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Find out if your agency has the capacity and the capability to grow
The last four years probably have been some of the toughest ever for independent insurance agencies. It’s easy to understand why agency economics (i.e., growth and profit) are suffering. The 2010 Best Practices Study shows that organic growth by independent agencies and brokerages was basically zero to negative, as they were simply unable to create new sales to overcome the soft market and retention issues.
However, there are still a number of aggressive sales-oriented agencies that have shown significant growth in these difficult times. This growth has three components: (1) increase sales; (2) decrease expenses; and (3) increase the value of your agency.
Accordingly, you must first become very aggressive in everything that you do around sales. You’ve got to be able to grow at a rate substantially greater than what the soft market and economy have taken away from you.
What does a truly aggressive, growth-oriented, profit-generating agency look like? First and foremost, it is an organization that has both the Capacity and the Capability to grow. What’s more, those characteristics must go hand in hand. As I’ll explain, you won’t grow if you have one without the other.
Capacity to Grow
Certain critical indicators will let you know whether you have the Capacity to Grow or whether you’ve reached your maximum capacity. Here are some of the key points to consider when determining where your agency stands:
Revenue per Employee. If your revenue per employee is less than
Revenue per Validated Producer. If your validated producers are generating revenue of less than
Personal Lines Policies. If your average personal lines customer has fewer than three policies with you, you have the capacity to grow.
Select Commercial Lines Policies. If your average “select” (small to mid-sized) commercial lines client has fewer than three policies with you, you have the capacity to grow.
Large Commercial Lines Policies. If your clients in this category have fewer than four policies with you, you have the capacity to grow.
Client Referrals. If fewer than 25% of your clients have ever given you a referral or an introduction, you have the capacity to grow. You have lead sources just sitting there who are willing to help you if you will just ask them and follow up.
Employee Referrals. Every employee is a rich source of referrals, so if fewer than 100% of yours have given you a referral, you have the capacity to grow. In an agency with 25 or 50 employees, how many people do they know who buy their insurance from someone at another agency? Everyone in your agency-from receptionist to senior producer-probably knows 50 to 100 people (friends, relatives and associates) who are buying personal lines insurance from someone. Shouldn’t it be you?
Trusted Advisor Referrals. If fewer than 100% of your Trusted Advisor Team (your CPA, attorney, banker, financial planner/wealth management advisor) have given you a referral, you have the capacity to grow. Generally, anyone to whom you write a check should be doing two things: (1) They should be writing a check to you and (2) they should be referring people to you. Go through your check register and take a look at everyone you’re writing checks to. If they’re not writing one to you, there’s your prospect list!
Pipeline. If your average producer has fewer than 20 targeted prospects in his or her pipeline, that producer has the capacity to grow. Although any producer can actively work that number of prospects, most are actively working less than a handful of prospects at a time.
Centers of Influence. If your average producer has fewer than 10 professionals in his or her Center of Influence Network, there’s capacity to grow. We’ve discussed this a million times. They have to get out there and network with other professionals, and show them their non-traditional approach to the marketplace. Further, they’ve got to make deposits with these professionals to earn referrals and introductions.
How does your agency measure up to the above checklist? If yours is like most, it has tremendous capacity to grow without increasing any operating expenses.
Capability to Grow
Do you really want to grow? Almost everyone will tell you that they want to grow because they’re supposed to grow, but I don’t know how much they really want to grow. And in order to grow, you must have a burning desire to do so. Capability and desire go hand in hand. Therefore, you’ll have the capability to grow only if you truly want to do the following:
Make Tough Staffing Decisions. We’ve all heard the cliché, “A chain is only as strong as its weakest link.” Trite but true; the same theory applies to independent agencies, where the team is only as strong as its weakest member. How strong is your team?
Do they cooperate with you and their fellow employees? Are they willing to do things your way, or do they generally ignore your directives? When you ask or tell them to do something, do they respond with a “this too shall pass” attitude and treat it as an optional event? If so, it is unlikely you will ever grow your agency to the needed level.
Enforce Upward Accountability. Do you demand upward accountability in your agency, where all employees proactively report to their boss without waiting for the boss to come to them? Do you have a performance management system in place that clearly defines employees’ roles, responsibilities, duties and desired results? This applies not only to salespeople but to everyone, including administrative and service employees. Are they expected to provide progress reports and updates to their superiors without being prompted? If so, you have the capability to grow. If not, your organization is likely to stagnate and ultimately could fail.
Create Sales Leadership. This doesn’t necessarily mean a fulltime sales manager, but someone within the organization who is truly in charge of sales. A true sales leader has the capability to put in place a non-traditional selling approach, as well as the capability to train, motivate, monitor and fire salespeople.
Demand Full-Time Clients. You’ll have the capability to grow if your agency works exclusively with fulltime clients. All of those call-in and walk-in clients that so many average agencies still seem to attract are primarily single-policy customers. Demanding a customer base of only full-time clients will positively affect your revenue per relationship, retention and profit.
Fire Clients. You’ll have the capability to grow if you’re willing to fire profit-draining clients. This includes any clients who aren’t willing to become full-time clients, who are a payment problem, who believe they have a maintenance contract and not a catastrophe contact, or who aren’t willing to go along with your coverage recommendations. If they’re not going to fit into a future ideal client profile, fire them!
Maximize Use of Automation. All employees must maximize their use of automation for your agency to have the capability to grow. We’re not using the “hokey-pokey” form of automation, with one hand in and one hand out. This is not a game. You have to be all in or all out. But make no mistake: Agencies with the capability to grow are all in.
Cohesive Management Team. The capability to grow depends largely on everyone understanding the goals, objectives and mission of the agency. Once the management team has established a plan and a focus, and has the culture and vision in place, it must be cohesive in its implementation and support.
To use a sports analogy: Once you break the huddle, you have to run the plays that are called. So even if everyone doesn’t agree 100% on a plan, the team as a whole can-and must- support it if they want the capability to grow.
Maximize Carrier Relationships. If you’re willing to maximize these relationships, it’s going to include some consolidation. We see that the average agency is losing a ton of money because it’s not willing to consolidate markets and negotiate better compensation packages.
Create a Results-Based Culture. If you’re willing to say that everything in your culture is based on getting results, you’ll have the capability to grow. Conversely, if you still allow an activity-based culture, you won’t be capable of growth.
Consistently Work ON the Business. In order to grow, it’s crucial to work ON the business vs. IN the business. This means having an annual business plan, a monthly formal review, and quarterly strategic retreats with the leadership team or sales team. If you’re willing to invest the formal “on” time, you’ll grow tremendously. If you’re stuck in the “in” time and are always too busy to get better, you’ll never grow. You might have a highpaying job, but you’ll never have a great business.
The bottom line: Do you have the capacity to grow? Do you have the capability? What are you going to do with it? Are you willing to make 2011 your best year ever?
As always, it’s your choice.
You’ve got to be able to grow at a rate substantially greater than what the soft market and economy have taken away from you.