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Diamonds and Tuxedos Glamour, elegance, and sophistication. That's what it's all about here in ECCIE's newest forum which caters to those with expensive tastes, lavish lifestyles, and an appetite for upscale entertainment.

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Old 11-04-2010, 03:06 PM   #61
Randy4Candy
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Default About Business

I ran and owned part of a construction materials business in a small market and had 3 other competitors - one and a half too many for the size of the market. When the dust settled every year, we had a Net profit of 2%. This was after all expenses, overhead, payroll, benefits, etc. were paid out, hence Net. The 2% was equal to the cash discounts we made damn sure we took when we paid our bills ON TIME. We operated anywhere from a 5% to 15% gross margin and were considered to be the leading business of our type in the area.

So.....wtf does this have to do with anything?

Can you say VOLUME? Don't fall into the trap of equating points of gross margin with numbers of dollars. 1% of $1B = $10M and that ain't hay.

Only dumbasses fall for that logic.
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Old 11-04-2010, 03:55 PM   #62
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Originally Posted by Randy4Candy View Post
I ran and owned part of a construction materials business in a small market and had 3 other competitors - one and a half too many for the size of the market. When the dust settled every year, we had a Net profit of 2%. This was after all expenses, overhead, payroll, benefits, etc. were paid out, hence Net. The 2% was equal to the cash discounts we made damn sure we took when we paid our bills ON TIME. We operated anywhere from a 5% to 15% gross margin and were considered to be the leading business of our type in the area.

So.....wtf does this have to do with anything?

Can you say VOLUME? Don't fall into the trap of equating points of gross margin with numbers of dollars. 1% of $1B = $10M and that ain't hay.

Only dumbasses fall for that logic.
Careful ther r4c. 'Fore you know it, the people will be puttin' 2 & 2 together and figuring out the Utility Company regulations work like that too. They have a ceiling on their profits too and it is for our own good!!!!

How about 'Tammy Fae Boener' yesterday. Good friggin' Lord. Put your opponent on the ropes and .......... cry!!!! F..k Me!!!
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Old 11-04-2010, 04:37 PM   #63
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Originally Posted by Randy4Candy View Post
Can you say VOLUME? Don't fall into the trap of equating points of gross margin with numbers of dollars. 1% of $1B = $10M and that ain't hay.

Only dumbasses fall for that logic.
That depends on how much capital you have invested in the business and how risky that business is. If you have $100M invested (or 10% of revenue), that 1% net margin is a 10% return. That is the low end of average returns (the S&P 500, i.e., big companies earned in the 10-15% range for most of the 20th century. In the 1990's higher leverage got more common and the average returns jumped more to the 15-25% range.) So if you only needed $50 million to generate that $10M, you'd be earning at contemporary industry standards - 20%. But if it takes $400M to run the business, $10M is a pretty shitty 2.5% return which is less than no-risk treasury bonds. Your investors would be looking to fire you unless you improved.

Getting back to the subject at hand, the typical large managed care company needs equity of about 30% of premium, so they would need to generate a 3% margin just to earn that middling 10% on equity.
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Old 11-04-2010, 05:05 PM   #64
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Typical "Your job is easy, and mine is so hard" answer.

I ran a self-insured plan for our companies for several years. We paid a third party adminsitrator (TPA) to administer claims handling, treatment approval, plan controls, etc. What did we pay for the TPA?...About 30 cents on the dollar. The rest was for claims.

At the end of the day, the overall cost was about a wash with a fully insured plan...so we switched back.

That's kind of like saying a lawyer takes 30-40 cents of every dollar and adds zero value to the system. Wait a minute...Now that comment may be right.
Very well said!

The cost of administering "care"

That cost is real. Can we improve or optimize it? I sure as hell hope so. Do I want Obama, et. al. to lead the effort? Hell no.

But folks, do me a favor and quit referring to this as "insurance" and using words like "premiums" -- it just isn't accurate
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Old 11-04-2010, 05:31 PM   #65
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Getting back to the subject at hand, the typical large managed care company needs equity of about 30% of premium, so they would need to generate a 3% margin just to earn that middling 10% on equity.
Guess they ought to shut their doors - OR - some types of business are more profitable to be in than others. Maybe they ought to take their pair-of-dimes and "shift." They're looking for sympathy? Hell, they need to be looking out for more competition and be spending less profits on contributions to ensure protected territories - maybe they ought to let the "free market" work its magic? Of course, heaven forbid, the top dawgs could take a little less. After all, they ain't Microsoft.

But, I do really understand your points and know that running a public company isn't exactly for the faint-hearted. It's especially hard when you are operating with borrowed or invested money. We were fortunate enough to not to have been in that position. The bankers hated us because we didn't borrow money...lol. But, that's nowhere near the norm - hell, we were just a bunch of hicks from the sticks and not trying to become world-wide pants...heh heh heh. And, yes, the "grow or die" maxim is hard to avoid.
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