What’s Your Growth Plan and Budget?

Roger Sitkins headshotCROPA Guest Post By: Roger Sitkins, Chairman & Founder of Sitkins International and Keynote Speaker at InsurEXPO14!

 

 

 

 

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Roger Sitkins will be the keynote speaker at InsurEXPO14

There’s no doubt in my mind that every agency owner wants their company to grow. Also, with the exception of a few Retired-In-Place producers, I think that most producers want to grow, as well. That’s why I’m always amazed when I talk to agency owners who are very enthusiastic about selling insurance but have no actual plan for exactly how they’re going to grow. And no, “selling A LOT of it” is not a plan!

Unfortunately, too many owners and producers expect to succeed in today’s marketplace by operating the old-fashioned way (i.e., by just being there and waiting for the proverbial roast duck to fly into their mouth). The reality is, growth doesn’t happen just because you want to grow. It only happens when you know how to grow and are willing to invest in that growth. In “Star Wars,” Yoda said, “Do or do not, there is no try.” Well I say, “Grow or grow not, there is no want!”

You absolutely must have a plan and be willing to invest in it or you’re dead in the water. That’s why I’m surprised that the average agency will not spend pennies to make dollars, even when they’re aware that the level of investment is commensurate with the amount of growth. Typically, they devote less than one-half of 1% of revenues on training budgets and investments dedicated to improvement and growth!! Conversely, those willing to prudently invest $50,000 – $100,000 to grow their firm can expect a return of three, four or even five times that amount.

With that in mind, how are you planning for growth in your agency this year and how much have budgeted for it? In which areas of your business do you plan to invest? Here are some suggestions.

Maximizing Your ROI

• Sales. Investing in growth starts with getting your current producers profitable (e.g., producing at a level that creates an operating profit for the agency). All too often, we see that profitable producers are subsidizing unprofitable producers, and in most agencies, it’s the owners who are the largest and most profitable producers. They would love to pay themselves on their own book of business at the same rate they pay their producers, but they almost never do.

How about you? Would you like to receive 40% new and 25% renewal on your personal book of business? Most agency owners would say “yes,” which would actually be a raise! Except for taking a management salary or distribution, few owners compensate themselves. They seem to believe that by not paying themselves, they’re somehow investing in the business. The truth is, they’re subsidizing the unprofitable producers, which only reinforces stagnation. That is not an investment in the agency!

Producers must create a profit, period. Furthermore, owners need to understand the point of profitability. Do you know how big a producer’s book of business must be before you realize a return? Although the numbers will vary according to agency size, the key is to know the minimum acceptable book of business that your producers must have in order to be profitable.

One of our aggressive, high-growth agencies estimates the acceptable minimum to be around $500,000. In other words, their producers must have approximately $500,000 of commission income on their book of business to generate an acceptable profit/ROI for the agency. The average producer has about $300,000. While that might be acceptable at some agencies, most profit-minded agencies will continually pursue opportunities for growth.

One of the best ways to grow is by cultivating and nurturing your best accounts. If every producer would simply focus all of their energies on the top 20% of their accounts and wow them to the point of earning introductions and referrals, they wouldn’t be able to keep up with the growth! The theory is simple: If the top 20% of your accounts = 80% of your revenues and you replicated those accounts (because every one of them knows someone like them) you’d grow by 80%. You’d only have 20% more customers, but you’d have significantly higher revenue.

Last year, one of my major Blinding Flashes of the Obvious was that more than 90% of accounts renew, but fewer than 10% refer! That indicates that most producers aren’t following a purposeful plan to wow their best clients to the point that they start referring their friends and associates. One of our favorite sayings is, “Your very best clients are your best competitors’ best prospects.” How do you plan to totally wow your best clients? What are you doing to make sure no one else can get in the door on these clients?

Assuming that you’re making current producers profitable, the next step is to add new producers each and every year. Every producer eventually plateaus at some level, so it’s very important to continually build the next wave of sales talent in the organization. Are you investing at least 2% of your total revenues in new producers each and every year? If not, why not?

We know that it usually takes about 3 years for a producer to start being profitable. That means we must be constantly investing in them through formal training, coaching and mentoring programs. That’s a considerable investment. You certainly don’t want to take the old approach of showing them to their desk, giving them a phone book and wishing them luck! Although that approach is a lot less expensive, you get what you pay for!

• Selling System. If you are still following a traditional agency sales approach (“Hi, we have the best markets, the best companies and the best people, we give great service, we liked to give you a quote, we can save you money!”), you might as well have a sign on the front of the agency that says “Free Estimates!” What is the unique and compelling story about your agency and its services that you and only you can tell?  What differentiates you in your marketplace?

Here’s an exercise you can do at your next agency sales meeting (you do have these don’t you?). Have your producers stand up, one at a time, and tell their story. What do they say to prospects about what your agency does and how it is different? What do they tell prospects about their unique system? My guess is that the majority of you will be shocked at what you hear, which is likely to be a very traditional approach — claims of great service and offers of a money-saving quote.

Do you have a branded, named selling process that you follow that differentiates your agency? Members of Sitkins International follow our Risk Reduction Approach. What is your unique approach? What can you say about your agency that no one else in your marketplace can offer?

Unless you have a different and compelling model, you’re just like everyone else in which case you have a ton of competition. If you don’t believe me, just Google “insurance” in your town. I did, and in my county, I found listings for 617 places that sell insurance —and that’s in an area with a population of only about 600,000 people! Therefore, one of the keys to growing your agency is to have a system so uniquely outstanding that it eliminates the competition.

• Sales Leadership. What’s your plan for proactive sales leadership in your agency? Over the years, we have found that fewer than 10% of agencies have an effective sales leadership program in place. This includes having a Chief Revenue Officer who is responsible for stepping up and driving revenue.

• Brand. Your brand is the clear, powerful and, I hope, positive thoughts others have about you. How do people feel after they’ve met with you? Do you know what your clients are saying about you and your agency? Have you ever had an outside firm do a client satisfaction survey? If you do, which I highly recommend, you’ll be amazed at what you can learn.

When you think about your brand, what does it say about the quality of different aspects of your agency? For example, what sort of impression does your agency’s physical plant make on people as they drive up or pass by? Does your property look well maintained and attractively landscaped? Are the grounds litter-free and nicely manicured?

What about your website? Is it professionally written and designed in a manner that guides clients and prospects in the right direction? What do your letterhead and logo look like? If they appear to be from the turn of the century (as in the 20th century), they’re probably sending the wrong message and need to be updated.

How is the phone answered? A receptionist is the Director of First Impressions and yet so few agencies explain how they want the phone answered. If you want to know for sure how callers perceive your agency, try calling it yourself! If you don’t like what you hear, do something about it right away.

Remember, all of these things create the client experience. If you’re not managing the brand and managing the client experience, you can bet that someone else is.

• Internal Team. What are you doing to develop your internal service and administrative team? Do you have an annual education calendar or plan for every one of your team members? For some, this might be continuing education to maintain their insurance credentials. For others, it’s a matter of ongoing training to sharpen workers’ skills in areas such as automation, phone etiquette, written communication, customer service and more.

The Bottom Line

Growth doesn’t happen just because you want to grow. You’ve got to have the elements in place that will nurture growth, including a sales plan, service plan, marketing plan and client experience plan. You must also be willing to invest in growth. If you do — and it’s done properly — you can expect as much as a five-fold return on your investment.

At the end of the day, you’ll grow if you have a plan and you follow the plan. It may sound overly simple, but that’s how it is. Invest properly and you’ll get a great return. It’s your choice!

Comments

  1. By Christina Taylor