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Benefits Administration Business Plan

Employee Benefits Administrators, LLC

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Strategy and Implementation Summary

5.0 Strategy and Implementation Summary

Employee Benefits Administrators will initially focus on employers with 10 to 500 employees within the local counties: Chester, Berks, Montgomery, and Lancaster. COBRA/HIPAA and Flexible Account Administration will be the main focus for these are areas in which companies can already begin to see the need for outsourcing services. Employers with 20 or more employees must offer COBRA if they offer any health insurance to their employees. And, if companies are already having to increase their employee contributions toward the cost of benefits, then offering a Flexible Spending Programme may alleviate this added financial burden.

5.1 Value Proposition

By outsourcing administrative functions, a company can save in two very important areas: Time and Money. This is basically the goal of outsourcing.

By contracting with EBA, companies can use their current Human Resource professionals in other strategic areas. For example: if the company is growing, it will need to hire qualified people -- and keep them. The company needs their HR department to focus on these issues. Not just attracting and interviewing the employees, but making certain the employees stay once they are hired. The company needs to offer programmes and benefits in order to retain these employees. Turnover and retraining are so expensive. If the company outsources the benefits administration, they would then be able to save the time and use their current staff to help with all of these more important issues. As the company grows and decides it needs to add HR staff, it does not have to add a Benefits Administrator -- for they have outsourced that function -- they can then use that budget for additional HR staff to hire a more strategic position -- such as a full-time Recruiter, Compensation Manager, or Employee Relations Manager.

As stated previously in Section 4.1.3, in the Philadelphia region, the average salary of a Benefits Administrator is about £45,000 annually plus benefits. For an average small company of 250 employees, EBA can administer the benefit plans for approximately £36,000 and a start up fee of £2,000.

5.2 Competitive Edge

Most of the competitors will shy away from offering a call centre to answer employee questions. This gives EBA a definite advantage called -- Customer Service.

When a client contracts with EBA, we represent two clients. One is the company, and the second is the company's employees. The call centre is a priceless customer service tool to both clients. By providing a call centre, EBA saves the client the time that the Benefits Administrator would normally spend on the phone with employees, plus it is a valuable service to the employees for their questions are answered on a timely basis.

The next edge is the expertise of the two principals. Both have held Employee Benefits and Administration positions and are aware of the laws, responsibilities, and customer service needed to excel. Competitors lack this advantage.

5.3 Marketing Strategy

The initial push for marketing will be the employer size, under 500. The business line of the company truly doesn't matter.

Networking and keeping a mailing database is crucial. Both principals are members of Human Resources professional organisations which meet monthly -- each attending approximately 4 meetings per month. At certain times, EBA will sponsor these meetings to present their services, however, these affiliations will be used as networking tools, and 'word of mouth' marketing.

In conjunction with this, EBA will also build a database with information obtained through the small business resources at the County Library. Informational packets and brochures will be sent out to the members of the database, with follow-up phone calls happening within two weeks of mailing.

The website will be linked to other popular sites, as well as advertised on small business service sites. By linking with these sites, EBA will be able to market its services over the Internet.

5.3.1 Pricing Strategy

Each level of service will be priced separately; the all-inclusive option will be discounted. Pricing will follow the industry standard and be charged on a per employee per month basis. Each client will also be charged a start-up fee depending on the number of employees. Depending on the size of the client and the number of group plans offered, EBA may impose an additional charge for the call centre operation. Each client will be charged a one time start-up fee for transfer of employee data into the Great Plains software.

P/S Level Name -- Brief Description -- Cost -- Start-up Fee

1. COBRA & HIPAA -- Notices, Administration of COBRA payments, and customer service for employees and eligible dependents -- £12.75 per employee per month -- £500
2. Flexible Spending Accounts -- Employee Communications, Enrollment, Flex Claims Processing and statements, and Employee and Bank Account Reconciliation -- One Account per employee: £6.50 or Two Accounts per employee: £9.50 -- £500
3. Basic Benefits Administration -- Employee Communications, Enrollments and Changes, Call Centre for employee questions, Reconciliation of Provider Billings, Maintenance of Employee Benefit Data. Does not include COBRA, HIPAA, or Flex -- £12.00 per employee per month -- £2,000
4. All-Inclusive -- All of the above -- £18.00 per employee per month -- £2000

5.3.2 Promotion Strategy

EBA's main focus on promotion will consist of speaking engagements at the professional associations, as well as networking with the members. Initially these engagements will be educational in nature, explaining the HR services and the laws that require employers to comply. EBA will also show that by offering a Flexible Spending Account Plan, employers will be able to help their employees offset any planned increase for their health insurance premium increases. Smaller employers may need education on these items since they may not have the resources to employ the HR knowledge.

As previously stated, the website is also a very important part of the promotion strategy. The majority of businesses today use the Internet not only for information, but also for comparing and pricing what is available. The website will house information about EBA, as well as educational information for companies who may not realise that if they have 20 or more employees, they must provide the COBRA option.

Direct mail will also be a small portion of the strategy -- with follow-up calling.

5.3.3 Marketing Programmes

The most important marketing programme is the networking, and both principals will initially be involved in the speaking engagements and subsequent sales presentation.

The first speaking engagement is May 18, 2001 at the monthly luncheon meeting of the Chester County Human Resources Association. The meeting will be attended by approximately sixty-five members.

EBA will sponsor this luncheon. Ms. Davis will speak about the outsourcing market and give a brief history of both principals. Ms. Wells will speak about EBA's services. A table with promotional material will be set-up, and a raffle will be held for a gift basket -- from which EBA will keep business cards. Follow-up notes and thank you notes will be sent the following week.

The other key marketing tool, the website design is currently being handled by Ms. Davis who will contract a designer by the end of May. The budget for this project has not yet been decided.

The direct mailings will be handled by both principals.

5.4 Sales Strategy

As stated previously, customer support for the clients' employees is key. If the employees are satisfied with the administration of their benefits, the client will hear no complaints. However, it is also necessary to keep the client company satisfied as well. Along with customer service, bottom line savings will be stressed in the sales presentation.

Considering EBA is starting out small, with just the two principals on staff, there is no question of accountability. Each principal is committed to customer service, and keeping the client happy with the services provided. To make certain this happens EBA will listen to the client and try to accommodate their needs with the services. EBA will provide clients with the services and reports that will make the client's jobs "easier". Internally, clients HR departments may be responsible for different reporting, and EBA will mold its services to fit those needs.

5.4.1 Sales Forecast

Projected sales figures are based on the four different services Employee Benefits Administrators provides. Each service has a different "AVERAGE" client.

1. Level One is COBRA and HIPAA administration. This client has an average of 100 employees, however, the average number of employees for which a client will use this service is five.
2. Level Two is Flexible Spending Account administration. This client also has an average of 100 employees. The average number of employees enrolling in a Flexible Spending Account is estimated at ten.
3. Level Three is Basic Benefits administration, including a call centre. This client also has an average of 100 employees, and it is likely that all 100 employees will enroll in one of the company's group benefit plans. The average number of employees enrolling in the Basic Benefits administration is 100.
4. Level Four is All-Inclusive of the first three services. This client also has an average of 100 employees, and it is likely that all 100 employees will enroll in one of the company's group benefit plans.

The sales forecast is based on obtaining:

• One client a month for COBRA and HIPAA administration. COBRA and HIPAA are federal mandates and must be provided to employees after their termination. This is not seasonal.
• One Flexible Spending Account client for the first year, adding three new clients each calendar year (one per quarter, and two at the beginning of each year since that is when Employee Benefits Administrators can obtain clients who are renewing their flex plans.)
• One Basic client added each quarter (100 employees), and two clients in January of each year for those companies whose plan year is the calendar year.
• One All-Inclusive client added each quarter (100 employees), and two clients in January of each year for those companies whose plan year is the calendar year.
• A signed service contract

As EBA attains clients, the only direct cost of goods sold is the data storage fee paid to the Application Service Provider. This is a per employee per month charge and is related to Level One, Level Three and Level Four. (It is not related to Level Two, Flexible Spending Accounts, as it is not necessary to use the same information system to store the data.) This can be tracked in an ad-hoc database created by EBA. It is also forecasted that EBA will purchase a software package designed to track both Flexible Spending and COBRA. The cost of this software in 2000 was approximately £14,000 and is not scheduled to be purchased until the second calendar quarter of 2002. After this software is purchased, COGS will also decline for those clients who are contracted for COBRA and HIPAA administration only.

Please note in the Sales Forecast Table the "start-up fee" is represented as £100. It is noted this way because the start-up fee is charged to the client, but the sales figures are based on the number of employees. The start-up fee schedule is a one time fee for transfer of employee data into the Great Plains software. Each COBRA/HIPAA client will pay £500; each Flexible Spending Account client will pay £500; each Basic Benefits and All-Inclusive client will pay £2,000.

Sales Monthly



Sales Forecast

Sales Forecast
Unit Sales	FY 2002	FY 2003	FY 2004
COBRA/HIPAA	360	1,110	1,830
Flexible Spending	180	660	1,380
Basic Admin	2,100	8,100	14,100
All Inclusive	2,100	8,100	14,100
Start-up Fees	240	290	290
Total Unit Sales	4,980	18,260	31,700
Unit Prices	FY 2002	FY 2003	FY 2004
COBRA/HIPAA	£12.75	£12.75	£12.75
Flexible Spending	£7.50	£7.50	£7.50
Basic Admin	£12.00	£12.00	£12.00
All Inclusive	£18.00	£18.00	£18.00
Start-up Fees	£100.00	£100.00	£100.00
Sales
COBRA/HIPAA	£4,590	£14,153	£23,333
Flexible Spending	£1,350	£4,950	£10,350
Basic Admin	£25,200	£97,200	£169,200
All Inclusive	£37,800	£145,800	£253,800
Start-up Fees	£24,000	£29,000	£29,000
Total Sales	£92,940	£291,103	£485,683
Direct Unit Costs	FY 2002	FY 2003	FY 2004
COBRA/HIPAA	£2.75	£2.75	£2.75
Flexible Spending	£0.00	£0.00	£0.00
Basic Admin	£2.75	£2.75	£2.75
All Inclusive	£2.75	£2.75	£2.75
Start-up Fees	£0.00	£0.00	£0.00
Direct Cost of Sales	FY 2002	FY 2003	FY 2004
COBRA/HIPAA	£990	£3,053	£5,033
Flexible Spending	£0	£0	£0
Basic Admin	£5,775	£22,275	£38,775
All Inclusive	£5,775	£22,275	£38,775
Start-up Fees	£0	£0	£0
Subtotal Direct Cost of Sales	£12,540	£47,603	£82,583

5.5 Strategic Alliances

EBA will depend on alliances with:

• Group Insurance Brokers who provide group benefit plans to employers with less than 500 employees. These brokers speak with clients daily and listen to their needs. Partnering with group brokers is a great strategy, for they can market our services initially without our presence.
• EBA's Application Service Provider is an outsource provider for Accounting Services. Their clients could possibly become EBA's clients.
• Accounting Firms -- Many small to medium size companies use outside accounting firms to handle their financial transactions and reportings. By affiliating with these firms, EBA can obtain referrals if their clients are in need of employee benefits administration services.
• Chambers of Commerce and other Business Associations -- These associations mainly deal with the same size client EBA is targeting. Speaking engagements and networking is a very big marketing and sales tool.

In addition to the above being strategic alliances for EBA, EBA will also be a referral source and advocate of these companies and associations.

5.6 Milestones

As described in the business plan's affiliated table, both principals have responsibilities with the milestones which have been set. Most of the initial milestones have been met, with the marketing and follow-up calls still to take place. Both principals are accountable for these milestones.

It should be noted that most of the milestones have been omitted which had a commitment date prior to the office opening in April of 2001. The principals had been talking, planning, and preparing for this for almost a year.

Milestones

Milestones
Milestone	Start Date	End Date	Budget	Manager	Department
Obtaining Office Space	3/1/2001	4/1/2001	£1,200	Wells	Principal
Marketing Post Card Mailing	5/1/2001	5/14/2001	£75	Davis	Principal
Bulk Mailing - Obtaining Leads	5/16/2001	6/1/2001	£0	Wells	Principal
Bulk Mailing - Letter Draft	5/16/2001	6/1/2001	£0	Wells	Principal
Bulk Mailing - Mail Merge and Mailing	6/1/2001	6/5/2001	£400	Davis	Principal
Obtain SBA Loan	4/1/2001	6/30/2001	£1,000	Davis/Wells	Principals
Speaking Engagement	5/18/2001	5/18/2001	£150	Davis/Wells	Principals
Follow-up Calling	5/25/2001	6/1/2001	£0	Davis/Wells	Principals
Brochures	4/1/2001	5/16/2001	£500	Wells	Principal
Office Furniture and Equipment	4/1/2001	4/2/2001	£500	Wells	Principal
Supplies	4/1/2001	5/24/2001	£400	Davis/Wells	Principals
Business Plan	1/1/2001	4/1/2001	£150	Davis	Principal
Success	4/1/2001	4/1/2001	£0	Davis/Wells	Principals
Totals			£4,375

Milestones