Planning: A Survival Tool

PLANNING: A SURVIVAL TOOL

As agency manager, every task you undertake on a daily basis should be one step nearer the completion of an overall agency plan.

'What plan?' you ask.

Not one single agency with which we consulted had a written plan for the current operating year. A few had some note in the desk drawer, but no plans had been formalized and shared with the agency staff. This is not, unfortunately, a very good record, but we think it is typical and may explain why so many agencies are experiencing difficulty in financial, operational, sales, and personnel matters.

So what can you do as agency manager? It really isn't as difficult as you might think. The name of the game is survival. If you are going to survive in your present form or merge with another agency, you must plan very well for your future.

Only 10% of agencies have a fully developed written plan that each staff member is aware of and following. That leaves 90% in a critical time in the insurance industry, without the essential tool of planning to help them get to where they want and need to be.

The most common excuse for not planning is that an agent has tried planning in the past, only to have circumstances change so drastically that the plan became meaningless. However, it is better to have to change a plan than to have no plan at all. Constantly changing conditions in the industry are the main reasons why planning is so important.

You must plan for competition, hard or soft market conditions, economic changes in the area (for example, the energy slump in oil states, or recessions driven by real-estate slumps), and, more important, for the continuation of our agencies, whether by internal perpetuation, sale to a third party, or a merger/cluster. You must have a plan for profit because of the ever-increasing expense of automation and such everyday overhead expenses as Group Health, training, and education. Actually, the reasons to plan are endless, based on a particular agency's configuration of needs.

COLLECTING DATA

If you have never done formal planning, beginning the process is the most difficult part. You will need the following data for your analysis:

• Financial information for the past three years

   

• All statistical reports from your automation system for the past calendar year, and this year to date.

   

• As much data as you can accumulate on the strengths and weaknesses of your agency staff

   

Once you have collected your data, you will need to proceed in an orderly, step-by-step fashion. The following steps will get you where you want to go:

1) Set up separate income and expense allocations for each revenue stream in your agency. The idea is to see if you are really making money in each business profit center.

2) Decide what you think can be accomplished in new business sales in each profit center.

3) Determine what your renewal-retention percentage should be in each profit center. Should it be 92%? 93%? Apply this factor to each of the income streams to see what your renewal income will be.

4) Staff, equipment, and office space should be considered next. As a result of writing new business, will the total income and activity mean you will need additional people, equipment, and office area? If so, decide what you are going to do about each need.

5) Decisions must now be made on company representation and general problem solving in this area. Decide what is wrong and how you intend to fix it.

6) The agency staff should be your next concern. Which people need training and education so that they can become more valuable? Design a program for each person in regard to further education and/or sales training for the coming year.

7) Based on the result of the first six planning steps, develop a budget for income and expenses for the coming year. By the way, include as an expense item the amount of pre-tax profit you would like. If you want 10%, then you'll have to pay all your expenses from the remaining 90% of your commission income and interest earnings. However, do not include contingency income in your budget.

8) Finally, take some additional time to create the needs in the following area for two and three years from now: new business sales by income stream, renewal business by income stream, people needs, equipment, space/occupancy needs, and automation expansion.

The next phase is to meet with your agency staff, share with them what you have created, and let them have all the input they want. If your agency is large, you may want to have each department manager take the part of your plan that applies to his or her department, and work within that area to build on the plans.

LET THE AIR OUT

Be prepared to have the air let out of your tires! If your people give honest feedback, they won't agree with more than 50% of what you have developed. That's the idea. What you create is the seed, to get your staff started on their planning. The sign of a truly professional manager is the ability to create, refine, and implement.

The final planning step is to put your key people together and put in writing all the input they have developed. Organize it into a plan that can be implemented by using an action-plan form. The best action plan defines each task, assigns it to an implementer, gives it a priority, and sets a date for the start and finish of the task.

You will probably end up with separate plans for each of the departments within your agency. For example, you might develop action plans for Sales, Personal Lines, Commercial Lines, and Life and Health departments, along with Management/Administration.

When you've completed your plan, you have a right to feel pleased with the accomplishment of a tough task. But your real work begins now. The key to making the plan work is your own personal follow-through. You must check the plan every week, and ask the individuals who are responsible for implementation of the various tasks how they are progressing.