You to a Few: Profitable Clients with 1 to 5 Employees

Robert Crowder, founder and President of The Benefits Trust, has over 30 years of experience serving pension and employee benefits clients. In 1994, he founded The Benefits Trust as a Third Party Administrator serving small and mid-sized business across Canada. Through Rob Crowder's dedication and leadership, The Benefits Trust has grown into the successful benefits provider that it is today.

You to a Few: Profitable Clients with 1 to 5 Employees

As a benefits advisor, it’s very helpful to segment your clients and prospects by the size of their business. Companies with only a handful of employees are going to make purchasing decisions in a very different way than companies with hundreds of employees, so it only makes sense to approach those prospects in a way that caters to their specific situation and goals.

There are 449,770 registered businesses in Ontario, and of those businesses, an impressive 440,000 have less than 100 full-time employees.

We can break it down even further into three distinct groups:

  1. 1 to 5 employees
  2. 5 to 20 employees
  3. 20 to 100 employees

This month, we’re focusing on the first group, which we like to call “you to a few.” There are easily 250,000 or more businesses in Ontario with 1 to 5 full-time employees, and of those businesses, 75% do not have employee benefits.

However, a survey conducted by Benefits by Design has found that 76% of new hires won’t consider a job unless it includes benefits. This means that those small Ontario businesses are missing out on top talent due to their lack of employee benefits, which translates to an enormous opportunity for benefits advisors.

How to Provide Value Added Service at a Profit for Clients with 1 to 5 Employees

We’ve established that there is significant opportunity for selling to businesses with 1 to 5 employees – that’s the first step. But how do you approach those small business owners and provide value while remaining profitable?

Here are some things to consider when selling employee benefits to businesses with 1 to 5 employees.

1. Client Needs Analysis

First, it’s essential to understand where your client is headed in order to determine how to best help them.

But how can you figure out where they’re going? It’s simple: just ask!

By asking future-based questions, you can get an accurate idea of your client’s goals and aspirations which will then allow you to craft a benefits plan that will help them to get there. Our favourite future-based question, created by Dan Sullivan from The Strategic Coach, is this:

“If we were meeting here three years from now and you were looking back over those three years, what has to have happened to say those were the best three years of your life?”

The answer to this question will give you a direct roadmap to where they’re going in a clear, concise, and specific manner. They might tell you that they’re hoping to grow, sell, merge, develop new products, enter new markets, retire, and so on. Whatever the answer is, it will open the door for you to help them and provide value.

If they don’t engage with your question, simply move on to the next prospect. If you don’t know where they’re going you can’t realistically help them, and there’s no sense wasting your time with a prospect that you can’t help when there are so many other opportunities here in Ontario.

2. Understanding Risks and How to Manage Them

Your job as an advisor is to translate insurance industry jargon into everyday language that the prospect will understand. A very powerful way to resonate with a prospect regarding their employee benefits plan is to frame it this way:

“A benefit plan is a promise between an employer and a group of employees.”

The question then becomes: What would you like to promise them? In general, there are two types of promises:

Low Frequency, High Cost

This requires insurance and includes benefits like group life, group AD&D, long term disability, critical illness, out of country travel insurance, and stop loss insurance.

These are the benefits that are only required on occasion, but when they are relevant, they’re substantial.

High Frequency, Low Cost

This requires budgeting and includes benefits like extended healthcare, prescription drugs, vision, dental, and a healthcare spending account.

These are the benefits that occur on a frequent basis, but which are typically less costly.

It all comes down to making it easy for the client to make decisions based on where they’re going. If you can get a strong grasp of their future goals and present them with valuable options in terms they understand, your client can set their own budget and you can get a quick answer with no guessing and no games.

From your perspective as an advisor, a quick “yes” or “no” is the most profitable way to interact with clients. A “yes” pays you, a “no” teaches you, but a “maybe” doesn’t help anyone.

3. Reporting and Accounting Considerations

It’s very good practice to send clients an extensive report each month. It’s essentially a sales receipt; it shows them how much they’ve paid over the month, how much has been paid out to insurance companies, the claims made across various categories, the operation expenses and commissions, and any surplus or deficit for the month.

This monthly experience report should also include a year-to-date cumulative section as well, so the client has an annual snapshot of their benefits plan performance.

This helps to ensure that the client understands exactly what’s going on with their benefits plan, and that they know where they stand each month. It’s critical that everyone stays accurately informed and that there are no surprises. Come the next renewal, the deficit or surplus will be used to inform the rates moving forward.

4. Taxation Considerations

Taxes are another consideration to be made when creating a valuable benefits plan for businesses with 1 to 5 employees.

All benefit plan costs are tax-deductible business expenses, and extended health and dental benefits are received tax-free. 100% unlimited plans are strongly recommended for business owners. However, healthcare spending accounts are sometimes a valuable option – especially in cases where the owner’s spouse has their own benefits plan. If the spouse does have a plan, the healthcare spending account is always the second payer.

We’re Here to Help

When it comes to providing valuable and profitable benefits plans to businesses with less than five full-time employees, understanding where the client is going is the most important part. Ask them future-based questions to understand where they’re headed and determine what it is that they want to promise to their employees. Provide monthly reports to ensure that there are no surprises and remember that 100% unlimited plans are particularly effective in this grouping of small businesses.

The Benefits Trust has been providing Third Party Administration services for over 25 years, and we’re here to help! Contact us today for more insights about selling to clients with 1 to 5 employees, or for general insights into providing valuable and profitable benefits plans.

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