Having An Effective Benefits Conversation With The C-Suite In 2022

Howdy, howdy, howdy. How's everybody?

We're doing well, Doing well. Just. Just got off the phone, Andy, with Mr. Blachak.

What's new in his world?

Stone Harbor, New Jersey.

A rough life.

Yes, yes.

But he's still close to the phone.

Awesome. I'm just gonna get rolling, invite people and let people in as they come in. All right, guys, I thought I'd do this today. Now you saw the topic. Financial conversation. How to have a financial conversation with the C suite in 2022. What I would, what I thought about, if you guys remember, I did this webinar a couple times late last year, early this year. But do we agree a lot has changed in the last six months?

This conversation, in my opinion, has become even more important than it's ever been. And partly because if you said on last week's webinar.

I really believe, and I know I'm not the only one, that if you're going out right now talking benefits, most decision makers are not very concerned about it. There are other fish they're frying right now. But if we can pivot what we do into what really matters to them right now, we've got their ear. And that's what I want to talk about today, is from a financial conversation standpoint, how can we turn what we do, a benefits conversation, into a financial conversation?

And so what I want to walk through today is just, again, you may have seen me show this before. Can everybody see this? This is my beautiful drawing of a P and L statement. And so we. Hey, what are you laughing about, man?

I can see you, asshole, in my office. I can see you.

No. So I'm going to go through this, guys. It was actually a conversation I just had with a client about an hour ago because he's got a prospect coming up in the auto industry, auto dealership industry. So we went through this whole thing. So here's my thought, guys. If there's one thing I'm doing right now, if I'm a benefit advisor, is I am studying a P and L statement. Because when you look at a P and L statement, there's a lot of information. This is the CFO's world, right? Probably a CEO and definitely a CEO. And there are a lot of numbers on this puppy right now that are going like this.

And what I want to talk about is how can we pivot our conversation as benefit advisors into this?

So for those that haven't studied a P and L, I'll go through it quickly. For some of you, it's be like, no shit, Andy. We know this. A P and L is simply this, right. You got gross revenue.

Cost of goods sold. Take cost of goods sold out. You got gross profit, right? After gross profit, you take out sales, general expenses and admin. That's a big one. Right. Now we're going to talk about. Once you do that, you get operating profit. Then you got interest, taxes, depreciation, amortization, and you get all the way down to this net profit number.

Now I did this webinar again six months ago and we focused mainly on anybody know where benefit falls in this P and L. What, what category? And I'm hint, I'm already giving it away. SG&A. SG&A. Right. So we focused our attention in the past on this benefits number. But guess what's happening right now. If you're a company and you have a gross revenue number, just think about industries you go after.

What'S happening to cost of goods sold right now.

Think about a contractor who's got to get copper or piping or what. I mean, for some industries, this number is going through the roof.

The cost of materials and labor.

So think about this. If I don't sell anything additional, I'm already squeezing my profit margin more now than I ever have just because of that.

Now we haven't even gotten to the monster yet, because inside SG&A, yes, you've got benefits, but we also got wages.

What are employees asking more for today?

Now, I know there's the argument that wages aren't keeping up with current inflation. That's true. But this number right now, the one I just looked up, is still today, it's 3.4% higher this year, wages.

So you got to factor that in. But here's the real killer inside general expenses is where you'll find rent, fuel, all the other stuff. Imagine if you're a contractor right now with 30 vans.

What's happened to this number?

It skyrocketed.

So without you doing anything.

Net profit is going like this.

And when that happens, what is the choice? Let's talk about this. I want collaboration. What is the choice? Or the decision of the of the CEO and CFO when this is happening, they, in my opinion, they have two choices. Anybody know what those are?

To keep net profit margin the same.

Reduce staff, reduce costs, reduce overhead, cut expenses. Right. What's another one? What's the other option? Sell more.

But it's less.

Sell more, raise your prices. Now, what's the risk if you raise your prices?

Customers. Yep. That's competitive, right? So guys, I guarantee this is the stuff keeping them up at night right now. So if you walk into a office and say, hey, I want to talk to you about your health insurance, Sorry, they don't really care. They got other things they're worried about right now. Cost of fuel. I don't even know what the percentage increase is over a year ago. It's insanity. 30, 40%?

100.

Is it 100%? It might be. You're right. I can't even know. Wages are up 3.4. Hey, Brian, I'm sorry, but you know, I'm trying to battle my materials. Building materials. I have to get that. That's up 20, 30%. We're just trying to sell more. But we also might have to raise our prices or we're going to have to really look at cutting overhead.

Guys, that conversation is going to get the ear of a decision maker.

Because now this is where you can pivot into what you do and make it about them.

I was just doing some research before the webinar looking up average net profit margins for certain industries. Came from a website called CFO Hub. Here's some interesting numbers.

Machinery. The machinery industry. Anybody have an idea what the average net profit margin is?

New machinery.

Yep. Selling them. Selling, like, heavy machinery. Equipment. Any guesses?

The floor plan is a big cost because everything they've got, they've bought sitting there to sell. They're paying interest on that floor plan.

Okay, guys, I actually have a personal emergency. I am literally on the middle of this webinar. I'm gonna hit silent for two seconds.

Brian, I think you see the same thing with automobile dealerships. Anybody's got a floor plan with all that iron sitting out there is dealing with costs going through the roof.

Yeah, but dealers can't keep their cars in stock.

Yeah, everybody. The P and Ls are. The P and ls are changing. So, like for a guard car dealership, they don't have a floor plan now because they don't have any cars out there to sell. They have a few out there, but most. They're trying to get everybody to order their cars so they don't have a reduction in their floor plan expense, which was their major expense before. Now that part now floor plans reduced, so their whole P and L change. They're making a lot of money right now.

If they can find somebody to sell a car.

Well, and you've seen they're shifting too. They're selling more used cars if they can get their hands on them.

Yeah.

And we're seeing the way they they're, they're turning in place because I look at our own example, my wife's Santa Fe, the payoff for the lease is $22,000. We've already had an offer for 32 and it's only got 15,000 miles on it. But I'm not in the car business. But it just goes to show how the dynamics, Andy, are changing.

And sorry for the personal emergency, guys. Our bathtub broke and we needed somebody to come over, so I had to take that call. So anyways, all right, back to this. So point is, guys, net profit margins. Someone brought up auto dealers. Do you know what the gross profit for auto dealers or net profit for auto dealers is right now? 1.4%.

Yuck.

Let's use them as an example to make this dramatic. Imagine if you're a car dealer right now. I gotta believe in the cost of goods sold. Buying the vehicle from the deal from the maker is part of that. What's going with that cost right now? Heck, you can't even get a car within a few months these days.

We were just talking about that, Andy, on the floor plan, because the model is changing, because everybody, the dealers, people are ordering their cars will be here in four months. So they don't have a floor plan. They don't have to pay interest on that car seal sitting at the dealership. So they're basically just order taking and selling it, making the profit there. So they have a reduced expense in their interest.

Yep, absolutely. No, that's absolutely. And so let's, let's play this out, guys. I want to do a live example for you guys because if you can go to the whiteboard in a conference room and do this, guys, you are going to get the attention of a decision maker. So let's use a fake example of a fake company in the manufacturing business. Okay? Match fat manufacturing. Let's imagine right now their revenue is $20 million gross rep, nice size, manufacturer.

Net profit margin currently. I'll even be nice and say it's 10%.

Could we agree naturally with them doing nothing else right now, that 10% slowly getting squeezed because of all these other factors.

Now you come in with what you do, and they currently have a health insurance budget. I'm just going to throw a number out there of $2 million.

Okay, guys, I'm going to give you the easiest math equation you've ever had. If their budget, their health insurance budget goes up 10% next year, how much is it going to go up?

200,000.

Again, all else equal, what does that mean for their net profit.

200 grand last. We subtract 200 grand down here. And if my net profit, this is, this is where you start doing the math, guys. If all else is equal.

And now my net profit is going down 200 grand just because I accepted a 10% increase inside my SGA on this thing called benefits. Outside of my wage increases, outside of my fuel increases and cost of goods sold increases just to offset next year's health insurance increase at $200,000 with a 10% profit margin, I have to sell $2 million, $2 million more next year just to offset that.

And again, I guarantee it's more when you think about fuel and wages and cost of goods sold. So how can I sell 2 million more? Well, I could raise my prices next year, but we know what the risk is there. Or I just have to kick my sales reps ass to go sell more.

Who want more money, who want more money to go do it. So the point is guys, if you now can say, listen, what if. And this is where if your advisors got to start turning the, changing the conversations on their strategies. What if I could actually show you a way.

To not have to raise your prices.

To not have to cut expenses, which to them means cutting payroll or getting rid of other stuff. That's how they view cutting expenses. It's always negative.

What if there was a third option?

What if we actually took your $2 million budget.

And we reduced it by 200 grand.

Without you sacrificing your contributions.

Or the benefits, the coverage. Because remember, we all know when you bring that up to them, we're going to help you reduce expenses. The first thoughts in their head are, oh yeah, we'll just contribute less or we're going to make the benefits worse.

But what if there's a third option?

Because if you now had the ability to come in with your ideas, your strategies, cost containment, and you could knock out 200 grand, guys, you're letting them start next year $2 million ahead.

Because as this profit margin keeps getting squeezed.

Anybody who can come in and show them how to cut some of this overhead.

And actually make it a positive, not a negative is going to get 10, is going to get a half hour at the conference room table.

So if I am you right now, this is the conversation I'm having.

Especially with this reset this pending recession coming, whatever that looks like.

Any questions on this? Anybody look at this and just want to know more about a certain area.

Now here's where you take this conversation next level. Now that you got them bought in on how you can do this. Here's where you open their eyes. Let's use this made up manufacturing company.

And I want you guys to play along with me, please. And I said, okay, Mr. Mrs. CFO, CEO of this manufacturing company, who are your top suppliers right now? People throw some things out at me. Where are my top suppliers going to come from if I'm a manufacturer? China, Southeast Asia. What did you say? China, Southeast Asia. Okay.

And we're probably talking companies from the material side, right, Allison? So at the end of the day, what we're really talking about is materials.

And here's the funny thing, guys. When you ask a company, a manufacturer who does 20 million air, who their top suppliers are, they're gonna rattle them off. They're not stupid. They know what they are. They know who they are. So, Alison, I got you on my screen right now. You are that CFO of the manufacturing firm. Alison, do you. You guys probably have a good idea what you spend with the companies from China and Southeast Asia on materials right now. Are you. Especially.

With cost of goods sold going up, Are you keeping a pretty close eye on the pennies you're spending on them? Yes.

Let me ask you a question. Inside your health insurance plan, believe it or not, you also have a supply chain. Yes. And in that supply chain, you've got four big players right now. You've got inpatient services, you've got outpatient services, pharmacy, and you've got anything else that happens inside the doctor's office. I don't know if these numbers are updated, guys, but are you aware that on average, about 30% of the cost inside your health insurance plans coming from hospitalizations, inpatient, 25 outpatient surgeries and imaging, another 25% from drugs and 20% from the things that happen in a doctor's office.

Do you know what you're spending down to the penny with these? No. You have no clue, right? Guys.

Most CFOs or CEOs at that point, it becomes an epiphany. The point is this their supply chain today, that's kicking their butt now more than ever. They know exactly what they spend down to the penny with these guys. And by the way, if one of these gets out of control, you know damn well they're negotiate with them or go find a new supplier.

But it's very amazing, it's very interesting how they have no clue what they're spending with these suppliers within one of their biggest expenses.

And these guys just keep raising their prices out of control every year. And they don't do a damn thing about it.

So if I'm a advisor right now and I'm selling, I'm telling that decision maker. Our job, just like your job, Mr. Mrs. CFO, is to make sure you know exactly what you're spending here right now so you can maintain profit margins. We're going to make sure what. We know what you're spending here, and we're going to show you how to control what to spend in here. And by the way, we might even negotiate with some of them.

The point is, and I don't know why this is breaking now, the point is, this whole conversation is now using their language.

I know some of you, this is not new. Some of you are doing this today.

But the point is, with the way things are headed right now, on a P and L statement.

If I'm a cfo, there's probably a lot of red on this right now because things are heading this way.

So the more you can show them how you can try to help maintain this number as much as possible, because this is the number that keeps the CFO hired or gets him or her fired.

If you can show them how you're going to help maintain this number as much as possible, they're going to be your friend. And the punchline also is how many of your competitors are having this conversation.

They don't know how.

They're talking benefits.

Andy, can we take a step back?

Yeah.

Because you're talking about when I'm in the room with the cfo.

Yep.

Let's get to the room.

What are we saying on that phone call when their admin answers the phone or we send an email that's going to make that CFO think about us versus comparing us with every other broker and everybody that's out there. So how do we. In the room, I think is much easier to have the conversation getting through the door to that person. So what are the buzzwords that we have to use in emails and phone calls that are going to get that guy to answer the phone?

Good question. I wouldn't be saying I can save you 40% because again, when you use that phrase that. Let's call it. What'd you call it? A buzzword, Mike. When you use that buzzword, they've heard that before. They've been sold that before. And in their head, when they hear save 40%, they immediately think, great, you're just gonna teach me how to make my benefits worse or it's gonna be really disruptive. What I would be saying, Mike, is I've been Working with a lot of. You're in New York. So I, I've been working with a lot of CFOs in the new York market who are watching their profit margins get squeezed right now. And they're trying to find ways to maintain profit. And I've been helping them. I've been showing them an opportunity that they're not aware of to help them reduce expenses without sacrificing anything else so they can maintain profit margins. Something. I'm riffing that real quick, but I would be having more that kind of conversation, Mike, on a phone call. And I know we've all talked about don't save benefits. Just say, I'm helping CFOs do everything they can to maintain those net profit margins. That's what I do today.

Yeah. Cause you know, like most of you don't know me, but over the past three or four years I've gotten into the cost reduction space. I don't personally do it, but I had a number of partners now where I'm going to CFOs and talking. I don't even bring benefits into it. I'm selling cost reduction within their own expense centers. From R D tax credits to the employee retention tax credit to WATSI tax credits. These are areas that can make companies money. And then once you've made the money, then they're willing to now have these conversations because you've already helped them in their other expense centers. And that's, that's how. And then I'm getting into these type of conversations because now I'm talking their language and it's, it's like I had an opportunity. Two weeks ago, therapeutic company, 65 people talked to me because I introduced them to the employee retention credit program, the ERC program. And, and while I'm talking to him, I asked him who his payroll company was and he told me it was total source. And I just said quickly, oh, how's that working out? He said, I hate them. And a week later I had a conversation with him and the director of hr and we're moving them away into a whole different thing and we're talking about other cost reduction concepts within benefits now to kind of help him. So that's why I was curious. Like these are great when you're in the door, but you gotta, gotta get them thinking today so they'll even take the call.

I would say the point that, the point to that, Mike too is now more than ever, guys, you want to be viewed more as a business consultant than a benefit advisor because this, this is a business conversation. This is not a benefits conversation. And Michael, you made me think of this because I know what you're doing a lot, a lot of the work you're doing. Guys, if you look at this supply chain right now, I'm always about the small, simplest path to success. We want the easiest path to success. If I, if I'm looking at this right now, which, which of these four buckets is the lowest hanging fruit?

DNA, what's that? Sga. But in the health care supply.

Pharmacy is probably the easiest area to help people save money. Right. So think about this guys. I'm going to give you a real life example. A former client of mine, I had a client spending.

I think it was 1.9 million on a self funded plan. That was roughly their, their premium or their overall cost I should say. But inside their health plan they had four people taking Humira.

Anybody know what that costs on an annual basis?

I think, I think it came to right around all in for the four of them. I'm rounding but it was about 300k.

So I came in with a pharmacy solution. They were already self funded.

Very low wage industry. I think it was assisted living centers. We were able to make 3000 because they all qualified for the program based on their pay and they all got the medication for free as did the health plan. So within one move there were 200 and some belly buttons on the plan. One move to help, four belly buttons. We eliminated $300,000 from their overall cost. Which, where did that $300,000 go gang? Bottom line to the bottom line and I'm not sure the profit margins in the assisted living facility facilities industry. But think about that guys. One drug, four people.

Bam.

But here's the thing guys, I'm going to say it. Sorry Mike, you can't come in and say I'm going to save you money on drug costs because nobody cares. No. Show them how it's going to impact their net profit and they care the how you do it. They actually don't care about you. Show them what it's going to do to their company. They care.

I was going to say the next, the next question to ask when you actually show them that type of money it's very interesting is ask them what do they plan to do with that money.

Yes.

Because there may be an opportunity for you to sell something else that will help the business in the long term. Because in today's day and age, retention and recruitment and having better benefit programs in place is as important as everything else. Because if they lose three people because the benefits suck and they go somewhere else. Finding those new people is, is more painful than finding 300 grand. So you may be able to take 100,000 of that and actually improve the overall benefit performance. Maybe you can give them an athletic program at no cost. You know, there's lots of different ideas that they're not thinking about that you maybe have an opportunity. Maybe they want to set up a defined benefit plan for the high end, you know, execs that they never could do. So if you're showing them money, there's more opportunity for you to sell as well.

To that point, Mike and I'll wrap up here, guys. Take that assisted living facility company I just referenced, client of mine. We saved them $300,000.

Is it possible they could take that 300 and increase wages by a dollar or two?

I mean, an industry like that where people are making 14, 15 bucks. You want to talk about competitive edge? They're now paying 17.

These are the conversations that perk interest right now because this is what's scaring the crap out of them. So the, the point, the punchline for today's webinar guys, is let's stop. Stop talking benefits for a second. Start talking business. And the more we do that, especially right now, the better. You guys are going to get your clients and prospects prepared for whatever this recession is, and you're going to help them make some positive decisions, not the negative decisions they're fearing.

And by the way, guys, there's 12 of you on the call. 40 signed up.

The other 470,000 people or whatever or 490,000 brokers in this area aren't having this conversation. They don't know how. So stand out, be the one that looks different. And this is going to take you a long, long way.

So with that being said, gang, that's all I got today. Sorry for the slight pause with the personal emergency. If you have any questions, I'll be sending out the recording like I always do. You got any questions, send me a note, hit me up. But this is this guys study PNLs. Start talking this language, it's going to do wonders for you.

Thanks, Andy.

Awesome, guys. Bye.

Bye, Allison.