How to determine if your agency or brokerage has a true sales culture
Even though you might be able to show extensive evidence that your agency is highly productive, profitable, or well capitalized, how do you measure your “sales culture?”
In our work with many of the industry’s top sales organizations, we’ve found that they usually monitor their sales culture metrics as carefully as their operational metrics. Here are five of the most important metrics they follow, on a producer-by-producer basis.
1. New Commissions per Producer. Perhaps the granddaddy of them all, this is also one of the easiest to track.
2. Prospect Pipeline. Sales-culture agencies require their producers to set new business goals, and then monitor their performance toward achieving them. A key measurement is a “prospect pipeline” report that tracks prospects by name, estimated commissions, and fees. Some firms require each producer to have in their pipeline a list of prospects with commissions and fees totaling four to six times their annual goal at all times.
3. Producer Prospect Pipeline. Sales-culture agencies also recognize that they need to keep building their base of producers. Over the long run, an agency needs to expand its production base by the same growth rate as its target revenue growth rate. This means, for example, that an agency with 10 producers that wants to grow 10% per year needs to hire at least one producer each year.
This requires continuous prospecting of production talent. The best agencies recognize that a single individual can’t do an effective job of bird-dogging production talent. Instead, they involve all producers in recruiting, requiring them to maintain a list of producer prospects as a method of sourcing culturally compatible production talent.
4. Average Revenue per Account. Sales-culture agencies understand that as a producer’s talent, experience, and relationship network grow, so should the average size of the accounts they pursue.
These firms have harnessed the power of the 80/20 rule (80% of profits come from 20% of customers) by providing their producers with a stratified listing of their customers, together with both carrots and sticks that encourage them to increase the average account size.
Many firms have quit paying their producers for accounts that are below a certain minimum. For example, the 2004 Independent Insurance Agents & Brokers of America Best Practices Study indicates that 40% of agencies with revenue between $2.5 million and $5 million don’t pay producer commissions for accounts that generate less than an average $1,733 in commission.
5. Receivables Aging. Sales-culture agencies recognize that their producers are salespeople, not bankers. Fewer and fewer agencies are extending credit to clients by being loose on collecting premiums.
The Best Practices Study found that the highest performers have made steady progress in improving collection time and avoiding bad debts by reviewing their receivables regularly and implementing strict collections policies with their producers.
In recent months, storm clouds have been gathering on the horizon of the insurance brokerage business. The good news for agencies that have developed a sales culture is that success doesn’t depend on the weather. Rain or shine, they’ll keep finding ways to build their viability and value.