Is Medicare a business without a future?

[EckoRomeo]

It's great that your acquisition cost is low. That doesn't mean it's insane that someone else is tolerating a $600 cost per T65 sale when the immediate revenue is at least $600. He's cash flow positive from the start.

$600 acquisition costs would be insane. It's basically the entire first year commission.

$641-600 =$41.00 net
$41+321 =$362.00 (22 month cash flow for Mar25 T65)

$641-200=$441.00 net
$441+321=$762.00 (22 month cash flow)

Not to mention that the MA T65 comp rules mean you're paid the full 2x comp regardless of the time of the year. I'll write $500 December T65s all day long if given the opportunity. I'll make $600 on Dec 1 and renewals start Jan 1.

I see the problem… you don't know what acquisition cost are? If your acquisition costs for a $641 sale is $600, then you don't "make" $641, you make $41.

But you are right that you should be willing to pay more for a Dec T65 than other months. Not $600 though. It's AEP. Basically any sell would net you the same 13 month cash flow.

 

[MedicareWAA]

I see the problem… you don't know what acquisition cost are? If your acquisition costs for a $641 sale is $600, then you don't "make" $641, you make $41.

You are explaining the obvious, and you're claiming there is a correct and an incorrect marginal profit margin.

Generally speaking, scaling a business past a certain point requires its owner to trade unit (marginal) profit for total profit. You can also stop growing (or not grow as much) and enjoy fewer albeit higher margin dollars.

There's nothing "wrong" with writing sticky business at a $41 profit when you've exhausted the $441 opportunities. It might not be your model, but that doesn't mean it's an insane model.

100 sales @ $441 Y1 profit and 3 year persistency = $1,065 x 100 = $106,500 net profit.

1,000 sales @ $41 Y1 profit and 3 year persistency = $681 x 100 = $681,000 net profit.

Scenario 1 is immediately cash flow positive and has a higher unit margin than scenario 2. Volume is capped at 100 because, in this simple scenario, that's the maximum number of sales possible at that margin rate.

Scenario 2 is immediately cash flow positive and has a lower unit margin but far more profit dollars.

Yeah, in a fairytale world with unlimited $200 sales, it makes no sense to intentionally chase sales that cost $600. In the real world, you will reach a point where further growth requires a lower unit margin in exchange for higher total profit

 

[DonP]

I would say another advantage of t-65 is a few reasons . Longevity of the plan in force will be greater . Your obviously catching the person at basically the youngest age he qualifies for Medicare . So you have the longevity factor . Also with t-65 targeting your mostly avoiding the lis/ dual lower income market . Few agents talk about death claims . There's a very very high correlation between much higher death claims in the lower income mkt . I've tracked my death claims the last 5 yrs . About 85% of my death claims are in the lower income . So the policys will stay on the books paying renewals much longer . That said with dst and lis seps gone April 1 and every agent and their brother will be targeting the t-65 mkt even harder now . It was very competitive before but now it gets even more competitive. So things like seminars could have lower attendance as more agents do them

 

[EckoRomeo]

You are explaining the obvious, and you're claiming there is a correct and an incorrect marginal profit margin.

Generally speaking, scaling a business past a certain point requires its owner to trade unit (marginal) profit for total profit. You can also stop growing (or not grow as much) and enjoy fewer albeit higher margin dollars.

There's nothing "wrong" with writing sticky business at a $41 profit when you've exhausted the $441 opportunities. It might not be your model, but that doesn't mean it's an insane model.

100 sales @ $441 Y1 profit and 3 year persistency = $1,065 x 100 = $106,500 net profit.

1,000 sales @ $41 Y1 profit and 3 year persistency = $681 x 100 = $681,000 net profit.

Scenario 1 is immediately cash flow positive and has a higher unit margin than scenario 2. Volume is capped at 100 because, in this simple scenario, that's the maximum number of sales possible at that margin rate.

Scenario 2 is immediately cash flow positive and has a lower unit margin but far more profit dollars.

Yeah, in a fairytale world with unlimited $200 sales, it makes no sense to intentionally chase sales that cost $600. In the real world, you will reach a point where further growth requires a lower unit margin in exchange for higher total profit

I think most of y'all post just to argue.

First, I don't think he was saying his costs are $600 per sale but rather $600 per breakfast.

My cost per acquisition is a mix of my t-65 breakfasts $600 each, and Facebook ad spend, my leads live transfer $35 each, and postcards, most costly at $380 per 1000. I know $100 is possible, just never fell anywhere close. Just being honest. The problem with just doing life and annuity is higher cost per seminar and longer sales cycles

Second, he isn't including labor cost in his calculation of acquisition costs:

I am faced with the choice of adding more states and going from grassroots local marketing to a hybrid live call transfer 50% model and the closing ratios are not the 1:3 and more like 1:5, so cost of acquisition is $175 for a $320 average 1st year and persistency is horrible on those acquired via leads.

$35*5= $175.

So, having a $600 cost per sale BEFORE labor costs is absolutely insane, and not really sustainable without soft money (which is what is in most danger of getting cut) .

Third, he isn't scaling breakfasts to 1,000 sales per year. So, your example isn't even realistic.