| WRITING AND CREATING YOUR AGENCY'S BUSINESS PLAN by Paige Proctor Use this proven, systematic approach to planning your agency’ growth. WHY PLAN? Planning requires a lot of time. The marketplace is changing so rapidly that your plan will be out of date almost as soon as you complete it. However, the disastrous results of not planning far outweigh the inconvenience of creating a plan and then having to change it. As a matter of fact, the most valuable consequence of planning is not the end result: the written plan. Rather it’s the greatly improved communications that come from involving everyone in the agency in the planning process. Obviously, results will be far better when everybody knows what they’re to be doing rather that not planning at all and just “letting it happen.” What, specifically, are you planning for? You will need to plan for the effects of competition, the soft market, and changes in the economy of your region, to make sure that you have perpetuated your agency and to create desperately needed profits not only to reward you, but to reinvest in making your agency better. A final and significant reason for planning is that you need to plan and share your plan with your insurance companies so that they know what to expect. Fewer than 1% of all agencies share their written plans with their insurance companies each year. Those who do share their plans have risen to the top in terms of agency size and profitability. When you companies know what you are doing, they will become better partners in business with you. How much time should you spend on planning? My experience suggests that in the average-size agency, the owner and staff will spend somewhere around 200 hours all told. The agency owner and key employees are responsible for most of this planning time. However, every employee should be asked for their input where appropriate based on their knowledge and job function. The hardest part of planning is getting the process started. The good news is that all the tools you need to do excellent planning exist within your agency or are in easy reach. There’s nothing exotic about planning. All you have to do is take the time to get organized. HOW TO START Begin the planning process by pulling together knowledge in these areas: - Gather all relevant financial information from your automation system. That will probably include last year’s financial data, plus year to date information from your accounting system.
- Evaluate your mix of business statistics, provided by the automation system. The key is to identify areas in which you have significant volume in both Personal Lines and Commercial Lines.
- Assess your competition. Who are they and what have they done to you in terms of taking business away from your agency? Your producers and CSRs can give you some valuable input in this area.
- Assess the local economy. What are its strong and weak points? Where does your agency fit into your area based on the results of the account evaluation you did in Step #2?
- Determine to what extent you’re using your automation system and what can be done to improve agency productivity If you’re uncomfortable with the idea of transactional filing, at least start using your automation system for all contacts and maintaining your customer files by “dropping the pieces of paper” rather than fully maintaining the file. If you have to rebuild something, all of the pieces of paper are together in one file and you can go back and recreate a daily copy from the data in the customer file.
ADDITIONAL INFORMATION NEEDED Internal From inside your agency, compile these statistics: - Overall written premium
- Overall gross commission income
- Mix of business
- Premium volume and mix of business by carrier
- Personal Lines/Commercial Lines ratio
- Total number of policies and total number of accounts
- Average commission generated by carrier and by coverage line
- Gross revenue per employee, including and excluding producers
- Contingent commission by carrier over the past three to five years; percentage of total written premiums they represent
- Loss ratios by carrier
- Number of open claims and reserved amount
- Average monthly aged receivables for past two years
- Experience and areas of expertise of staff - collectively and individually
External Data from outside your agency can be very helpful. Insurance companies have data on demographics for your marketing area. Go to one of your leading carriers, tell them that you’re doing some planning, and ask for as much information as the company can give you about their competition (other companies competing against them) in your area.
You’ll probably want to ask for this information: - Percentage of business by line of insurance, premium and carrier
- Gross commission by carrier and by line of insurance
- Competitor profiles
- Carrier profiles
- Profit and loss by carrier and by line of insurance
- Number of agents/brokers in your marketing area; license information; split between P/C only, Life only, and P/C and Life combined; percentage of types of licenses
- Growth of total premium dollars/percentage written in your state or marketing area
- Percentage of market controlled by carriers operating in your marketing area
CONSOLIDATE YOUR DATA Now that you have all of this information, allocate it among the individuals within your agency who can help you analyze the data. Ask each of them to prepare a concise report on the area you have assigned to them. Clearly explain to each individual the ultimate need for this information in the planning process. The task has to make sense to them or they will be reluctant to help because they simply do not see any value. AGENCY PROFILE Next bring together everybody who has completed data for you, including what you as the owner/manager have put together, and complete an agency profile in these six areas: - Areas of agency expertise in both sales and service.
- Target markets that you’ve developed or that your companies are making available.
- A profile your insurance companies to see who is doing the best job for you.
- A decision on whether to grow your agency to grow or maintain the status quo.
- A review of your management structure. Each employee should have only one boss.
- The input of each employee in the planning process? Listen carefully — you might be surprised.
The purpose of profiling your agency is to develop a thorough knowledge of your agency’s strengths so that you can capitalize on them. Don’t ignore the weaknesses in your agency. You might discover that your agency is suffering because of a lack of an accounts receivable control program or that you have inadequate staff meetings, which is creating a communication breakdown in the agency. Use you profile to build on the positives and work on eliminating the negatives. THE PLANNING MEETING Use the research about your agency as the basis of a planning meeting at which you will use this knowledge to create a plan of action for the year to come. Finish the plan at least two months before the end of your current fiscal or calendar year so that there’s time to make any final adjustments and allow adequate time for distribution to your agency staff. You might also wish to provide a copy of the plan to your key insurance companies — those with whom you need to communicate effectively. Those in attendance at the planning meeting should be the agency owner(s)/manager(s) and the other agency employees. If you’re large enough to be departmentalized, this meeting should include your Personal and Commercial Lines managers, as well as the Sales Manager and Financial Manager. If you have an administrative manager, they should be there as well. The location of the meeting is critical. It must be off site so that you’ll be totally undisturbed (unless, of course, a true emergency occurs). If you’ve trained your staff properly, even though you and all management staff are away from the office, business should continue as usual. The planning meeting will probably take the better part of two days. I would recommend that beginning on a Friday morning and be prepared to work through Saturday afternoon if necessary. Take the time you need! A hastily thrown-together business plan can often be worse than no plan at all. Do not hold planning meetings at a restaurant, where things going on around you could distract you. You can arrange to have a catering service bring meals to your meeting site during a 45-minute to hour break at noon. Also, take frequent breaks so that everyone’s thinking remains clear and sharp. The time of year for your meeting depends on whether you operate on a calendar or fiscal year. If your agency is on a calendar year, you should be doing your planning in the latter part of October. You will then have November to make final adjustments and it will be ready for distribution in December. You might wish to get your planning meeting off to a stimulating start by either creating a mission statement, if you don’t have one, or refining your current mission statement. Your next step is to move right into a brainstorming session. BRAINSTORMING SESSION A brainstorming session at the beginning of your meeting empowers everyone to use their creativity in proposing ideas to consider for either the annual plan or your longer-range plan. Of course some of the ideas will be unusable, but you’ll be surprised at the scope of creativity and what you can learn from this session. Take every idea seriously. Be sure to record the important content of every idea mentioned. Use a flip chart to record each idea or thought. These flip chart pages can be torn off the chart and taped up on the wall in sequential order so that you can constantly refer to them throughout the planning process. I can tell you from personal experience that there’s magic in having the flip chart pages posted on the wall. (The Disney people call it “story-boarding” and have found it to be a powerful tool.) These flip chart pages provide you with a constant visual reminder to refresh your memory on each particular topic.
As the leader of this brainstorming session, you can stimulate thinking by asking such questions as: - Where are we going?
- What do we want to be?
- Tell me how we’re going to do that. Give me some details.
Your role during this session is to be a facilitator and to extract from your people every single idea that they wish to offer whether you personally think the idea is good or bad. GETTING PRACTICAL Your next step is to begin getting your ideas into workable form. The best way is to create an outline of an entire plan for the next year so that everyone can visualize what’s going to happen. Once again, using a flip chart is useful. I’d suggest that you use a planning matrix, so that everyone can see the entire plan at one glance. The left-hand column of the matrix should display all of the subjects that will probably requite some action or planning during the coming year. You can now begin to “back into the details” and finalize your plan. I particularly like using the one-page matrix because it enables everyone to visualize the end result so that you can begin to discuss the details of how to get where you want to be. Here are a few suggestions on the use of the planning matrix: - Revenue increase. When projecting gross revenue for the coming year, don’t be bound by such conventions as projecting across-the-board 10% increases in revenue. During your brainstorming session you might have decided that the agency could produce a 15% to 20% growth in some areas.
- Sales people/Support staff. If you’re projecting revenue increases, consider adding to your staff sometime during the year ahead. If so, decide when you’ll start recruiting and when you’ll want new employees to begin.
- Space/occupancy. As the agency grows, you might find that you will run out of space. The planning matrix offers a place for growth planning: Your current office building must be utilized more efficiently, expanded to meet your new needs, or the agency will have to move to a new location.
- Automation expenditure. Is your current automation system capable of growing with the agency, or is it time to consider the move to a new system? More effective utilization or minor expansion of your system will enable your system to do far more than you thought.
- Markets: Choosing the right company partners and working with them, including the sharing of your business plan, is a key factor for success today.
- Phone system furniture and fixtures: If your customers often get a busy signal when they call your agency, it might be time to increase the number of lines, or perhaps even replace your entire phone system. You might also need to look critically at your furniture and fixtures to make sure that they are both and project a positive image in your community.
- Placer: You agency might be large enough to consider having a person devote at least part time to placing business for all producers.. It’s becoming more difficult for a salesperson to be an expert in all areas of responsibility and also remain an expert in knowledge about what every company is successful at underwriting and pricing.
- Team/Unit concept: If you’re not already operating using teams consisting of Commercial Lines producer(s) and CSRs, it might be time to consider the team concept. Putting together a team of one or two producers with a CSR and having them work to handle all of the business of that producer, or producers, is a highly effective way of doing business. If you wish to consider the team concept, remember that each team or unit must have enough commission income to make it a true profit center. A good benchmark for this is that each team should have at least $250,000 of commission revenue.
MARKETING It should be easy to set up a good marketing plan at this point because you’ve done the preliminary work of studying every facet of your agency. You should know what has made you successful up to this point. Expand those targeted areas and then take the time to try something new. Maybe it’s time to really get going on the Life and Health sales program. You might even want to plan to hire a producer in the Life and Health area. BUDGETING AND DETAILS The next step in your planning process is to put together a rough budget of how much income you will have in the year ahead and then decide how you are going to spend the money. Remember that this is only a rough budget — you and your bookkeeper or financial manager will have to put the final touches on the budget before you include it in your overall plan. ACTION PLAN The final step of the planning process is to take each item on your planning matrix and create an action plan for it. The key to using an action plan is to break down into small steps each matrix item that must be planned. Make sure that each step includes a brief description, an individual assigned to implement the task, a priority (A, B or C or 1, 2 or 3) and a start and completion date for each task. You, as the agency manager or owner, must check the plan daily to make sure that the people assigned to tasks are either starting or completing them on schedule. If you’re unwilling to monitor the implementation of the plan, it will fail. CONCLUSION Be realistic: Agency planning is not a one-person show. Divide up the research and data gathering among those people in your office who have the talent in each particular area. This includes everyone on your staff, right down to the receptionist. Planning is a game of divide and conquer. Once you have put your plan together, be aware that circumstances will begin to change. However, think how easy it will be to call your staff together to handle changes. Have each staff member bring a copy of the plan to the meeting, tell them what has changed, and make alternate plans to move ahead. At this point, you’ll be making minor corrections to a plan already in existence, rather than having to begin planning from scratch. To quote one of my favorite bumper stickers, “If you don’t know where you’re going, how will you know when you get there?” |