If you have an accounts receivable problem, you better fix it.
It's not as prevalent today as it was in the past, because direct bill has resolved problems with collections for so many agencies. However, if you ever have to write off a bad debt, what's the cost?
Let's take a write-off of only $10,000. At an average commission rate of 13% and a profit of 15%, you'd have to write $512,820 of new premiums to replace the lost profit caused by the write-off. Mind-boggling, isn't it? So if you do not have a process for zero accounts receivable over 30 days, you'd better fix it the day before yesterday.
If the majority of your producers are not hitting their annual sales goals, that needs to be fixed. I believe this is rampant in our industry. Goals with no accountability are a joke and your producers know it. There's really no consequence if they don't hit their goal, other than they make less money. But they're not the only ones making less money. The agency makes less also.
At a minimum, producers should achieve annual net new revenues of at least $100,000. Now, don't be like some agency owners who make up excuses: "Roger, you don't know our marketplace." Actually, I do and someone is already doing it in your marketplace.
Whatever your goals and results are, I know—and have proven—that every producer could generate at least an additional $25,000 per year of gross commissions. At two times revenue, that's a lost value of $50,000 for every producer you have.
If you have "CSRs" (a job title that I really don't like anymore) who handle less revenue than they should, you better fix it.
I'm shocked by the low number of accounts and amount of revenue reported by even Best Practices agencies. A personal lines CSR handling only $300,000 has terrible productivity and is costing you a ton of profit and eventually, value.
The Better Way Agency model calls for a minimum of $500,000 per personal lines CSR (which we call "personal risk managers"). Thus, the average agency is at only 60% productivity ($300,000 vs. $500,000). Put another way, for every $1 million of payroll, the average agency is getting only $600,000 of productivity. Think what that does to your value.
It's time to take a really hard look in the mirror, and ask yourself and your leadership team, "What's broken in our agency?"
Remember, all progress starts by telling the truth. If nothing else, your annual business plan (you do have one, right?) Should address what's broken, what it's costing your agency and how you propose to fix it.
Every agency owner will eventually leave his or her business, whether through internal or external perpetuation. That's why it's critically important to fix what's broken today in order to maximize your value tomorrow.
It's your choice!
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