC, eliminating the need for a modem.

Telephone central offices have utilized digital switching (both voice and signaling information is transmitted in digital form) between central offices for 25 years and yet the signal between the customer and the C/O has remained analog – until recently. The major motivating factor for the telephone company’s accelerated use of digital transmission is economy but equally important is customer’s demand for higher data a transmission speeds. With ISDN, data is transmitted at 64 kilobits per second, while today’s modems transmit data at much slower speed.

ISDN Deployment: End users might wonder why it has taken so long for this digital technology to be available. Divestiture of the “Bells” and the lack of national and international standards are the major reasons. The Consultative Committee of the International Telephone & Telegraph (CCITT) was developed in 1984 to formulate the standards for ISDN for all telephone providers. Then CPE (Customer Premise Equipment) vendors wanted the telcos to commit to wider deployment and the telcos wanted to see more ISDN products before commitment. TRIP 92 (Transcontinental ISDN Project) launched national ISDN and brought about commitments for ISDN products from big name computer companies. The wide spread usage of PC’s has been a major catalyst for the RBOCs current “push” for ISDN implementation. Tariffs have been filed with the Public Utilities Commission to offer “ISDN anywhere”. This would be achieved in a metro area used FX (foreign exchange) from an ISDN-capable C/O switch to the C/O without ISDN capabilities.

ISDN’S Potential: Mr. Ed Klingman, president of ISDN* tek, was quoted in a “Technology Update” story in Communications Week May 16, 1994: “The public policy push for development of the ‘Information Superhighway’ includes ISDN as an-and in many cases as the – access mechanism. Groups as diverse as AT&T, the Electronic Frontier Foundation and the Consumers Federation of America have all endorsed ISDN as the appropriate technology to provide end-user connectivity to the Superhighway.” 3

In a recent article in America’s Network, Dianne Hammer sited Microsoft and IBM as major factors in the re-newed push for digital services. Microsoft will use ISDN lines for 2000 employees to access their corporate network from remote work-at-home offices. IBM has developed a digital modem with 64 kbps speed.

ISDN was utilized for telecommuting after a major earth quake in California. The RBOC was permitted by the PUC, to install “free” ISDN and to lend terminal adapters and phones to people in the area. Employees who were unable to reach work by the normal highway were able to work via a superhighway.

ISDN Interfaces: There are two ISDN access interfaces to the network: Basic and primary rate. Basic Rate ISDN (BRI), uses a single telephone line, comprises of 2 B-channels with transmission speeds of 64 kbps and D-channel at 16 kbps. Primary rate ISDN (PRI) is generally 23B-channels and a single D-channel with all 24 channels operating at 64 kbps.

The “B” (bearer) channels are used to transmit voice or data and the “D” (delta) channel sends signaling information to control the B channels.

Each ISDN BRI line required a Network Termination Type 1 (NT-1),” ISDN device responsible for the termination of the ISDN transmission facility at the customer’s premise.” 4 NT-1’s can be purchased from vendors or your telephone company for $300-$400.

ISDN vs. DID’s: ISDN can replace DID trunks and numbers! A limited number of hardwire accounts can also be supported using a directory number for dedicated assignment of the customer’s line. In average-sized bureaus, each work station would require one B-channel (primary purpose is for voice and data transmission) with the D-channel (the network and user’s equipment exchange signaling messages necessary to request services on the B-channel) for typical messaging tasks. The second B-channel can be added when needed.

ISDN BRI replaces DID trunks, numbers and in some cases, business or patching lines. ISDN eliminates DID and Hardwire hardware: digital switches, DID trunks and business line cards. Unlike DID incoming-only trunks, ISDN lines are used for incoming calls and out dialing, making ISDN more cost effective than DID services. Conferencing or call transfer (patching) is connected at the central office.

In an ISDN telemessaging system, clients would all forward their line to a main directory number (DN) of the telemessaging service bureau. Then when the client’s phone number (DN) was dialed, the call would forward to the Service’s main DN. Additional information delivered with the call, would be cross-referenced to that client’s account file. This client’s DN identification is called the “redirecting number”. Other call management capabilities, currently available only in the central office, will be brought under the user’s control. The reason for call redirection is a feature of interest to messaging services. At present, there are five possible reasons that can be provided for handling the call: call forward busy, no reply, Data Terminal Equipment (DTE) out of order, call forward unconditional and call forward by the called DTE.

In the Southeast, a comparison of the installation charges for ISDN and DID surprisingly confirms that ISDN costs less to install than DID trunks and numbers! Is this our telephone company’s strategy for steering users away from old technology to the new? Monthly costs are competitive (old technology versus new services and features are not easily compared) and the cost of NT-1’s is expected to decline with the upsurge of new ISDN products.

Future of ISDN: Although the US viewed ISDN with skepticism initially, it has taken a leading role in developing standards, applications, products and services. Many in the telecommunications industry predict that more applications and services will be developed for the use of the ISDN. Will our industry play a role in these predictions? I think so!

Rose Anne Hurd and husband, Clint have been co-owners of a telemessaging service and RCC paging company for 13 years. The Hurd’s are involved with Morgan Comtec in the manufacturing of ISDN telemessaging equipment.

[From Connection Magazine, July 1994]

You Never Get a Second Chance to Make a First Impression

By John W. Weikert

How many clichés have you found that apply to the “live” operator business such as “Your service is only as good as your worst operator?” How would you ever really know what impact your total business is having on your customers if you haven’t surveyed your customers? If you haven’t surveyed your customers, your business operation is based on guesswork. The bottom line is that customers are just about the most important component in any business. If you aren’t keeping them happy, they will find someone else who will.

The bottom line to the successful operation of a live operator business is maintaining a loyal customer base. Present answering service owners must look for new ways to improve their business which can be done by applying corporate management techniques. To apply these techniques, management must have the information to utilize the changes and improvements. Thus in order to improve customer retention and increase profits, management must have continual feedback from its customer base.

Customer surveys can identify factors that are most predictive of customer risk and loyalty. Recent surveys conducted of answering service customers found that between 23% and 28% felt their existing service provided either fair or poor service. This alone indicates that an astounding number of customers might be ready to switch services.

In real business terms, a lost customer is a shocking expense. New customer prospecting is expensive, so good customer care matters! For an example, the cost to purchase new customers from another service can range from $400 to $600 per account. Conversely, a dissatisfied customer can spread the bad news and undermine your business.

Here’s some examples of how management can use the information produced from a survey:

  • establish a company-wide standard for performance and customer satisfaction
  • immediately contact all dissatisfied customers and rectify any misunderstandings
  • reward top performers and initiate additional training on poor performers
  • detect negative trends as they occur – not after
  • identify which strategies should be emphasized in the sales and marketing process.

The following responses are from a recent customer survey taken around the country. The question asked was “Please tell us how (name of TAS company) could become even more important to you?”

  • “This firm is very unprofessional on the phone when/if they answer at all. One of my parishioners asked what time the church service was held and was told they didn’t have the information. I have also had numerous complaints that the phone simply wasn’t being answered.”
  • “Patients who call on weekends with emergencies are cutoff. several times. This is unacceptable in a medical practice and can potentially become a legal issue. It should never happen.”
  • “If they would: answer the phone more politely, give correct information about the office, take messages instead of abruptly getting rid of callers, answer the phone when asked after one ring instead of 15 rings.”
  • “We lost a big contract due to their inability to answer the phone. They let it ring 7 – 10 times then mispronounced the company name. There were also babies crying in the background.”

In all fairness, there are many customers who also have a great many accolades to say about their service.

The only true way to evaluate your client base is to have an independent company perform the survey function. Many times it’s easier for customers to respond candidly to an objective third party. It will cost more than for example, enclosing a survey card to your customer base, but the results and analysis can make a world of difference in the way you conduct your business. It is not uncommon for a research company to achieve a response rate of 35% or more which gives a statistically accurate assessment of your customers’ loyalty factor. A survey can take anywhere from a few days to about 75 days depending on the complexity.

Here are eight things to look for in a survey:

  1. Simplicity of Language: Questions should be clearly and easily understood. Avoid questions such as “do our operators engage you in interactive dialogue”.
  2. No Ambiguity: Avoid words such as “often”, “usually”, or “normally”. These terms mean different things to different people.
  3. High Level of Confidence: Confidence levels are dependent upon the number of people surveyed. Thus aim to survey 95% of your client base or higher.
  4. A Carefully Chosen Sample: Choose the right mix of people from your client list. Samples can be selected at random, by cross section, stratified according to specific criteria etc.
  5. Selecting the Most Appropriate Question Format: Deciding what kind of questions to use is an essential part of the questionnaire design process. Survey developers must avoid making the mistake of asking only what someone thinks are the important questions. Ask the customers what they think the important issues are. Ask what improvements they would like to see; what new services can be offered. People may be asked to rate something according to a certain scale i.e. 1-20 (use a scale that will give a range of response but not too large as it can be overwhelming); to check off their response to choices; to answer simple yes or no; or to answer how they feel about a certain issue.
  6. Survey Administration: One must now decide how to administer the survey; by email, mail, fax, letter, by telephone etc. How will you encourage people to complete the survey and how are they to send it back to you? What is an acceptable rate of response? There are factors to be considered for each of these issues and the best test designers will and should explain the differences.
  7. Scoring and the Turn Around Time: How the survey will be scored (turn around time) can be important factors in your choice of a survey design and provider. Today most, if not all, surveys are scored by computer and should be analyzed by computer. This will give you the fastest turn around time and the greatest degree of complexity and sophistication in data analysis.
  8. The Kind of Report that will be Produced: Survey results are usually reported in the form of tables, graphs and written comments. You must decide how much complexity and detail you want and can use. A good rule of thumb is to strive for simplicity, clarity and brevity. Decisions about the report should be tempered with some thought about who is going to read it, to use it and how the information will be disseminated to other people in the organization.

Surveys are one of the most important tools to use in determining customer loyalty. Contact a market research company for additional information. Your customer’s loyalty factor can either make or break your organization.

John Weikert, of J. Weikert & Company, may be reached  at 203-371-6423.

[From Connection Magazine, May 1994]

2-Way DID’s “Smart Trunks”

By William G. Hunter

It has been a long time since the telemessaging industry has had something to get excited about. As we all know, the telephone facilities we need in order to provide service to our customers have changed very little over the past 15 years. Other than a few customer line features, such as call forwarding if no answer and busy call forwarding, our customer’s phone calls are processed by the telephone company and are basically dead-ended at our answering service or voice mail system. This has greatly limited our ability to do very much with an incoming call other than take a message, or upon occasion, patch the caller to another number.

Whether you offer answering service, voice mail, paging, or cellular communications, the advent of new technologies is vital for the future of our related industries.

For the past 3 years, I have taken a personal interest in seeking out new technologies which would impact and change the way we process incoming calls for our customers.

In late 1991, I started working with the concept of 2-Way DID trunks and what they could do. My first endeavor was to contact the telephone companies to find out what they could provide using existing central office facilities. After talking extensively with all the Bell operating companies (and I mean ALL), and a few independents, it was clear they had no idea nor had they ever heard of what I was talking about. This led to months of research and hundreds of phone calls and meetings which have brought us to today.

On July 14, 1993, I introduced an ONA, Open Network Architecture request before the Information Industry Liaison Committee (IILC), an organization made up of telephone companies, manufacturers, and industry related businesses. Accepted and assigned as Issue 042, “2-Way DID” with Call Transfer,” I am pleased to report that this new capability is now a reality.

The term “2-Way DID” is exactly what it implies; this new trunk configuration can receive and place outgoing calls on the same trunk.

Answering Service: Example: Let’s suppose you have an answering service with equipment compatible with this new technology. You would receive an incoming clients call, probably call forwarded, and answer the call in your customer’s name, “Good morning, ABC Construction.” Your temporary instructions indicated that Mr. Smith is in his car today and all calls for sales should be transferred to him. Now comes the 2-Way DID.

By putting the caller on hold, you are now able to call Mr. Smith in his car on the same trunk, tell him who’s calling and connect the caller on hold to Mr. Smith’s car phone. Your trunk is now free to handle the next call. This function means you will no longer patch a caller, but transfer and reconnect the caller in your telephone company’s central office. You can also use these same trunks for out dial paging or delivery of customer messages. This will allow you to eliminate your regular business trunks and use only 2-Way DID’s.

Voice Mail Service: This application for voice mail service will have the greatest impact by far. Now, your voice mail system can receive calls, play customer recorded information, and at the caller’s selection, Push 1, Push 2, or at the customer’s pre-selection, automatically transfer the caller to any other telephone. The market potential for this capability is almost endless. In reality you are now in the Telephone Switching business. And why not! Who is the second largest processor of phone calls next to the telephone company?

Paging Service: Many Paging Companies offer voice mail as an enhancement to their paging service. But like all services using standard DID trunks, their service offerings have been limited. With 2-Way DID trunks, a simple digital display pager can become part of a service package with double or triple the income potential.

Call Screening: With all the talk about CPNI, it’s good and bad features, Call Screening or knowing who’s calling is possible today using live attendants or voice mail with 2-Way DID trunks.

One Call: Today’s business person has more phone numbers for people to reach them than they can remember or print on a business card. With voicemail and 2-Way DID’s the One Number concept is a reality today.

I have been involved in the communications and telemessaging industry for over 30 years and have never seen anything as exciting, with as much potential, as 2-Way DID. As usual with new technology, deployment always takes time. Local telephone account representatives for the most part will have no idea what you’re talking about should you request this service. I will say, however, that the RBOC’s are scrambling to make 2-Way DID’s available sometime this year with one Telco already on line with a tariffed service. American Voice Mail currently has over a dozen voice mail systems on-line successfully using this 2-Way DID feature and profiting.

As someone once said, “All good things come to those who wait, “unless it’s from the phone company. 2-Way DID’s are here today and the impact they will have on the way we do business will remain with us for many years to come.

William Hunter is President of American Voice Mail, Inc., a voice mail manufacturer, and American Message Centers, Inc., a telephone answering service both in Warren, Ohio. He has been involved as a member and consultant to the telemessaging industry since 1964. If you would like information on the availability of 2-Way DID trunks in your area or a voice mail system compatible with this new technology call 800-DID-SMART.

[From Connection Magazine, March 1994]

Ten Common Marketing Mistakes

By Orvel Ray Wilson

  1. Assuming You Don’t Have to Market: Coca-Cola is by far the most widely recognized brand name in the world, and one of the world’s largest advertisers, investing tens of millions of dollars annually in marketing. Even if you’ve got a better mousetrap, the world will not beat a path to your door. Every business must market itself constantly, aggressively, or fail.
  2. Assuming You Need Big Money to Market: Jay Conrad Levinson, in his best-selling book Guerrilla Marketing Attack*, lists 100 marketing weapons, and 50 of them cost you nothing. Even the smallest one-person business should cultivate good relations with the press. Read Jeffery Lant’s book, The Unabashed Self Promoter’s Guide, to learn how to write dollars worth press releases and articles that will generate thousand of dollars worth of free publicity.
  3. Improper Targeting: Try to say something to somebody or you will be saying nothing to everybody. “Narrow cast” your marketing message to a specific group who want, need, or have to buy your products. Advertise to remind rather that to impress. Repetition is key; mail postcards weekly for a month instead of a single multi-page brochure blitz. Enclose a business card with everything.
  4. Confusing Image and Identity: Guerrillas strive to communicate their identity, not their image. Image implies something contrived or counterfeit. Your identity is who you really are. Customers recognize and appreciate the truth. Put your picture on your business card and your address on your stationary. How else will they know where to send the check?
  5. Undervaluing the Product: Hungry retailers routinely sell their work for a fraction of the fair market value. Be competitive, even aggressive, but don’t give products or services away. Customers will not place a value on your work unless you do.
  6. Incomplete Customer Feedback: Follow up every order after several days to make sure the customer is still satisfied. Ask everyone, “How are we doing?” and “How could we improve?” Take every suggestion seriously. If you really listen to your customers, and do what they tell you to, you can’t fail.
  7. No Specific Marketing Goals: Define exactly the outcome you want your marketing to produce É to inform, to educate, to entertain, or to persuade? Every dollar spent on marketing is an investment, so expect a specific rate of return. Be clear about your goals and track your response rates in registrations per hundred calls, or sales per thousand brochures.
  8. Insufficient Information: The belief that people don’t read long copy is a common marketing myth. Readership falls off dramatically after the first 50 words, but long copy sells to readers interested enough to finish. Put the “5 W’s” up front (who, what, when, where, why), then use enough ink to tell your whole story so your customers can make an informed decision.
  9. Failure to Develop Vendor Relationships: Don’t always go with the lowest quote. Get to know a printer, designer, or agency that understands your needs and will compete for your long-term business. For example, ask them to price the printing of your newsletter on a monthly-for-a-year basis.
  10. Switching Too Soon: Easily the most costly, and certainly the most common mistake, is changing the theme, format, or media used in your marketing campaign. This one is so important that it should be listed as number one. Just about the time you’re sick to death of your marketing, your prospects are just beginning to recognize who you are. Instead of updating your advertising, spend the money repeating your message, again and again and again and again.

Orvel Ray Wilson is an author and speaker on sales, marketing and management, and co-author of Guerrilla Selling: Unconventional Weapons and Tactics for Making the Sale. For a free copy of The Guerrilla Selling Newsletter, call 303-637-1461.

*guerrilla marketer (n) 1: one who deploys irregular marketing weapons that are effective, inexpensive, and productive. 2: one who uses time, energy and imagination, instead of brute marketing force to gain an advantage.

[From Connection Magazine, March 1994]

Buying and Selling Telephone Answering Services

By Thomas G. O’Roark

I find buying and selling Telephone Answering Services (TAS) to be an interesting subject. There are over four thousand TAS in the United States, and most are small, closely-held, family owned and operated businesses. The value of a TAS is almost entirely intangible. Assigning value to an intangible asset is always tricky. In this case, the customer list is the intangible asset which, in my opinion, represents most of the value in a TAS. Buying a TAS is particularly viable because seller financing is usually available as part of the terms, and because significant changes are taking place in the TAS industry which have stimulated buying and selling activity.

As to financing the purchase of a TAS, in my experience, most bankers will not loan money against an intangible asset. The TAS customer list is a recurring revenue base of service bureau subscribers, representing a cash flow stream not unlike an annuity. A future stream of recurring cash flows can be discounted to a net present value, similar to the way that bankers discount loan payments or the way that bonds are valued. Within the financial community, most lenders like to have solid collateral for a loan, such as real estate. They tend to completely ignore the value of intangibles, relying only on the “tangible net worth” a business. Therefore, seller financing is an essential part of any sale or purchase of a TAS.

The first step in buying or selling any business is strategic planning. An individual owner of a TAS should focus on internal factors such as retirement planning, developing exit strategies for becoming liquid, and actually realizing their hard won capital from the business. Often the business represents decades of “sweat equity.” The customers are also friends and neighbors who often have been loyal subscribers since the inception of the business. Providing uninterrupted, high-quality service is of utmost concern. Management succession and training are critical.

Can the Owner/Operator replicate him or herself? Can he or she afford to?

Not every individual owner has an heir who is interested in or capable of running a TAS. As they say, you can lead them to water, but you can’t make them take over the business.

Also, forecasting profitability and cash flow projections are vital to both buyer and seller. It’s often the case that a small TAS can support one family quite nicely, but not two. So both Mom and Jr. can’t both be drawing a full management salary.

How does Mom get her retirement nest egg out of the business, but still pass on the business to Jr.?

Alternatively, how does Mom retire, but continue to own the business, if she has to replace her owner’s draw with a manager’s salary?

Similarly, if an absentee owner/investor buys a TAS, the new owner must pass on all or part of the owner’s compensation to the manager and also service the acquisition debt, which leaves little or no draw for the new owner.

This cash flow dilemma is often the motivation for selling to a competitor who can consolidate two offices into one, or can divide management time between both offices, thereby freeing up enough cash flow to service the acquisition debt. Consolidating offices eliminates duplication in office rent, supervision, night shift operators, etc., and helps leverage existing over heads for support staff, billing, collections, equipment capacity, telephone trunkage, etc. In my experience, a large, reputable competitor is usually the best choice when selecting a buyer.

Selection of a buyer is without a doubt the single most important decision to be made after an owner decides to sell. Unless the price is all cash, consider critical success factors in selecting a buyer.

  • Is the buyer qualified to operate a TAS?
  • Will the customers stay on service after the sale or will there be excessive account loss?
  • Can the new owner make a profit operating the service as-is where-is? Could you?
  • Or, will he/she have to move it or upgrade the equipment?
  • Will the new owner be able to make their debt payments to the seller?
  • Is the new owner dependent upon the cash flows from the business being acquired to service the debt?
  • Or does the new owner have other cash flows from other sources that will enable them to pay for the business?

We all know how quickly a service business can decline, and trying to repossess an answering service is not very practical. Sellers need absolute assurance that they’ll be paid irrespective of what happens to the business after the sale.

Conversely, the prudent buyer wants to be guaranteed of receiving full value for the purchase price, and will normally require the seller to warranty the accounts for some period of time after the closing of the sale. The buyer and seller typically compromise on a mutual sharing of the business risk involved in transferring the accounts to the new owner, with some well defined criteria for qualifying the accounts. Qualification might typically involve an account remaining on service for some period of time following the sale and becoming a paying customer of the new owner.

I suggest both buyers and sellers look closely at the competition. The easiest place to find TAS is in the yellow pages. Shop them.

  • What are their capabilities?
  • How do they price their services?
  • What about new entrants into the market?

Most TAS experience occasional (albeit temporary) loss of customers (usually high volume users) to “flat rate” competitors offering unlimited usage, so consider the pricing trends in the local market, and whether usage is billed per call, per message or per minute. Consider the difference, for example, between day service (only answering between eight am and six pm, Monday through Friday) and full-blown 24- hours a day, 365-days a year, type service. What do most customers demand from an answering service in today’s market?

There are very significant TAS Industry trends which affect the value of a TAS business, such as the contracting TAS market. Every analysis of the TAS industry that I have seen indicates a shrinking market for traditional TAS services. Alternative technologies such as cellular, voice mail, alpha-numeric paging, etc., have severely impacted demand for traditional answering services. The industry is undergoing a rapid consolidation with fewer and fewer competitors, and larger remaining call centers. The level of buying and selling activity within the TAS Industry is good, with fair availability of willing buyers and willing sellers. In order to maintain their revenue levels, TAS owners who do not wish to sell are forced to buy their competitors and/or diversify into new and different value-added types of services. Diversification often demands expensive investment in automated equipment with capabilities that are more flexible, more complicated, and more fully featured than even most automated TAS systems can traditionally provide.

As TAS change their focus away from traditional messaging services and toward other service niches, their appetite for acquiring the customer bases of their competitors may naturally wane. The margins and the prices charged to customers of traditional, take-a-name-and-number type messaging services, are not particularly attractive in light of other niche services that yield higher revenues per minute and that have the potential for exponential growth. Scarce capacity will naturally be allocated to the higher ticket, more profitable service niches.

Timing is everything in life, and TAS owners should carefully consider if and when they might be in a selling mode.

In a declining industry such as telephone answering services, the durability of existing cash flows is in question, which results in lowering of values for the businesses. It may well be that traditional TAS businesses will never again be worth as much as they are right now. Outside investors are typically not attracted to declining industries. The number of competitors keeps steadily dwindling and those that remain have larger shares of a smaller market. Most TAS systems have definite upper limits for capacity in terms of numbers of ports and/or numbers of operators. Competitors may be aggressively buying accounts today, but may satisfy their demand. Once a competitor has maximized the utilization of his/her TAS system, then a second system would be required before any new accounts could be added, the cost of which may be prohibitive. Experts disagree over the optimal size for a call center, but consolidation has definite limits.

The larger a call center becomes, the fewer competitors there are who could consolidate it into another office. Industry consolidation tends to have a self dampening aspect to it that gradually slows the pace of the process.

There are new and emerging customer needs and market driven demands for innovation as well as upgrading of the service. Even if retirement is not a factor to a TAS owner, replacement or upgrading of plant and equipment requires careful cash flow planning. Consider the investment required for technology, service enhancements, productivity tools, opportunities to reduce costs, obsolescence of old equipment. TAS veterans well remember the advent of answering machines and the resulting reduction in the size of the TAS market, and the transition from hardwired secretarial lines, cordboards and concentrators to DID’s and call forwarding. Today’s customers are demanding their TAS offer fax, paging, fully integrated voicemail, modem access, remote printing, order-taking, credit card verification, scripting, label printing, and Interactive Voice Response (IVR).

  • How comfortable are you with new technology?
  • Do you understand computerization, data base management, networking, data file manipulation and transfer?
  • Most importantly, how will you finance the new hardware and software?
  • It isn’t cheap, and it won’t always work as well as or easily as advertised. After it’s installed, how will you maintain it, and at what ongoing cost?

New buyers should consider the skills and commitment required by a 24-hour per day, 365-day per year business, that never closes for holidays, Sundays, blizzards, storms, volcanoes, earthquakes, riots, or anything else. In fact, the more disastrous the local situation, the more customers need you, with zero fault tolerance. Also, any failure to answer the phones can have significant consequential damages to a customers business, as in the case of doctors or other emergency service providers. It can be oppressive. One reason I consistently hear for selling is a yearning for freedom to travel and to enjoy the well deserved fruits of hard earned success.

The labor intensity of answering service is sometimes overlooked by new entrants into the industry. Recruiting, training, supervising skills are essential. I am occasionally contacted by a bleary-eyed seller who is motivated to sell sooner rather that later due to recent turnover in key people. If a new buyer is not from a labor intensive background, then managing a call center could be quite a challenge. It’s the nature of a service business that even your lowest paid employee will interact with your most valuable customers. There is a demand for a uniform, consistent level of service that requires constant monitoring, observation, training and retraining. These service businesses cannot stand to be neglected at all. It’s amazing how quickly an answering service can decline due to poor service.

Finally, before buying or selling, one must consider such external factors as recession, inflation, global economy, U.S. economy, and most importantly for a local service bureau, the local economy. It’s hard to collect when your customers are going out of business, or when your competition is desperate for new business. Also, there are issues of inflation, new governmental regulations which add cost, and office lease escalation clauses to consider and plan for. Be sensitive to labor force changes and to legal and regulatory issues .

In closing, it is my opinion, that the TAS industry is undergoing important changes. As the industry declines, rapid consolidation is occurring resulting in fewer, larger call centers. Owner/operators are diversifying into new value-added services and are transitioning away from traditional message taking. Therefore, the availability of willing buyers and sellers is presently good, but timing is critical, and capacity is limited. Strategic planning by owner/operators is very important to determine when and if they might become a buyer or a seller, and what their strategy will be with regards to diversification into new service niches.

[From Connection Magazine, March 1994]