This article outlines three defined contribution sales tips you can use today in prospecting small and medium sized businesses.
As background, over 2.3 million small businesses don't offer health insurance in the US. However, the majority of small businesses want to offer health insurance to recruit and retain employees. Before defined contribution health plans, there was little a broker could do to help businesses that couldn’t afford group health insurance.
By offering a defined contribution solution, brokers have another tool to diversify and grow their book of businesses in this changing health insurance market.
Sales Tip #1: Prospect the Right Company
Companies of all shapes and sizes are adopting "pure" defined contribution. However, to see the most return on your sales and marketing efforts, focus on prospects within these three ideal company types (with an emphasis on #1):
1. Small Businesses (< 50 Employees) Without Health Benefits: Small businesses without health benefits, who want to start offering health benefits for recruiting and retention, are the best prospects for a defined contribution solution.
Why? Likely they have shopped for group health insurance and have either been priced out, or cannot meet minimum participation requirements. Defined contribution helps them solve these challenges and allows them to offer health benefits.
Defined contribution is also an ideal solution for small businesses (<50 employees) because they are not subject to the ACA employer mandate, set to begin in 2015/2016.
2. Small Businesses (< 50 Employees) With Health Benefits
Small businesses with health benefits can also be ideal defined contribution prospects if they are struggling with the cost of group health insurance.
Why? Defined contribution addresses this challenge by allowing the employer to fully control the cost of the health benefits and predict the cost year after year. The employer can contribute any amount (no minimum or maximum contribution amounts), and there are no annual renewal fees or increases.
3. Medium Businesses (50-99 Employees) With Health Benefits
Small businesses with health benefits can also be ideal defined contribution prospects if they are struggling with the cost of group health insurance. A consideration for businesses with 50-99 employees is that the ACA “play or pay” mandate will apply to them in 2016. In other words, they will need to conduct a financial analysis to compare:
- The cost of ACA-qualified group health insurance
- Penalties alone for not offering group health insurance
- Penalties + Defined Contribution Allowances
Sales Tip #2: Shift from Salesperson to Consultant
Small and medium sized businesses have a strong demand for educational outreach. You will have the most sales success when you slow down, shift into the role of a consultant, and move away from “just selling”. After all, how do you know what health benefits to sell until you fully understand your clients’ needs? Ways to do this are:
Understand their Unique Challenges by Asking Questions - A small business may present a challenge, but what is the true challenge?
Understand their Buying Process - Who will be involved in the decision? What are their steps to make a decision? Match the steps of your sale process to where they’re at in the decision-making process.
Use Education and Analysis - Once you understand their true challenges and their buying process, take an educational approach. Use specific numbers and analysis that help them solve their challenge.
Sales Tip #3: Don't Approach Small Businesses Exactly as You Would Larger Businesses
When it comes to buying health benefits small and medium sized businesses have unique characteristics that influence their decision making process. These buying characteristics are both similar and different to a larger business's buying process. For example:
Small businesses usually have a tighter focus on their budget than larger businesses.
A small business's buying process is usually less complex than in larger organizations, and they often make faster decisions.
Similar to larger organizations, small businesses value personal relationships. Relationships are the foundation of business transactions with vendors and suppliers.
Even if a small business says they have a set health benefits budget, they are much more fluid and flexible with their budgets than with larger businesses.
Referrals and word-of-mouth carry a lot of weight with small businesses.
What are your tips for selling defined contribution? Leave a question or comment below.