THE DEFINITION OF INSANITY: DOES IT APPLY TO YOUR AGENCY?
by Becky Lathrop
“It has been said that ‘attitude’ will be the deciding factor in your failure or success. If you want something different, do something different. Make it happen. Progress is impossible without change, and those who cannot change their minds cannot change anything.
George Bernard Shaw
The world is constantly changing around us. Consider the state of U.S. economy, financial instability in international markets, greater government involvement in business, and companies scaling back, just to name a few current upheavals. Is our insurance industry also in a state of flux? You’d better believe it!
You’ve undoubtedly heard this said before, but it’s worth repeating: “The definition of insanity is doing the same thing the same way and expecting different results.” This holds true in life – and especially for insurance agencies today.
Agency owners are constantly complaining that they’re working harder, but making less. You need to make a decision to either sell your agency or stay in the business for the long run. If you decide to stay in the business, can you really expect different results if you don’t adapt to the ever-changing issues that impact your agency?
This is a great time to adjust your thinking, both personally and professionally. First, stop and assess your situation. Unless you will be retiring or selling your agency in the very near future, it’s definitely time for a change!
Start with a “change in attitude.” New beginnings are good; they can be exciting, and fun, too. This doesn’t mean it will be easy, but you have the advantage of the experience you bring to the table. Think of new and different challenges.
Strategic Planning
It’s critical to start by developing a long-range plan with specific goals. Begin with a “SWOT” analysis of your agency’s Strengths, Weaknesses, Opportunities, and Threats. This will help you determine the next steps in developing a specific strategy to change the way you operate.
Managing Your Portfolio
It’s imperative to establish realistic new business and renewal goals. When setting these goals, you’ll have to consider several important factors:
- Agency sales culture and abilities
- Sales vs. service/retention responsibilities –actions required
- Income streams – Personal and Commercial lines, financial services, other fees, etc.
- Growth – organic vs. acquisition (or both)
- Budgetary issues
- Carrier appetites and capabilities – target marketing strategies, bonus programs
- Client expectations and needs - both new and renewal
Now you’re at the point in your plan where you must assess the marketplace in more detail. What areas or businesses may be advantageous to explore? Based on what you’ve done previously, do you need to shift your marketing strategies?
For example, have you focused on larger Commercial accounts in the past? Maybe it’s time to write more small- to medium-sized accounts and businesses, so you can diversify your portfolio if carrier strategies change (something we’ve seen happen regularly). Do you need to spend more time on the Personal lines side of the business? Have you effectively multi-lined your portfolio?
What are other successful insurance agencies doing? This will depend on market demand, both short and long-term, and your agency’s ability to change with these demands.
Agency Productivity and Effectiveness
After completing your “SWOT” analysis and determining how your portfolio might change, it’s time to address the workflow within the agency. Are you maximizing the use of technology so you and your staff can work more efficiently, effectively, and productively?
Does your plan focus on customer satisfaction? Do you have the lowest-paid person handling administrative duties (staff stratification)?
Does each staff member have clearly defined roles and responsibilities, using updated job descriptions?
The way you’ve done business might no longer be the best or most profitable way. Make sure your new way of doing business is compatible with any changes in the makeup of your book of business.
Evaluate Your Human Resources
Evaluating your agency’s human resources is a critical step toward success. Do you have the right people, talent, and expertise to follow your “new” direction for growth? Can you change to lead the way? Can the people you have currently make the changes needed to help the agency reach your goals? If not, you might need to seek different talent in the marketplace. Due to our current economic challenges, there’s more talent available today than in the past. Evaluating your human resources is usually one of the most difficult and sensitive areas to approach; however it’s a step that you must take.
Evaluate, Implement, and Execute
Will the changes you contemplate significantly increase the cash flow, profitability, and value of your agency? If not, why are you making them? If they do, communicate your high-level ideas and plans to your peers, family, and key members of your agency. Ask for their honest feedback and input. They’re part of this plan going forward, and you’ll need their support to make it happen.
To maximize agency value, put everything that you have discussed in your overall strategic plan. Because your agency is probably the largest asset in your personal financial portfolio it’s critical to have a written plan with highly specific action strategies. If you don’t know where to begin or think you need help, find a facilitator to assist you. Just make sure the person you hire is knowledgeable about the insurance industry.
However, the real key to success in increasing the value of your agency over time is the ability to implement and execute these action plans. Never underestimate the value of measurement along the way, in case you need to make adjustments for something that might not be working as you had planned. This is an ever-evolving process that you must evaluate constantly.
Summary
Remember the definition of insanity: “Doing the same thing the same way and expecting different results.” If you want to create new results, try something different. Step out of your comfort zone.
The insurance business is a great one – and you take pride in the protection and peace of mind you bring to your clients, and the income you provide to your family. However, now’s the time to decide which fork in the road you should take:
- Do I sell the agency and retire or become a producer for someone else? or
- Do I put a plan in place and grow my agency so I can maximize its future value?
You’re in the driver’s seat! If you decide that it’s time to sell the agency, then do it. If you decide to change your way of thinking and you want to remain in business, then begin as soon as possible. Good luck!
P.S. Learn More, Earn More
Basic agency management strategies and procedures are examined at CIC Agency Management Institutes and examined at a more advanced level in Agency Management Practices Ruble Seminars. Maximizing Agency Values II, an Academy publication, discusses perpetuation issues and evaluating agencies for future acquisition.
Becky Lathrop, CIC, is vice president of Optimum Performance Solutions, LLC, an insurance agency consulting firm that provides sales, marketing, retention, workflow, profitability, valuation, merger and acquisition, and agency perpetuation planning services to agencies nationwide. You can reach her at (561) 373-0560; [email protected]; or visit www.optperform.com. Reproduced from Resources Magazine, with permission from The National Alliance for Insurance Education and Research.