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Stop Losing Millions!

Uncategorized Apr 29, 2016

Eventually, every agency owner will leave their business. Whether or not you want to, whether it’s through internal or external perpetuation, you are going to leave. Knowing that this is going to happen, why leave millions of dollars on the table when you do?

In today’s merger and acquisition environment, every $125,000 of additional operating profit you generate is worth approximately $1 million of value. That’s why now is the time for agency owners to stop doing business and start building their business.

In his original work, “The E Myth,” Michael Gerber popularized the phrase, “Are you working in your business or on your business?” But because that book is now over 25 years old, I fear that it has become a cliché. The idea behind the phrase may sound good and be good, but it appears too many agency owners just aren’t following the advice.

In order to adapt that principle to today’s world, perhaps the real key is to set aside time to build your business instead of just doing business.

Doing business

As agency owners, most of us start our days with really good intentions. We get up and get going, we’re really focused on today, we’ve prioritized our “to-do” list and we truly believe that today is the day that we’re going to hit the long ball. So what happens when you arrive at the office?

By the time you get there, you’ve probably already been reading emails on your smartphone or your desktop is pinging relentlessly to notify you of a million incoming messages. (Note: Turn off the email alert so you’ll quit looking at it!) Then, of course, you have some snail mail to go through and piles of work cluttering your desk and desktop. You have all this stuff to contend with.

Not only have you become a CRAP magnet (as in, Can’t Resist Attracting Paper), you’ve become your agency’s SAKU (Source of All Knowledge in the Universe). People line up to see you because you can solve all of their problems as no one else in the universe can. It’s no surprise that you’re exhausted at the end of the day.

But what have you actually accomplished?

Ask yourself, “What did I get done today? I was busy all day, but what do I have to show for it?” Chances are, you’re confusing activity with results, which is something we’ve discussed a million times before. Just showing up and doing business while allowing others to dictate your day means you’re leaving millions of dollars on the table. If that’s the case, you need to redirect your focus.

Building your business

Once you decide to shift your focus to building your business—growing it and not just working in it—you must devote the time to do so. (Remember, every $125,000 of additional operating profit brings $1 million of value.) Setting aside “building time” begins with a strategic planning session, which has become increasingly rare in our industry. In fact, fewer than 10% of all agencies have a tangible, documented strategic business plan for the year.

Strategic planning should answer three basic questions:

  1. Where am I today?
  2. Where do I want to go?
  3. How will I get there?

Perhaps the first question, “Where am I today?” should be “Where am I leaving millions of dollars on the table today?” It’s easy enough to figure out.

The “Ifs”

Borrowing a page from Jeff Foxworthy’s “You Might Be A Redneck If ...” playbook, I’ve compiled a partial list of the many ways agencies fail to maximize their revenues. I’m sure you can come up with additional fill-in-the-blank “ifs,” which indicate that you/ your agency is leaving major money on the table.

You might be leaving millions of dollars on the table if:

  • You have part-time clients (i.e., more than 50% of your customers have only one policy with you)
  • Your producers are doing less than $100,000 of new commission income per year • Your revenue per employee is less than $200,000
  • Your personal lines service employees are handling less than $500,000 each
  • Your commercial lines service staff handles less than $750,000 each
  • Your team is utilizing less than 50% of the capabilities of your automation system and all available tech tools and solutions
  • You have a closing ratio of less than 50%
  • Your retention is less than 96%
  • Your prospect pipelines are not overflowing with more opportunities than time • You have “Retired-In-Place” shareholders
  • You don’t have a compelling story of differentiation that actually gets executed.

For most readers, several if not most items probably got their attention. If so, they’ll be the first to agree that they’re losing millions.

The remedy lies in identifying and utilizing the basic building blocks of growing your business.

Building blocks

So where do you start in order to make 2016 your best organic growth year ever? It starts at the top with you as the leader. Leaders lead!

So many agency owners began their careers selling insurance because it was something they loved to do, but then they ended up running a business. Years later, they aren’t necessarily building their business, even though they’re constantly working. Their hyper activity leaves them no time to be truly productive.

What’s your model?

Leaders have two agency model choices. They either become a “transactional/ commodity-based agency” or a “relationship-based agency.” Assuming you’ve committed to (a) no longer losing millions and (b) building your business, how will you lead? Here are some things you should be doing:

  • Take advantage of your own natural pipeline. As an agency owner or senior leader, you probably have better pipelines than anyone else in the agency. Why? Simply because you’ve been around for such a long time. You know people in the community and in the industries you serve, so it’s likely you have a long list of people who would take your call any time—if you were so inclined to call them. The reality is, you probably don’t want to do the work. If you don’t want to make the sale yourself, at least open the doors for others. You can be the rainmaker and let the younger producers be the buckets.
  • Maximize carrier relationships. Previously, I’ve discussed why it’s critical to invest the time into making the most of your carrier relationships, including the importance of conducting annual planning sessions with them. However, less than 2% of agencies proactively meet with their carriers, present them with a formal business plan and agree on how they can work more effectively in the coming year.
  • Identify what’s no longer acceptable. Determine those things that are causing you to lose millions. I just read a book that refers to the 80/20 Rule I’ve often discussed in this column. The book asks the question: “What’s your 20%?” For you to have a vision of what the agency will look like when you leave, you’ll need to figure out the specific things you do (the 20%) that yield the majority of results (the 80%). What’s more, you should be able to truthfully say that you do them 40%, 50%, or 60% of the time—not 20%.
  • Be the role model for your client experience. If you’re going to have a great year, you need to lead by example, and whether you know it or not, you are a role model. As such, you should set an example for the client experience you want your agency to provide. Be the role model for proactively managing your relationships and for maximizing your automation (or at least making sure the tools you’re paying for are being used). Constantly reinforce the basics. • Practice and rehearse. Often, agency owners have superior sales skills and sufficient experience to “wing it” and get away with it when they present to clients. Typically, the younger, less experienced salespeople cannot. You should demand that every presentation is rehearsed, including all the owners. I still spend hours practicing my presentations— and I’ve been making presentations for a long time!
  • Get great results. Are you personally getting great results and are you demanding them from others?
  • Internal communications. Agencies either over-communicate or under-communicate (although I can honestly say I’ve never seen one that over-communicates). Do you consistently schedule and conduct the following? • Weekly team meetings. Are you making sure that all the producers and all departments have team meetings every week?
  • Monthly state-of-the-agency meetings. Each month, do you assemble your entire team to update, celebrate and discuss the agency’s vision, plans and projects for the year?
  • Quarterly sales retreats. I can’t imagine not getting an agency’s salespeople together once every quarter, if not more frequently. You need to spend at least a day a month working on the selling aspects of your business.

The bottom line

At one of my earliest consulting jobs, I saw a sign that was prominently displayed over the coffee machine. It read, “The worst thing that can happen to an individual is to reach age 65 and realize they never reached their potential, and then realize it’s too late.” Well, I have a new sign that I’d like to see over the coffee machine at every agency: “Stop losing millions and start building—vs. Doing—your business!”

It’s your choice.

 

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