One of the really great things about owning an independent insurance agency is that you are Independent! You can and do make choices every day that affect your agency’s performance and success, both in the short-term and long-term. In other words, you have options and you’re exercising them, some more purposefully than others. As we look forward to 2015, now’s a great time to examine some of the options you have concerning the future of your agency.

Option Five: Sell To or Merge With a Local Competitor

In most cases, this is not the optimal choice. Not always, but usually. You might create some economies of scale, but you won’t necessarily create a great agency.

The local competitor who wants to acquire your agency may not have the financial strength to finance or cash out the transaction, making it likely that you’ll become “The Bank.” At the local level, cash buyers are rare, so if you agree to finance the sale, it’s always possible...

One of the really great things about owning an independent insurance agency is that you are Independent! You can and do make choices every day that affect your agency’s performance and success, both in the short-term and long-term. In other words, you have options and you’re exercising them, some more purposefully than others.

As we look forward to 2015, now’s a great time to examine some of the options you have concerning the future of your agency.

Option Four: Prepare to Perpetuate

Something we absolutely know is that everybody eventually leaves their business. Hey, I just did and it took me a long time to do so! But I chose to perpetuate part of my business, which requires meticulous planning.

Step 1: Get the boat ready to sell! You may recall the story about the time my son, Patrick, and I wanted to sell our 16-foot flats boat and get a slightly larger one. Together, we worked really hard to clean it up so that we could sell it quickly. Once we were finished,...

One of the really great things about owning an independent insurance agency is that you are Independent! You can and do make choices every day that affect your agency’s performance and success, both in the short-term and long-term. In other words, you have options and you’re exercising them, some more purposefully than others.

As we look forward to 2015, now’s a great time to examine some of the options you have concerning the future of your agency.

Option Two: Commit to Growth

As we’ve talked about before, you must have the Three Cs if you want to grow your business: Commitment, Capacity and Capabilities. You just have to find the right systems and guidance that will create predictable and guaranteed sales and profit improvements. Also, you’ll need to invest at least two percent of your revenues for these growth initiatives. The goal is to create the “Agency’s Way” of growing that all team members buy into.

 Option Three: Shrink...

One of the really great things about owning an independent insurance agency is that you are Independent! You can and do make choices every day that affect your agency’s performance and success, both in the short-term and long-term. In other words, you have options and you’re exercising them, some more purposefully than others.

As we look forward to 2015, now’s a great time to examine some of the options you have concerning the future of your agency.

Option One: Keep Doing What You’re Doing

There’s an old saying that I really like and often use: “If you always do what you always did, you’ll always get what you always got!” Another favorite of mine, courtesy of Albert Einstein: “The definition of insanity is doing the same thing over and over and expecting different results.”

Actually, I’ve noticed that when agencies repeatedly do the same things, they ultimately wind up getting less. Their book of business slowly but...

Operating Profitability Issues

How does an agency possibly make a 40% Operating Profit? Answer: By spending only 60%! Ta-Da! In the average agency, if the top 5% = 50% of the income, that means the bottom 95% of accounts are the other 50% of the income. Where are the expenses being generated? Can you say “Profit Center Analysis?” When we look at it, the bottom 50% of customers in the average agency = less than 10% of the revenue and the bottom 25% = less than 5% of the revenue. So again, this is a profitability issue.

Contingency/Profit-Sharing Income

How would you like to have a year without any contingency/profit-sharing income? All agency owners are great managers in March and April! That’s because when we look at our P&L, we’re looking at our total profit, not our operating profit. So while it may appear that we are doing phenomenally well, it may not accurately reflect our true profitability.

Financial Model

Do you have a financial model that you...

Profitable Producers Subsidizing Unprofitable Producers.

The agency owners are typically the most profitable producers you have. But if the majority of non-owning producers aren’t hitting their goals, they’re most likely unprofitable. What percentage of your producers exceeded their sales goals last year and what percent are on track to exceed them this year?

Profitable Accounts Subsidizing Unprofitable Accounts.

We know from the thousands of profit center analyses we’ve done over the years that the average agency’s “A” clients (the top 5%) are very profitable, their “B” clients (the middle 15%) are marginally profitable and the “C” clients (the bottom 80%) tend to be unprofitable. I’m not saying that’s how it is in your agency, I’m just suggesting you take a look at it. Play the “what-if” game. What if you didn’t have the top 5% of your customers? Would you be profitable? Ultimately, you...

This reminds me of the story about the Cobbler’s children who have no shoes. This phrase is used to describe the phenomenon where professionals in any given area are so busy with work for their clients and their teams that they neglect using their professional skills to help themselves or those closest to them. Think of the web designer that hasn’t finished their website, or the accountant who is late in submitting his own tax return!

A great friend of mine, who’s also a great client, asked me an interesting question recently. “After all these years of consulting with independent insurance agencies, what are your greatest concerns for them in the future?” My immediate reply: Vulnerability tied to Profitability and Perpetuation.

Agency Risk Issues

Although they are not the only ones, I believe that vulnerability, operating profitability, and perpetuation are central to the greatest risks facing approximately 95% of IIAs. Unfortunately, these are issues...

Roger was featured on two “Monday Morning” sessions with George Nordhaus from AgenciesOnline.

Watch the first session below:

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