Quaestor Equity Partners LLC
The Niche Industry Brief: Highlights for $5 to 50
million makers and marketers of
industrial products.
Second Quarter 2005
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Articles:
Partnering
with your Employees to Save Money Using HSAs
Success
in Negotiation is 90% Preparation – Using Quad Sheets
Competitive Intelligence
from the GSA Advantage Program
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Partnering
with your Employees to Save Money Using HSAs
By John Chalekian, jchalekian@hrstore.com, and Mark Gibb,
As part of the
Prescription Drug Modification Act of 2003, a new program was created to
rein in exorbitant health
care costs. Employers can create Health Savings Accounts (HSAs).
HSAs will revolutionize
health care similar to the way 401k plans revolutionized retirement
saving. Is this new
concept right for you?
If you are like most
employers, the cost of your employees’ health care has skyrocketed an
average of 15% annually,
doubling over five years. You have
probably "shopped around"
and gone through the
upheaval of changing insurance companies, medical cards, doctor
networks, etc. Did the savings last for more than the first
year? Probably not; the new
insurer will raise your
rates substantially after they get enough loss experience data.
Other alternatives
include cutting features (vision, dental, prescription coverage); raising
deductibles, co-pays, or
out-of-pocket maximums; increasing the employee contribution.
You are paying more. The employee is paying more and getting less
coverage.
It is time to find to
a real solution
The average family visits
the doctor 6.9 times a year, according to the Census Bureau. Most
families have less than
$2,000 in health care bills per year. The average employer-paid
medical coverage for a
family is $9,950 per year, according to the Kaiser Family Foundation
(KFF). What accounts for the large difference
between the average costs and the premium
paid? Most, about $4,860, pays for those families
who experience catastrophic health events
like cancer. But a
sizeable portion, about 31% or $3,090, is administrative cost according
to
the
Small claims are driven
by low co-payments. They destroy incentives for controlling health
care costs, because
people only pay the $20 co-pay. They go to the doctor for routine cold
and flu, or take a
prescription drug that has minimal effect. They feel that at least they’re
getting something for the
high premiums.
How HSAs work
HSAs combine high
deductible catastrophic health insurance and a tax-free reimbursement
and savings account. The
employer sets up the HSA with a financial institution and buys the
high deductible insurance
coverage. Both employer and employee may contribute to the
HSA. The employee pays first dollar health costs,
up to the deductible amount, directly to
the doctor, after
receiving an Explanation of Benefits statement from the insurance
company. The employee has
a debit card or checks drawing on the HSA to pay these bills.
The insurance policy must
have a minimum deductible of $1,000 for single coverage and
$2,000 for family
coverage. It could go as high as $5,150 for family coverage. The higher the
deductible, the lower the
insurance policy premium, and the more money can be put in the
HSA. The maximum HSA
contribution is equal to the deductible. This is not a use-it-or-
lose-it plan like the
Section 125 Plans. Unused funds can accumulate tax-free and be used for
retirement. It rewards
employees who work to control health costs.
The new math - quantifying
the mess
Here’s an example:
Typical family coverage $9,950
per year
Catastrophic health
policy (average premium$5,150 deductible) $3,300
(KKF figure)
HSA Employer contribution
deposited into the HSA $5,150
Total cost of insurance
plus HSA contribution $8,450
Savings over the
traditional policy (a 15% reduction) $1,500
In addition, if the
employee has typical health care bills of $2,000 per year, then he will have
$3,150 left at year-end,
which can pay future bills or be saved for retirement. This is a new
way of doing business.
Call me or consult with those knowledgeable on the benefits and
procedures for starting
an HSA at your company.
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John Chalekian recently
joined the staff of The HR Store, a full-service Human Resources
consulting firm. The HR
Store (www.hrstore.com) provides
strategic solutions that impact a
company's bottom line.
For more information on HSAs, please contact John directly via
email: jchalekian@hrstore.com or call (847)
215-6706 for a free phone consultation.
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Success
in Negotiation is 90% Preparation - Using Quad Sheets
By Pojen Suhendra, psuhendra@federalsignal.com
Regardless of the company size or the product, preparation is the key
to purchasing
negotiations. Yet it is often underestimated. Why? Many think that
formal negotiation
preparation is only for major corporations. Others think that
interpersonal skills are
sufficient to overcome difficult situations. However, without proper
planning, purchasers:
Don’t
know what their negotiation position should be
Don’t
anticipate what the other party will do
Can’t
realistically respond to the other party’s proposals
Don’t
know if the agreement is reasonable
Smaller companies have limited resources with which to do formal
negotiation preparation.
The Quad Sheet is a tool that is tremendously useful in negotiation
preparation and can
significantly improve the outcomes without spending too much of your
resources.
Quad Sheets
A Quad Sheet is divided into four quadrants, each representing one
aspect of an issue: Facts,
Tactics, Goals, and Supplier Benefits. Fill it out, and you have
completed most of your
preparation for that issue. It’s important to use one sheet for each negotiation issue (quality,
delivery, pricing, etc.). This avoids the
practice of bundling that can distort the negotiation.
Facts – include external and internal information. You
can input important facts about your
company
(e.g. we need 15 days to process invoices). Or more importantly, include all
offers
from
suppliers. This allows you to scan your best offers quickly. You can
confidently ask for
a
better proposal knowing your request is reasonable, and knowing your best
alternative.
Tactics – include questions, how you want to introduce
them, and how to obtain the
desired
responses. Instead of Yes/No questions, ask open-ended questions. They can
produce
unexpected better offers. Plan exhibits
that illustrate your position (e.g. historical
data
on marketing initiatives can support your request for joint marketing funds).
Don’t
follow
your tactics so closely that you don’t follow up on suppliers’ responses, or
ask already
answered
questions. Check your Tactics quadrant to ensure all questions are covered.
Goals – include your best-case scenario, and the minimum
you’ll accept. This prevents you
from
moving on without achieving your goals. Although it seems simple, it’s
important to
research
what you can live with, and what is possible. This lets you pursue goals
confidently.
Supplier Benefits – look at the negotiation from your vendor’s
viewpoint. This is counter-
intuitive
for most people, but it is crucial. It’s very effective to frame your proposals
in terms
of
benefits to the supplier, either direct or indirect. Avoid thinking in terms of
zero-sum
game;
almost all issues have some benefit to the supplier. For example, a future pricing
mechanism gives the supplier stable pricing for
budgeting purposes, and eliminates costs of
future bid processes. Most vendors are impressed with your preparation, and appreciate
that
you
took time to consider their viewpoint. That opens significant opportunities.
Fill out a Quad Sheet on
each issue, and you have completed your negotiation preparation.
And thorough preparation
leads to the best results.
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Pojen
Suhendra is a purchasing professional at Federal Signal Corp., a $1.2 billion
manufacturer with many
diversified divisions. As part of a nine-member corporate
purchasing organization,
Pojen supports 120 purchasing professionals worldwide. Contact
Pojen at psuhendra@federalsignal.com.
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Competitive Intelligence from the
GSA Advantage Program
By Paul Graham, P.E., CnIConsulting@mcihispeed.net
You are evaluating your
offering terms (price, discounts, delivery, etc.) for new or existing
products. You have done
all the obvious competitive intelligence – defined by the Society of
Competitive Intelligence
Professionals (http://www.scip.org/ci/)
as "the legal and ethical
collection and analysis
of information regarding the capabilities, vulnerabilities, and
intentions of business
competitors." You have:
Tried to obtain competitor catalogs and price lists
Tried to get pricing through distribution channels
Attended trade shows to find information from their
employees or distributors
Purchased their products for analysis
What else can you do? The
U.S. General Services Administration’s GSA Advantage program
is a way to supplement
your normal channels of competitive intelligence to find your
competitor’s product
pricing and strategies.
The GSA Advantage program
Our tax dollars fund many
programs, including GSA Advantage. It offers Governmental
agencies a web-based way
to procure millions of products from tens of thousands of
businesses. While
intended to link Federal purchasers with approved products and services
quickly, confidently, and
at best value, GSA Advantage can also help you know:
If your product is priced right against your competitors
If your quantity discounts are competitive
If your delivery times are typical
If the additional cost you charge for setup and delivery
are competitive
If there are other distribution methods for competitive
products
Do your competitors use the GSA Advantage program?
To find out, go to www.gsaadvantage.gov. GSA Advantage is a
fully searchable database
by keyword, part number,
manufacturer, contractor or contract number, or product
classification. Enter a
competitor’s name in the "What are you looking for?" box, and use the
default "All
categories" in the dropdown. (Hint: using quotations marks around the name
will avoid extraneous
results.)
If your inquiry yields a "hit",
you will go to a Search Results screen. In the Search Results
screen you will see the
NSN/Mfr. Part No/Product column. Clicking on the NSN number
(National Stock Number, a
13-digit number that is assigned based on the end use of the
item) will send you to
the Product Detail screen showing:
Detailed product description
Delivery
Unit price
Discounts
Manufacturers part number, contract number and contact
info
Minimum and maximum order quantities
Stocking status
Shipping and packaging details
Back at the Search
Results page, if Options/Accessories appears in the Price/Delivery
column for an item, click
on it and you will go to a Product Configuration screen to
understand options beyond
the base model.
Looking for other competitors
Also on the Search
Results page, you will find at the top a listing of Suggested Categories.
Select the one or ones
that most closely fit your product range and you will find a listing of
other related products
and their manufacturers.
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Paul Graham has a broad
background researching and managing the design of new products
and processes in
Engineering, Marketing, Sales, and Quality, is a Registered Professional
Engineer, and is a diverse
inventor of electrical, acoustic, aerodynamic, radio based and
illumination products.
Reach him at CnIConsulting@mcihispeed.net
or (708) 420-9201.
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Edited by Mark Gibb, Quaestor Equity Partners LLC, mark@quaestorequity.com
Mr. Gibb is a Partner of
Quaestor and President of SINCO, Inc., a $20 million provider of
safety netting solutions.
Prior to Quaestor, he was President of Safety Storage, a $20 million
manufacturer of pre-fabricated
HazMat buildings. Before that he was a Strategy Consultant
for Accenture, and he held
senior sales and operations roles with Stewart Warner and
Federal Signal. Mr. Gibb has
a BA from the
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Copyright 2004 Quaestor
Equity Partners LLC,
The Niche Industry Brief
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