“Administering employee benefits is fun and easy!”—said no business owner ever.
The myriad types of insurance coverage available, from short- and long-term disability to medical, dental, and vision, plus flexible spending accounts, 401k plans, and more create incredible complexity, especially for the companies that are enrolled in self-administered employee benefits—which is most companies with more than 50 employees.
Because of that complexity, mistakes are common. It’s estimated that one in four companies using self-administered plans are incorrectly deducting premiums and fees from employee paychecks. That not only costs companies but can lead to claim denials.
After seeing and working on this issue from both the carrier and corporate client sides, one enterprising entrepreneur set out to build a solution. Here’s the story of Joe Gagnon and his startup venture, SAB Co. Software.
Tom: Hello, everybody. Welcome to another founder’s interview on Webbiquity. Today I’m joined by Joe Gagnon, Founder and CEO at SAB Co. Software. Joe and I have talked at Beta Minnesota events, so I’m excited to have him here today to share his story. Hi, Joe. Thanks for joining me. How are things going?
Joe: Good. You know, slow, but sure. It’s always exciting in the startup world, so I’d say everything’s going pretty great.
Tom: Sounds good. Let’s talk about what SAB Co. Software does and what customer problems you are solving.
Because of the complexity outlined above, employers frequently have issues with missed deductions and premium payments in their employee benefits programs.
One in four companies that are enrolled in self-administered employee benefits programs—which is almost all companies with more than 50 employees—are incorrectly deducting from their employee paychecks.
This happens because a lot of these companies responsible for self-administering the policies don’t know how to do that correctly. Today, this administrative process is often done within HR departments, using Excel, and it’s often done by someone who’s not a subject matter expert in the benefits area.
Often, companies are under-deducting; they’re not withholding enough from employees’ paychecks. That not only costs the employer money, but when employees file claims, the insurance carriers will check to verify that premiums are being deducted correctly. Incorrect deductions can lead to claim denials, creating hassle and headaches for employees.
SAB Co. Software automates all of the administration burdens around employee benefit administration for self-administered companies.
Per the company’s website, it provides accurate and easily accessible premium data for groups, brokers, and carriers—ensuring every premium is paid correctly, on time, and has the necessary back up required. It eliminates the pain and errors of benefits administration, delivers advanced analytics, and integrates with popular employee payroll and benefits solutions for HR.
What sets the company apart from alternatives in the marketplace is that today, there isn’t really anyone else solving this problem. The only true alternative and SAB Co. Software’s number one competitor is to do nothing, which means do it internally.
Year founded: 2021
Funding rounds: Bootstrapped for the first year, raised $25K in a friends-and-family pre-seed round, and kicked off a $500K seed round fund raise in March 2023.
Company size: Five employees. Paid pilot in place with Christensen Group, a top 100 broker, and some of the companies within their block of business.
Tom: What inspired you to work on this particular problem?
Joe: About four or five years ago, I worked at a carrier. I actually started on the same day as my co-founder, DeAndre Mason, and we were tasked with auditing employee benefits, self-administered employee benefit groups, premium payments to see if there were any issues.
We ended up designing and building a variance database for this carrier, and were able to collect over $5 million in underpayments in about 90 days. I realized that this was a huge market problem and it was really affecting a massive amount of groups without them really knowing it.
That’s when I got really interested in the problem. From there, I became a full stack developer at SPS Commerce and then built a solution for the companies versus the carriers I had built for in the past.
Tom: Great. So you had an inside view of it, saw the magnitude of the problem, and figured there was a business here.
Joe: Yes. I saw the problem first from a carrier perspective, and really figured that the best way to solve the problem is actually on the company side of things. So I built a business around that.
Tom: When you say employers are withholding incorrectly, are they more often withholding too much or too little?
Joe: We find that companies can be over or under-deducting, but when they under-deduct, it costs the company money and causes more problems for their employees.
Tom: Got it. That makes sense. And makes the value pretty clear.
Tom: What were the most effective channels or methods from a marketing standpoint for you to get the word out to prospective customers when you first launched the software?
Joe: The most beneficial tactics have been warm referrals or word of mouth—organic growth. When we’re looking for early adopters, getting warm referrals and those early conversations seems to be the biggest hurdle, especially when we don’t have a strong reputation yet.
So, warm referrals, and then those were closely followed by email campaigns that are targeted around customer interviews. We’re just trying to have conversations with prospective end clients. Over time, that will inevitably lead the early adopters becoming clients if we’re solving a genuine problem they’re having.
Those are the number one and number two most beneficial growth methods for us so far.
Tom: Excellent. Have you done anything in SEO, content marketing, online ads, any of those channels?
Joe: We haven’t done any paid marketing yet. We have some SEO things set up by our marketing guys, but we haven’t done any paid. We want to really make sure we have a strong product-market fit in place before we start throwing a lot of money at marketing.
Tom: You’re now a couple of years into this. If you would, finish this sentence: Knowing what I know now, if I were starting over today, what I would do differently is…
Joe: Finding sales immediately. I learned over the course of the first 18 months that the most important thing for any startup is traction. When people say traction, they mean revenue-generating activities. So, the sooner as a founder you get to selling and really get customer interface, customer conversations happening, the faster you’ll find product-market fit, and the faster you’ll find that traction you need to raise, and grow, and move forward.
Tom: Excellent. What’s the most important advice you could offer to an entrepreneur just starting out today?
Joe: Again, revenue generating activities should be your number one focus for at least the first couple years. Beyond that, the other most important thing is to build a strong team around you. Being a solopreneur or trying to go it alone, especially as a first-time founder, is very hard.
The more people you have sharing your vision and moving in the same direction, the faster it is, and the easier it is, to get traction. It’s hard as a founder to be optimistic and pushing uphill all the time. The better the team you have, and the earlier and stronger your team is, the better things will go for you.
Tom: That’s one I’ve heard quite a bit. Thanks Joe, great discussion. One final question: how can people connect with you and learn more about SAB Co. Software?
Tom: Excellent. Thanks again, Joe. This has been great. And have a fantastic weekend.
Joe: Thank you. Appreciate it.