What a proper business plan and perpetuation strategy can do for a brokerage

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Years ago, we were approached by a benefit brokerage to help their firm to refine its marketing message and to identify strategies that would enable the business to accelerate its organic growth. The practice, like most, was largely focused on the general, small business market. In fact, the client base was principally comprised of employers with less than 50 employees, with a majority having less than 25 employees.

And of course they thought that their competitive advantage was that they gave good service (not a differentiator). Their client retention was quite good and revenues were growing at a 12% compound rate. But their potential was so much greater than the results their firm had achieved up until then.

During a strategy session, several interesting and very powerful insights were gained. One of the principals had grown up professionally in healthcare and had held a few positions of increasing responsibility in HR and benefits provisioning, as well as medical personnel recruiting. It was a natural market since she could “talk the talk and walk the walk.” In addition, healthcare was and is one of the only growth industries we have in the US.

Based on an analysis of their then current book of business, we were able to identify two other natural markets. Collectively, we worked to develop specific marketing messaging for each of the three markets and most, if not all, of the proactive marketing and business development opportunities were directed at these three markets.

This kind of market segmentation has been very effectively used by a number of firms, and it was no surprise when sales started to take off in warp speed.

Today, the average client size for this firm is around 150 employees with a few employers having 500-3,500 employees. And in the last eight years, revenues have increased more than 500% while the business has only needed to add five or six additional resources. The profit margin has sky-rocketed. The business has been featured in a number of industry articles, and deservedly so.

Shouldn’t your practice be achieving these kinds of results? Do you have a plan to make that happen?

Exit strategy

We also have been focused on formulating the ownership exit strategy, and planning for the perpetuation of the business. More than a decade ago, we initiated a discussion with a business owner who was in his 60s at the time. There was no business perpetuation plan in place and he was enjoying success and having fun, so he was not focused on exiting the business. But his family’s financial security, the future incomes of his employees and key executives, the effectiveness of his clients’ benefits plans, and his 20+ year legacy, all were in jeopardy if he became disabled or died.

Also see:2018 Rising Stars in Advising.”

Thankfully, after dozens of emails, phone calls and in-person meetings, the owner agreed that this was a critical strategic and operational weakness of the business and that it would adversely impact the business asset value which he had spent half his adult life creating.

Sound familiar? Fast forward to today, and his business perpetuation plan is in place, his family’s future financial security is assured, the key management personnel have been financially rewarded and have the comfort of knowing the business will endure, and there will be an orderly transition of leadership over the next several years.

The business has a great new strategic and financial partner, and the owner is still actively managing the business and its relationships. Isn’t that what you want for your family, staff, key executives and clients? Well, what are you doing about it?

There are dozens of other examples that are illustrative of why developing a formal business plan and perpetuation strategy are essential to the long-term success and sustainability of your practice. The question is: will your business be one of the future success stories? We certainly hope so.

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