During a recent discussion, one successful adviser told me he was moving into the small group market. When asked why he’s bucking the industry trend, he credited an SBU, or small business unit.
SBU. It sounds like the latest Law & Order spinoff, but a Small Business Unit, a comprehensive upgrade to your small-group block of business, can help you reduce your workload, improve your service and increase profitability.
There are three steps for advisers to create an SBU:
1. Audit your book of small groups;
2. Put all groups on an efficiency platform;
3. Eliminate your least profitable groups
Small-group audit
Few brokers know their most — and least — profitable accounts because almost no agencies track the cost — time and resources — required to service each account. By using a concept called “Service Load,” it’s possible to quantify and rank each accounts’ impact on your service team.
Administer a basic small-group audit by ranking all accounts by revenue generated — highest at the top — and then total. Starting from the top, one by one add each group’s revenue until you hit 70% of your total small-group revenue. If you’re like most agencies, that 70% is generated by less than 40% of your groups. More on the least-valuable groups later.
Best practice: Require all new groups to generate a minimum revenue, usually $10,000 (some smaller shops use $5,000).
Efficiency platform
We all know that small groups often make more service demands than much larger accounts. One way to greatly reduce your service burden is to require all small groups to move onto a technology platform — benefits admin or HRIS — that provides much greater efficiency.
Checking an employee’s benefits, open enrollment and so much more becomes easier and faster with technology. Less service work means more profit.
Also, since most platforms’ online enrollment system includes ancillary and voluntary benefits, you’ll add additional revenue that will drop to your bottom line, making the account more profitable.
The caveat: it must be mandatory for every group to go onto your platform as a condition of remaining your client.
Removing the least profitable
Now it’s time to make your book much more profitable. The groups that refuse to go on your technology platform and those least valuable groups (generating the least revenue) need to go off your book — with the exception of the small company owned by, say, the mayor or your brother-in-law.
For those groups that are technology non-compliant, simply explain that you’ve loved having them as a client but all your clients moving forward must be on your tech platform. For those groups that don’t generate enough revenue, tell them that they’ve been great clients but that changes to your business model prevent you from being able to service them properly.
Here’s the best part. Identify a small-group broker you respect and offer to sell these groups for one times revenue. That broker will be thrilled, you’ll cash out one more time, and your remaining groups will be less work and much more profitable.
