Amanda Iverson, Pinnacle Plan Design, LLC
At a recent industry conference, I was asked to speak on the topic of TPA business success. While each person’s definition of success will be different, three vital elements of our TPA success tend to remain consistent: our clients, employees, and our profits. As small business owners, we tend to wear a lot of hats. We get so busy working in our business that we do not adequately work on our business. So, given how busy we are, what steps should we take when time allows us to wear our CEO hat?
Strategic planning is essential to generating business success. A well designed strategic plan can help drive the objectives of a business and lead it toward success. Additionally, various business metrics can direct us with the tools to analyze our business efforts. Metrics can also provide focus for our organization and help us to identify problem areas. When it comes to putting a strategic plan in place, it’s important to consider the key components of a strategic plan.
A strategic plan isn’t as hard as you might think, but it isn’t a once and done practice. Simply ask yourself a few simple questions to get started.
Various business metrics can pave the way with fundamental tools to analyze business efforts. Metrics can provide emphasis for organization and help identify problem areas. They are also key when evaluating the three vital components of success. Keep in mind, metrics can include all aspects of your business. How many plans did you bring on each month? How many did you lose and why? What was the net growth, not only in plans, but in revenue? Is the bulk of your time being taken up by the clients who pay you the most on an annual basis? How much time does a distribution request take? How much of your revenue came from services not included in your standard fee schedule? These are just a few of the metrics to consider when constructing a strategic business plan.
With any successful plan, time management must be a key focus. Many TPA businesses across the country have expanded into multiple client service lines. Those may include actuarial outsourcing services to other TPA firms, plan design, administration and actuarial services to direct plan sponsors, even 3(16) fiduciary services. With multiple service lines, come very different management and turnaround requirements. For example, actuarial services to other TPA firms require a very fast turnaround, whereas the direct client model has different, but still very important, service and turnaround requirements. In our firm, using annual workflow projects in PensionPro plays a pivotal role to ensure deadlines are not only being monitored but are meeting turnaround metrics that are set as goals for the firm. These internal built-in-the-project deadlines help to monitor both client service turnaround and employee efficiency and productivity level. In addition to tracking various internal deadlines, metrics are also used to evaluate employee efficiency.
And, what about client retention? As TPA’s we love to talk about the number of plans we have brought on in a year, but what about the clients that we lost? When establishing goals for client retention, one must first evaluate the firm’s retention trends. What type of business has the firm lost and for what reason? Does your firm focus on a certain business sector or referral source that is consolidating or diminishing? What is being done to retain the current business? These should play a significant role in the strategic plan.
Of course, growth is always a key component to any healthy business. When developing an annual sales and marketing plan, it’s important to use various metrics to evaluate growth areas and areas of client attrition. Client retention rates, lead generation analysis, and evaluation of marketing goals are important in helping to understand where the firm is headed. All this information is helpful in setting future goals and objectives and allows you to use proven historical trends to put the best foot forward.
Finally, as a company, it is key to pay close attention to the firm’s financial statements and information. The firm should use growth, profit, and cash flow trends to help direct the future strategic business decisions and purchases. A thorough financial analysis is critical as it provides a very important measure of the company’s success.
While every industry professional will define success a bit differently, most can agree that having employees who are engaged, productive and challenged ensures a client base that is receiving excellent service and the capacity for new growth. Using the metrics defined above along with an analysis of the company’s financials will provide its stakeholders with the desired profit and a formula for success.