[Guest Blog] 3 Steps to Putting Fee-for-Service into Practice

[Guest Blog] 3 Steps to Putting Fee-for-Service into Practice
Cheryl Perez, BIG HR

This blog post was written by Cheryl Perez, President of Big Innovations Group/BIG-HR. BIG-HR is an HR consulting and outsourcing company that provides HR services and support to clients who need additional help handling day-to-day HR functions. 


There's nothing quite like the feeling of being comfortable, is there? You know... that time of peace, that perfect scenario, that situation you're in where everything seems just right.

Early in my career, back when I'd first established my very own insurance agency, I achieved (and very much enjoyed!) that kind of comfort. I was content with the way I was doing business and the income I was making, and saw a future of limitless potential for growth ahead of me as long as I kept working hard to build my client base and continued raking in those commissions and renewals.

And then the Affordable Care Act came along. Suddenly, everything began to change in my comfortable world. My clients' needs began to change, the products and services that I was providing began to change, and my revenue began to change (and not for the better). All of these factors definitely shifted me into a state that I would describe as positively uncomfortable. To tell the truth, I was angry. I'll admit that I even buried my head in the sand a little at first, completely hoping that it would all go away... sound familiar?

Of course—as we all know—it didn't go away. So I began to evaluate what I was going to do, which required a lot of reflection. As I examined this new landscape, I determined that the only way my business could continue to thrive (or even survive!) was to explore and prioritize adding fees for my services. But... how would I do this? After all, for the past 11 years I'd been delivering all of these services for free for my clients, because I was making all the revenue I needed from the carriers whose products I sold. How would I ever be able to go back to those same clients and say "Now you have to pay me to do these things"?

It was a true struggle, and I was very afraid that I was going to lose some of the clients that I had worked for, for so many years! As scary as it was, I realized I needed to put a new plan into action. I'm happy to report that today, BIG-HR is a full-service consulting agency with 70% of its current revenue coming from fee-for-service contracts. It's from this foundation that BIG-HR has achieved (and continues to achieve) real growth! The following three steps outline how I pulled off this transition for BIG-HR... and how you can do it for your agency too.

Step 1: Evaluate where you are and where you want to go.

Before I could implement any changes, I really needed to take some time to evaluate my current business from top to bottom. I examined its operating budgets, its revenue sources and streams, and where all of my client revenue was really coming from. I determined who my top clients were, and I conducted surveys to uncover what their real needs were in this new benefits climate.

I also led a few focus groups in order to determine if some of the services that I assumed they wanted and needed (and that I had been giving away for free) were actually wants and needs that clients would be willing to pay for. In essence, I had to do a complete organizational review. In the end, I was able to really determine what size my target market truly was. I identified where I was receiving the majority of my commissions (i.e. which product lines, which carriers, which clients, and which services).

Most importantly, I needed to learn that what I was already providing for free, my clients would be willing to pay for. That complete organizational analysis was very eye-opening for me. For years, I had walked around assuming that everything was great the way it was, and that I was delivering for my folks! However, as I continued to reach out to my clients, I began to learn about the “others” who were offering them things that I wasn't even aware of... and they were already willing to pay for them!

Simply put: because I'd been ignorant of some of these factors, that money would not be mine to earn. You see, I was functioning in a space where--because of my level of comfort--my assumptions guided my decisions. This was my opportunity to stop assuming and truly let the facts about my clients, my financials, and my business model guide my decisions. It was then that I was able to determine that fee-for-service was a viable option for me.

Step 2: Determine Your Service Offering.

Once I determined that I could actually get paid for things that I had always been giving away for free (which was kind of depressing, honestly), it was time to figure out exactly what those things should be.

I had been in benefits for so long that I thought of it as its own industry. Soon, though, I began to realize that benefits was only a part of a much larger industry... and that industry was Human Resources. If I could add other services directly related to what I was already providing, it would be easier for me to transition into contracts, consulting services, and fee-for-service. I concluded that it was time for me to learn about all things HR, and to determine exactly what other areas I was willing to move into.

I started out with small stuff: the things that would be easy for me to add to what I was already offering, and which made sense to charge a reasonable fee for (Benefits Compliance & ACA). I also identified several things that were costing me a lot of money that I was giving away for free, things that were legitimately not going to be profitable any longer with the new carrier compensation structures in place.

Finally, I figured out that my next step in all of this was to determine which services I would be providing at what cost. Figuring out that cost was a whole different ball game (which I will get into later in our Fee-for-Service Series during March, April and May), because it really did involve diving into financial and competitive analyses that I really never had to do before because I was so comfortable.

Ultimately, I decided to take it slow, become an expert, and recognize that what I was providing was valuable and worth the money!

Step 3: Build your Infrastructure.

This next step was really going to be a beast for me, because the infrastructure that I now needed had been pretty much non-existent under my previous business model. I needed to develop the new services, create new contracts and invoicing practices, find the right people to deliver the sales and services, and find new ways to track everything.

Before this transition, I had always been subject to the support I received from all my carriers. They created the products, they created the pricing, they created the support teams, and they created the systems and tools that would make it possible for me to sell their products. At the end of the day, this meant that they also dictated how I would get paid and how much I would get paid... and that is what I was focused on changing.

Building the proper business structure was critical, and it was something that I knew would take time, effort, energy, and money. I began to realize that I had never really experienced what it truly was like to be a business owner that was completely in charge of her own destiny. I knew that there would be key areas that I would have to change completely within my organization, and other areas that I would have to create from scratch. I knew that it would take time, but I was up for the challenge and realized that it would all be worth it in the end.

So I got to work, and over the next few years I focused on building the team, the marketing, and the technology necessary to run a sustainable fee-for-service agency. Without this crucial infrastructure in place, I would never have been able to provide and deliver upon the services that would justify my price points.


With everything above being said, I would like to drive home the point that while the transition into fee-for-service isn't easy, it's absolutely worth it! There is nothing like the feeling and freedom of knowing that regardless of what changes might happen legislatively or in the market surrounding me, I remain prepared and poised to grow my company.

Looking back, I recognize that it wasn't too far of a stretch or a change from what I had already been doing. I just needed to get my mind wrapped around what it would take to increase the success for my employees, myself, and my family.

Image Source: Pexels

[Recorded Webinar] 3 Steps to Implementing Fee-for-Service into Your Agency

The health and life insurance industry is changing. In order to keep up and stay competitive, agencies need to meet that change. For many agencies, this means implementing a fee-for-service model that helps them to recoup costs and stay profitable in the future. Learn how in this webinar!

Watch the Recording

By Cheryl Perez on February 28, 2018 in Manage Your Agency

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