It used to be the $1 million ceiling. That was the level of revenue at which an individual performing agent with a few helpers had to become a business with different people handling different clients and responsibilities. Everyone still worked for the agent, but the agent no longer made every decision.
However, running an agency as a business doesn't automatically result in growth and a high quality of professional service. By the time the agency reaches $2 million, it runs into another "invisible ceiling."
The $2 million revenue mark around which many agents hover for several years is one in which a change in management must occur in order to break into the next level of growth. Owners who have been jacks of all trades, filling the gaps to ensure that customers are serviced adequately, must convert themselves into managing partners. If owners wouldn't spend $100,000 for a Personal Lines customer service representative, it behooves them to staff the agency properly. Then they can use their time in a way that's appropriate for their skill level and that justifies their compensation.
The key to moving into the next generation of growth is to develop a deeper understanding of the power of management. Management is a productive profession, not a frill that can be trimmed in favor of sales or service. How do you explain the appreciation of fine painting to a blind man? He knows he can live without it and can't understand the fuss about applying some textured paint to a canvas.
If he were able to
see, he might find out that art adds a dimension to his life that he never knew existed. Most owners of small agencies facing the $2 million ceiling without knowledge of management are like the blind man. The only way they know to grow is to repeat they've done in the past, but since the old familiar methods no longer work, they're at a loss. New ways seem risky.
But they don't have to re-invent the wheel. All they need do is review similar companies that have grown through the $2 million mark and into double-digit growth. They'll find that these companies hire enough of the right people to manage the daily workload. They focus their managers on growth, profitability, productivity, and monitoring and managing others to accomplish more than they could ever do themselves.
It takes fortitude to build businesses from scratch-but leverage is what builds large businesses from small ones. The reason that 93% of all businesses never grow beyond their owners' ability to produce personally is that they refuse to invest in people and learn the arts of delegation and management. They feel that their long experience puts them beyond the learning stage. However, the special 7% use their historical success as a springboard to a
different level of success and understand that they'll never cease learning their business. Each subsequent level brings new challenges and responsibilities.
If you're facing the $2 million barrier to further growth, consider taking these steps:
- Formulate a strategic and tactical plan and budget. Nothing happens until it's written down.
- Relieve your owners and key managers of daily process-driven work. If necessary, hire people to accomplish administrative tasks at lower compensation levels.
- Determine the most productive thing that each owner can do to justify his/her compensation and focus on those tasks. Growth, productivity, or profit to twice the owner's compensation level is the minimum. Triple justification is more likely to sponsor profitable growth.
- Delegating functions doesn't mean delegating control. Maintain control over day-to-day operations through a reporting system that informs you how much comes in, how much goes out, and how many and how old are the items remaining undone.
- Knowledge about your business is not just an important thing, it's everything! "I'm too busy" is a poor excuse. Evolve a Management Information System to tell you about new business, renewal status, and lost business.
These steps are the preliminaries to creating a professional agency as compared to the Mom-and-Pop shops that still dot the landscape. The professional agency knows how to move in the right direction to grow. The Mom-and-Pop shop believes that the fates control its destiny and trust in luck. Which would you prefer?