There is the belief out in the benefits world that the small to mid-sized benefits brokers will either struggle to survive or not survive at all. With Obamacare, Private Exchanges, ACO’s, new competitive threats, it simply will be too difficult to change one’s business to succeed, or so some believe. I disagree. Not only do I disagree but sometimes the market changes in a way where small to mid-sized businesses may be better positioned for success.
Let’s start with the idea in general that small to mid-sized firms won’t survive. Why would this be the case in the benefits business but not in any other industry? There are small law firms, accountants, restaurants, hardware stores, and breweries. Heck, I am managing my in-laws independent pharmacy that continues to be profitable year in and year out. And my business bank is a local bank that has only one location. Sure, there are some industries like large manufacturing where the barrier to entry is real high such as the automobile business, energy, or aircraft manufacturing. But that is not the case with the benefits business. It is primarily a service industry and I have a hard time thinking of a many service type industries where all the small firms were displaced by the larger ones. I have seen both larger and smaller firms displaced by firms with newer technology, but let’s leave that for another article.
According to the census bureau there were 6, 634,155 businesses in the U.S. in 2010. Of those 3.8 million were firms with less than 10 employees, 10 – 99 had 1.3 million, 100-500 had 1.65 million, and for companies with 500+ employees there were 1.1 million firms. What these stats are saying is that the majority of employers are small to mid-sized businesses (less than 500 employees) therefore the majority of a benefits brokers customers and prospects are also small to mid-sized employers.
Small to mid-sized employers are proud of what they do. In fact, many believe they do whatever it is they do better than their larger competitors. If you were to ask the average small to mid-sized business owner how they are better they would say things like “we provide more personalized service”, or “we can adapt faster to client’s needs or market changes”, or “we are more vested because we own the business”. You see most businesses in general are more like the small to mid-sized broker than they are like the larger broker. Think of this for a second. If everyone did business with only the largest companies in any industry both you and your prospects or clients would be out of business. A small business owner may appreciate that perspective.
In some situations small to mid-sized firms have an advantage. A good example of this is how quickly firms have responded to the competitive threat of Zenefits. It is my experience that the mid-sized independent brokers have been able to respond faster than the larger ones. When Zenefits says we will “help you with payroll” many larger brokers say “we aren’t touching payroll”. While independent mid-sized brokers are making changes quickly to meet the demand larger firms are asking permission of their attorneys and compliance people. It doesn’t matter whether you are big or small we don’t get to make the rules of the game and sometimes the market will go in a direction that may make certain firms feel uncomfortable.
This article is not taking sides. Small and large businesses can be displaced. Whether you are big or small you need to provide something that is valued in the market. But, you don’t get to make all the rules. Big brokers can’t say, “We don’t want to do that”. Well they can but they won’t get the business. Smaller firms have to find ways to deliver what larger firms do or find other ways to differentiate themselves. And when you are talking to a small to mid-sized prospect ask them how they are different from their bigger competitors. When they say that they provide more personalized service, adapt faster to market changes, aren’t afraid to take chances, etc… just say, “well I’m just like you”.
JOE MARKLAND 