Shore Capital Benefits Administration Insights, Part I: 7 Tips to Building A Great Business and 3 Trends Impacting Investor Outlook

Co-Founder and Partner Ryan Kelley shares his learnings and thoughts about the next 12 months

The Benefits Administration industry is in a challenging place, but opportunity lies ahead.

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Ryan Kelley on Microcap Moments Podcast: Sculpting Success in the Microcap Space – The ‘Why’ Behind Shore Capital. (Photo: Business Wire)

Small and mid-sized business entrepreneurs and investors are experiencing growth headwinds. Amidst rising costs, regulatory complexity, increasing employee expectations, economic uncertainty, and technological advancements, administrators are stretched thin before taking on growth, innovation, and scaling for the future. There are significant opportunities for businesses that can successfully navigate the landscape.

The Shore perspective.

Shore has a firsthand look at the impact, with approximately 50 portfolio companies, 40k employee lives, and 80k covered lives. Approximately 30 Shore companies are using self-funded benefits today.

For investors, a combination of macroeconomic factors including inflation, rising interest rates, and a recession make it tougher to predict market trends and make good deals. For entrepreneurs, the ever-shifting healthcare landscape adds day-to-day and complexity to growing a business. Amidst this environment, Shore Capital Partners Benefits Administration team and portfolio companies have executed 6 platform investments, 12 add-on acquisitions, achieved strong organic growth, and delivered results for founders, investors, and management teams.

Shore’s strong results are a combination of its value creation playbook, independent board network, and industry-specific strategy, led by Ryan Kelley, Co-Founder and Partner. Ryan has chaired 11 companies, including Shore’s current investments in Point C, Evolution Risk Partners, and Reliant Health Partners, and recently recorded a podcast titled: Sculpting Success in the Microcap Space: The ‘Why’ Behind Shore Capital. The full episode is available here.

Ryan's 7 tips to building a great benefits administration business:

Ryan notes that “we often tell founders that they've forgotten more about their business than we'll ever know, but for a financial partner coming in, we've done a lot of homework and we're pretty in tune to the market and what the opportunity is for that company.” Additionally noting, “we have a repeatable 360° process” that focuses on: growth and partnerships, operations and infrastructure, client relationships and solutions, balancing performance and trust, and continuous improvement.

1. Elevate Client Engagement with Dashboards: enhance your client experience by investing in automated dashboards. Power BI is a good choice. These dashboards provide a comprehensive view of the services you offer, underscoring your value proactively rather than defensively. By showcasing positive outcomes and key data, you equip your team to communicate effectively. Example: dashboards are particularly useful during quarterly business reviews (QBRs). This approach reinforces transparency and fosters proactive account management, ensuring clients see and appreciate the full spectrum of your efforts.
2. “If you can’t measure it, you can’t manage it” – Retention: boost your business strategy to closely monitor key retention metrics. Focus on gross and net revenue retention for clear insight into the financial stability and growth of your accounts. Additionally, track logo retention to understand client loyalty and brand strength. By tracking these metrics, you empower your team to make informed decisions that drive business success and client satisfaction. Example: analyze the balance between revenue upsell and client revenue down-sell to optimize your service offerings.
3. “If you can’t measure it, you can’t manage it” – Revenue: sharpen your financial strategy by tracking revenue growth through both price and volume changes. To clarify the drivers behind your top-line growth, dissect the percentage increases attributable to pricing adjustments and those resulting from volume expansion. This granular analysis will equip your team with the precise insights needed to tailor client strategies effectively. Example: if your overall revenue growth is X%, delineate how much, Y%, stems from pricing strategies and how much, Z%, is due to increased volume.
4. Capitalize on Talent Arbitrage: build a competitive advantage through a forward-thinking approach to identify and invest in "talent arbitrage" opportunities. Don’t pay up for industry expertise, rather focus on recruiting young, high-aptitude individuals who may not have extensive experience but possess the potential to innovate and excel. This strategy cultivates a dynamic and adaptable workforce and allows your organization to benefit from fresh perspectives and energy. Example: by betting on emerging talent, you can build a robust pipeline that drives long-term growth and innovation.
5. Drive for Predictability: enhance the accuracy and value of revenue forecasting by mapping out the conversion journey in detail. Demonstrate how marketing leads transition into sales leads, how these sales leads become proposals, and ultimately, how they convert into new clients. The more granularly you can track and present these metrics over time, the better. This detailed visibility improves forecasting accuracy and empowers your team to refine strategies, allocate resources more effectively, and anticipate future results with greater confidence. Example: evaluate each client stage for cycle length and conversion rate, to determine if there are opportunities to improve either metric.
6. Increase Your Enterprise Value: concentrate on developing a scalable system of interconnected parts. Move beyond relying on individual heroics and focuses on creating a cohesive structure that collectively generates value. This unique configuration provides competitive differentiation in the marketplace, making your business more attractive to clients and potential partners. Example: a cloud-based CRM platform like Salesforce or HubSpot provides a tool to manage customer interactions or track sales and marketing effectiveness, and can grow seamlessly as your business grows.
7. Formalize Client Satisfaction Metrics: understand and address clients’ concerns to establish strong, trust-based relationships and identify potential pain points when selling or onboarding new clients. Example: Create a client feedback loop using a tool like Net Promoter Score (NPS) surveys and follow-up meetings to show you value and act on their input.

Ryan's three key trends impacting Benefits Administration investments in 2024-2025:

1. Integration and Bundling: investors are increasingly influenced by the growing demand for integrated solutions within the benefits industry. Historically, this sector has been characterized by numerous unique point solutions, each addressing specific niches. There is a noticeable shift as buyers favor the convenience and simplicity of bundled offerings. Bundled packages allow for a convenient, single vendor to provide multiple products, streamlining management and procurement processes. This trend enhances customer satisfaction by reducing complexity, which increases customer retention, and potentially larger contract values.
2. Pricing: investors are noting a significant shift in client behavior towards price sensitivity. During 2022 and 2023, many vendors in various sectors raised prices. There is growing sentiment among buyers that "enough is enough." This increased pushback is signaling a crucial trend where clients are more discerning and resistant to accepting higher costs without clear value justification. Investors look closely at how businesses manage their pricing strategies in this environment. Companies that can balance maintaining competitive pricing while demonstrating clear value are likely to stand out.
3. Client Service: service and responsiveness will often carry the day. Many benefits administration companies implement responsiveness and service as a core metric. Investors like to see these metrics defined and improving over time, for example service measured as X% of cases responded to within Y hours.

In summary, small and mid-sized business entrepreneurs and investors alike are experiencing growth headwinds. But for those with a solid growth or benefits strategy, there are significant opportunities to gain share or design a winning plan. It starts with knowing which levers are available to pull and best meet your business where it is today.

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