A few years ago, an agency principal — let’s call him George — had hit the wall. He couldn’t produce any more than he was already producing. Most people would’ve said it was time to hire a producer. George thought otherwise. He figured a producer would cost him money and he had already set his spending priorities. Besides, the money would have to come out of his pocket because the agency didn’t have any capital. George outsmarted the IRS every year by paying himself almost all the of agency’s profits as a bonus to avoid double taxation.
Because his companies wanted more production, he couldn’t just sit on his book. So George came up with a better idea than hiring producers. He announced to his CSRs, 'Start cross-selling and I’ll pay you $15 for every cross-sell.' Paying CSRs for sales wouldn’t cost him a dime because he wouldn’t pay unless they sold something (and he wouldn’t have to pay an initial salary while a new producer got started). The CSRs promptly guaranteed that they’d start cross-selling, tomorrow. Three months later, George looked at his flat sales and scratched his head. He asked his CSRs why sales hadn’t risen. They told him that none of their customers had called and asked for additional insurance!
George then implemented a program for them to call clients. Four months later his company marketing reps asked why sales were flat. George assured them that things would improve once the CSRs started selling. When that day never came, he asked his CSRs what was wrong. They told him that they neither liked nor knew how to sell. He’d forgotten that they might need some sales training.
Later that month, George attended a presentation at the state’s agent convention. The speaker suggested that the best course was to hire a producer and train them from scratch. George saw the point. Easy enough to do with the right resources — but the agency didn’t have any money. What’s more, George (like most of us) didn’t want to give up any part of his lifestyle. He felt that he needed to keep his very nice car as a way of impressing clients and prospects. He had a country club membership so that he could sell on the golf course. He also paid his staff quite well.
Pressed for more business, George decided to give up part of his paycheck and found an experienced producer so he wouldn’t have to subsidize him for long. He hired a former company marketing rep who had been laid-off after 20 years. When the producer came to work Monday, George showed him where to sit, introduced him around, and showed him the restroom and coffee machine. A CSR gave him a run-through on the automation system that morning and he was ready to start.
George and the producer had a meeting a few months (actually 15 months) later. The producer’s severance had expired and he was starving. George had hired him for a small salary plus commissions because they thought he’d make enough sales before his severance ended. George told him, 'Hang on. It’ll just take some time.' The producer said he needed some training and money to survive. George had always meant to get around to training him, so he said he’d come up with something soon, and would increase his small salary. Because George is an eternal optimist, he knew that sales would start picking up that very afternoon, so cutting expenses was out of the question. George also drew down some of his cash accounts (i.e., trust account) to finance the producer’s raise. After all, his dry spell was only temporary.
A few months later, the company reps began showing up pressing for growth commitments. Times were tough. George turned some of his accounts over to the producer to supplement his income and to give George room to write more. However, he wasn’t as aggressive as he used to be. To keep up his conspicuous lifestyle, he made a few more withdrawals from the agency’s trust fund. Although his bookkeeper warned him about having a trust ratio of less than one, George knew that she didn’t understand the needs of an agency owner. Besides, sales would soon skyrocket as the producer started to get customers.
That fall, the marketing reps again began their annual parade into his office. The meetings went much like those of the past several years, with George promising to hit the unrealistic goals set by the companies. The meetings got him thinking about sales. His producer’s sales hadn’t increased much after he’d sent him to that one-day sales school a few months back. He would start spending more time with his producer in January. The holidays were a bad time for starting anything new.
George started going on sales calls with his producer in March. Although his producer was good with customers and prospects and had strong technical knowledge, he just wasn’t selling. Their relationship grew weaker as both became frustrated. In November the producer left. He had built his book to $110,000 in commissions, including what George had given him, over the past four years. George wanted to hire someone else — but experienced producers wanted $50,000 in living expenses while they got started, plus 40% of renewals.
George still needs a producer. He’s worked hard and wants to relax a little. However, he doesn’t have the money to pay the going rate and because he financed the last producer through his trust fund and hasn’t repaid it yet, George can’t afford to go that route again. He hopes to find a great producer who’s both willing to work for peanuts and can succeed from the get-go.
Every now and then George thinks about leaving money in the agency — but something else always seems to come up and besides, who wants to pay double taxes? Meanwhile, he keeps looking for a way to grow. After all, sales will begin rolling in tomorrow!