In a counterintuitive revelation, Pitney Bowes Inc. executives revealed this month that by one measure the company registers nearly triple the revenue in the U.S. from small businesses as it does from large corporations.
As much as Pitney Bowes is relying on the little guy these days, the little guy is also depending on the Stamford-based company for credit to continue using Pitney Bowes”™ mass-mailing systems.
In Pitney Bowes”™ review of its first-quarter results and a subsequent investor day last week, CEO Murray Martin said small businesses appear to be recovering while cautioning the sector typically lags an overall economic recovery by several quarters.
The importance of U.S. small- and mid-sized businesses to Pitney Bowes can be expressed by one interesting factoid ”“ the company generates $345,000 in average revenue from each employee who is focused on that sector, vs. $121,000 from employees focused on large U.S. corporations.
Loans remain harder for small businesses to come by, Martin said ”“ including those extended by Pitney Bowes itself to its customers.
“Credit still remains tight for small businesses,” Martin said. “They are still struggling with the credit side of their business.”
Credit is a key component of Pitney Bowes sales strategy, allowing it to help small businesses spread the upfront costs of its systems over time. Pitney Bowes has not changed the terms or conditions by which customers can obtain a line of credit, but has been more aggressive with collections, according to Michael Monahan, the company”™s chief financial officer.
“In our credit business, where we provide lines of credit to customers through the economic downturn, we actually cut back on those lines of credit to manage delinquencies and write-offs,” Monahan said. “So we took proactive actions. We felt it was prudent action to reduce that exposure during that period of time.
“As we see improvement in mail volumes, that would bring more activity back into the line-of-credit business,” Monahan added. “Generally, customers use that to purchase postage ”¦ at some point in the future if we decide to increase those lines of credit, obviously that would make more credit available to customers.”
The company has also worked with customers to extend existing leases rather than ink new ones, a tack that results in less revenue for Pitney Bowes, though higher profits. Pitney Bowes plans to continue offering lease extensions, but at a lower frequency.
On the product front, Pitney Bowes last month introduced Connect+, which allows customers to print high-resolution graphics on the outside of envelopes, and to use a web-based application for a wide range of mailing services. The product gives Pitney Bowes a new yardstick on the appetite of businesses for new products ”“ regardless of the availability of financing.
“Connect+ ”¦ is a product that opens a number of other opportunities,” Martin said. “It doesn”™t just do metered mail; it can also do permit mail, which is an area which we have not done much in. With full color printing it allows for printing return addresses and logos on the envelope, eliminating the need for pre-printed envelopes, so that is a cost saving for customers.”
Martin said the company is seeing signs of stabilization in the small- and mid-sized business (SMB) sector, including a willingness by companies to reinvest capital in their operations.
“I am still fairly cautious on that sector,” Martin said. “As consumer confidence has improved a little bit, so has the SMB sector.”
