he Small Office/Home Office (SOHO) market is huge (9 million businesses), according to this white paper. It is growing faster than the rest of the economy (5-10% annual compounded rates), accounts for virtually all of the new employment, and for commercial banks it is TEN times more profitable than the consumer or large-corporation market segments.

While the document does an excellent job of describing a series of new financial services for the SOHO market, what it missed was how these products will be sold. The assumption is that commercial bankers will simply start taking orders once the products are made available. It is my belief that Merchant Level Salespersons are going to provide the "feet on the street" that will explain these new services, sign the contracts and educate the users about how to transition their paper/clerical/error-prone accounting practices over to the new emerging electronic payments.

For sales agents interested in generating new sources of revenues from their existing clients while also expanding their prospect base, this document is worth a download and careful reading. Executive Summary CheckFree, for those of you unfamiliar with the name, is the country's largest electronic bill payment processor. Its Web site details CheckFree's bill payment services in two dimensions:

1. As an online bill presenter for 260 large national billers (utilities, credit card issures, insurance companies, etc.)

2. Enabling more than 6 million consumers to receive and pay all of their bills online

This "Pay-All" capability means that when a consumer decides to pay the local veterinarian or dry cleaner though the CheckFree Web site, a paper check is going to be generated and stuffed in an envelope to make payments to low-volume billers. In fact, today CheckFree is the nation's largest laser check printer in the country in addition to being the largest electronic bill payment processor.

This year, for the first time, CheckFree was able to report that it was able to settle more than 50% of its bill payments electronically. Until then, there were more paper checks printed than EFT transfers used in performing Electronic Bill Presentment and Payment (EBPP).

The focus of this white paper is that the same technology platform that CheckFree has built out for consumer EBPP can be deployed by bankers serving the SOHO market. The enabling technology that is creating the opportunity to automate both revenue collection and disbursements is the dramatic rise in PC's with Internet access.

The white paper cites research that shows that the percentage of Internet-active home offices swelled to 81% at the end of 1999, up from 26% at year-end 1996. The number is expected to further increase to 92% by 2004.

Of course, the Internet allows small businesses to expand into global markets, and the rise in broadband connectivity also enables these companies to streamline their accounting functions - thus leaving more time for selling and growing their businesses.

Merchant Level Salespersons who are starting to present their retailers with payroll cards can quickly appreciate the opportunities that CheckFree is describing in this white paper. These cards represent the first acquirer offering for sales agents to generate new revenues from automating accounting functions.

Payroll cards deliver to employers substantial savings in the form of printing and distribution of checks, their reconciliation and duplicate check fraud. For retailer employees, many of whom are unbanked, these cards mean that they get their cash from the nearest ATM as opposed to paying steep fees to check cashiers.

If the cards have the Visa or MasterCard logos on them, they give employees the convenience of making POS PIN debit purchases along with cash back in most supermarkets and government agencies, such as the post office.

CheckFree is proposing the Internet connectivity in the SOHO sector soon will enable these businesses to further streamline their accounting practices. They simply will click a mouse to approve their bills for payment, they will be able to look up payment history online and they can download this payment history directly into their accounting packages. As the white paper states, electronic billing and receipts collection delivers better and more convenient overall financial management of their operations.

The hard dollar savings projected in this report suggest that the average small businessperson could afford to spend $11,000 to generate the type of ROI that can be realized from signing up for electronic bill presentment. This kind of sales opportunity, together with providing sales agents with many more prospects (insurance/real estate agents) to call upon in their markets, makes EBP a service that CheckFree needs to package and make available to the processor and MLS channel.

Excerpts from this White Paper

• "Small business may be the fastest-growing segment of the U.S. economy."

• "The SOHO category represents nearly 99% of all U.S. employers as well as 75% of new jobs - according to the U.S. Small Business Administration."

• "Another important characteristic of today's small business sector is the fact that half of the market is found in the service and retail industries."
• "For those prepared to develop a deeper understanding of the vertical industries that make up these different sectors, they will eventually develop industry-specific financial products and services for these small businesses."

• "Today, women account for nearly half of the ownership of small business, rising from just 40% a year ago - according to statistics from the U.S. Department of Labor."

• "Minority owners of small businesses have seen their ranks rise significantly. There has been a 232% surge in Hispanic-owned businesses and a 180% increase in Asian-American businesses and a 108 % rise in African-American-owned businesses in the past 10 years."

• " ... Small businesses leveraging an EBP solution can save an estimated $356 per month according to the following analysis provided by a 2000 study conducted for CheckFree:"

Web Sites for More Information on Electronic Services for the SOHO Market

www.checkfree.com/

The home page for the author of this white paper.

www.oracle.com/appsnet/products/smallbiz/docs/integration_technologies.html

Oracle has a targeted offering for the SOHO market, and this is it.

www.greatplains.com/

Microsoft recently purchased this small business software firm to compete in the SOHO market.

http://developer.intuit.com/default.asp?2001betadevelopers

Intuit has the most to gain or lose in how the SOHO market adopts electronic funds transfer with its installed base of Quicken and QuickBooks users. This site demonstrates Intuit's willingness to partner with third-party developers who can create value-added plug-ins.

www.intuit.com/company/investors/corporate_releases/2001/09-24a.html

This press release describes Intuit's "Best for My Business" strategy to protect SOHO clients who outgrow Quicken and QuickBooks.

www.quickbooks.com/products/pointofsale/

A few months ago, Intuit released its first targeted offering to the growing retailer with its QuickBooks Point-of-Sale system.

www.americanexpress.com/homepage/smallbusiness.shtml

American Express's Web page targeted for the SOHO market.

http://usa.visa.com/business/small_business/

Visa's recognition that the SOHO market is a growth opportunity for its members.

Eric Thomson is Executive Vice President of Profit Source Advisors. He can be reached at etprosc@attbi.com.