There are seven criteria brokers should use when selecting abenefits administration platform. In this column, we’ll discuss thefirst — the company itself.

Related: Benefits administration: Trends, deal breakers andtechnology's massive potential

Is it venture-backed? Owned by insurance companies? Is itassociated with a general agency? Or maybe a different benefitsbrokerage? Is it cash-flow positive or burning through money? Eachscenario creates a different dynamic that can have implications foryour agency’s success.

Why? Because depending on the background of the vendor, yourplatform partner’s incentives may be aligned with your own, ordifferent. No matter which background the platform has, there areways that brokers can mitigate any negative consequences. Here area few things to consider about each scenario.

Venture-backed

Zenefits is the epitome of a venture-backedfirm. It achieved fast growth quickly, fueled in large part thesame way many brokerages grow — relationships. The fast growthZenefits got via those relationships coupled with its locationallowed it to raise a lot of money, fueling buzz and more growthfrom start-ups and other entrepreneurial businesses across thecountry.

The company proceeded to spend a lot of investor money in aneffort to achieve a growth target that their venture capitalistbackers — who had absolutely zero background or knowledge abouthealth insurance or the business of advising employers on theirbenefits package — thought was correct.

The lesson for you? If you’re evaluating a company that isventure-backed, ask about the venture capitalists who may really bethe ones calling the shots.

Are they going to push this company to grow faster than ispossible, causing an implosion whose after-effects will impact yourbusiness as well? Or do they know insurance and benefits andunderstand that growth needs to be managed responsibly, and salesgrowth cannot go beyond the systems and processes that the softwarecompany has in place to support?

How much money have they raised? Is it so much that the pressurefor financial results may lead to decision-making that focuses toomuch on the short term? How can you prevent that from hurting yourfirm or your clients?

Owned by insurance companies

If an insurance company or a group of insurance companies ownsthe firm you’re evaluating, then you have an entirely different setof questions to ask.

Related: A different approach to benefits administrationtechnology

Some of the questions are obvious. Do you have to offer thatinsurance company’s products in order to use the software? Is theinsurance company’s name going to be on the software? Will otherinsurance companies avoid working with the software company becauseof the presence of the one that is an owner?

In other words, if Acme Insurance is a big owner of the softwarecompany, will that make Beta Insurance reluctant to let you offertheir products on it?

And then there is another set of questions. These revolve aroundthe roadmap for product development. Is the insurance companysetting the roadmap? Is that roadmap aimed towards solving problemsfor the insurance company, or solving problems for your agency orfor HR? Insurance companies have their own problems to solve,completely unrelated to what your employer clients or even youragency cares about.

You will want to understand how the product development roadmapis set and who makes those decisions.

If you see a lot of headlines about how the product is“powering” some facet of the insurance company’s online systems orquoting engines, that can be a sign that the software company isdesigning for the insurer rather than for HR or for agencies.

Associated with a general agency

Just like with an insurance company, a general agency is a stepaway from the employer client. As a result, it will not have assharp an understanding as you do of the challenges the employerhas. It will be tempting for them to demand that the productroadmap disproportionately include solving the general agency’sproblems rather than the employer’s problems. Eventually, this canmean that this company ends up with a less attractive feature setfor your customers.

If you’re going to go this route, you need to get comfortablewith the idea that the software firm is not going to be asattentive to the needs of the employer clients you serve as youare, and should give you the flexibility to offer whateverinsurance products you want within what the firm can support.

Associated with a benefits brokerage

The bottom line with this sort of firm: You need to getcomfortable with the idea that it is not going to go and startcalling on your clients.

The primary advantage of this type of firm is that it should bejust as in tune as you are with the needs of the employer and theagency. After all, it hears directly from employers just like youdo and it has close knowledge on what it is like to be a brokerliving and dying by a possible AOR change. It should alsounderstand agency operations better than a general agency,insurance company, or venture capitalist possibly could.

And its product roadmap should be aligned with what you wouldwant: Solving for employer and agency needs. It should have aproduct lead today and that product leadership should extend ascompetitors who are associated with venture capital, insurancecompanies, or general agencies focus too much on needs outside ofwhat the employer and agency need.

But that brings us up to the concern that this type of firm isgoing to end up calling on your clients – and trying to get the AORfor its own brokerage. One approach to this is to ask for what iscalled a non-solicit agreement alongside your license agreementthat forbids the associated benefits brokerage from being able tocall on any clients that you put on the software.

Beyond that legal protection, it is also worth evaluating theactual likelihood that this company’s benefits firm is going tostart calling on your clients. Is their benefits brokerage near yougeographically? Are you in a market that would be easy for theirbrokerage to access? Does their brokerage believe in the idea of acall-center approach to benefits, or does it believe in theimportance of a local advisor where there is a strong relationshipbetween the advisor and the employer?

Cash flow positive

Finally, it is important to consider the financial strength ofthe firm. Imagine you sign an agreement and begin transitioningyour clients and then they go out of business. It happens.Benefitbay is just one example. It raised money, signed a bigagreement with Humana, and got some traction with agenciesnationwide. But they were never cash flow positive and were unableto continue raising money. They ended up having to close thebusiness.

That was terrible for the individuals who poured so much intotrying to make it successful. It was also terrible for the agenciesand the brokers and service people who had poured money, time, andenergy into learning about how their system worked or even movedclients onto their system only to now have to move them somewhereelse.

If you’re talking to a firm whose salesperson makes a big dealabout how they raised $2 million from a venture capitalist lastyear, keep in mind that venture capitalists expect eight out of tenof their investments to go out of business. In other words, raisingventure money alone is by no means evidence of a sure thing.

At the same time, nothing in business or life is a sure thing.When you’re gauging the strength of the software firm, ask them ifthey are cash flow positive or profitable.

If not, when do they expect to be profitable? Do they havepartners that signal strength? One pilot agreement with Humana wasnot enough to save Benefitbay.

But if you see that they have agreements with multiple, bigindustry players, that can be a good signal that they arefinancially strong and sticking around for the long haul.

When comparing systems, it can be easy to focus on featurecomparisons and the day-to-day operations of your potentialplatform. But be sure to ask the tough questions of your vendor’sbackground — if they aren’t able to answer or answer sufficiently,you may want to evaluate another option.

This column is adapted from the book “Online Benefits Technology: The Strategic Broker’sGuide.”