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...pression of the entire agency wage scale. This reduces the range between the t...asing rate, perhaps your compensation scale is not competitive. In smaller cit...

...s are trying to imitate on a small scale what the giants of the industry do as...

...ands of policies. Startups race to scale without proportional cost increases. ...tion aspects, models perpetuate it at scale. Successful systems include regula...

... than toward them. And, prepare to scale up rapidly from the initial implement...

... lot of extra work to get them cleaned up. This housecleaning will then take time away from the production of new business. After analyzing the agency's external relationships with insurance companies and accounts and the internal relationships with employees, you will e in a better position to assign a risk factor to this transaction. Weigh all of the information that you have reviewed and rank the situation according to the following scale: [ ] Little risk involved and chances of achieving the projected growth rate are quite good - 8. [ ] An average' situation that does not have any extraordinary features - 6 or 7. [ ] High level of risk involved with substantial attrition possible 4 or 5. Once you have determined the potential growth rate and the risk that this growth will not be achieved, you are ... seven year period of time. If this time period seems short, consider the fact that the average account will stay on the books for seven years. Do you really want to still be paying for business after the revenues that you would receive from it are gone? Once the initial cash-flow projections have been made, adjust the forecast to reflect the way the transaction will be structured. In an installment purchase, tax deductible interest will have to added to the expense projections. If amounts are to be allocated to expirations and covenants, tax deductions will be available that may allow the buyer to pay more for the agency. If the seller is to be paid as an employee, those payments and the associated employee benefits must be included in the cash flow. For planning and pricing purposes, ...

... If there are no written contracts spelling it out, is there some question of where the actual ownership of the accounts may rest? After analyzing the agency's book of business, company relationships, and internal management style and procedures, you'll be in a better position to assign a risk factor to this transaction. Weigh all of the information that's been reviewed, and rank this situation according to the following scale: Little risk involved and very good chances of achieving the projected growth rate- 8 An average situation with no extraordinary features- 6 or 7 High level of risk involved, with substantial attrition possible- 4 or 5 Once you've determined the potential growth rate and the risk that this growth might not be achieved, you're ready to address the third key element in valuing a business combination-the anticipated after-tax ... might be in order. When a branch is being acquired and the seller is being retained as a manager for a few years, set up a separate profit center with a bonus arrangement that pays a large percentage of the profits exceeding the earnings plan. This will provide a reward for higher commissions, lower expenses, and/or both. Agree to a slightly higher guaranteed price, but with installments to be reduced if the commissions don't remain at predetermined minimum levels. Hire the former owner to perform management functions (company relations, computer installation, sales or customer-service training, acquisitions) . Pay this individual a combination of salary and results-oriented bonus based on a formula in keeping with the assigned tasks, such as increasing contingent income, revenue per employee, or commission per producer or CSR. ...

... the top of the wage schedule on the basis that older employees, in terms of service, are reaching levels which the agency owner or manager believes are close to a maximum the agency wishes to or can pay; thus, annual increments for these positions become smaller. Meanwhile, starting wages for new agency employees have increased, mostly because of inflation, causing a compression of the entire agency wage scale. This reduces the range between the top and bottom wages, causing dissatisfaction on the part of the older employees, creating morale problems and lower productivity. As a rough rule, there should be at least a 10% differential between those supervising and those who are supervised. This matter of wage compression is quite serious. Loyal, older employees wonder why their years of service and acquired expertise ... or your compensation structure demonstrates insensitivity to the quality of your employees' work, eventually your agency's performance will deteriorate. Agency employees who give more of themselves than is expected and who take pride in doing a job well, soon become disheartened when not compensated for their extra efforts. They realize that extra work makes no difference, and mediocre performance becomes the norm. Have you considered or attempted to install productivity increase incentives? For example, do you pay for employee-provided leads which culminate in sales? Do you permit your licensed inside employees who sell by telephone to participate in the commission earnings gained on their sales? Do you urge your inside staff to constantly think insurance and of insurance sales opportunities and reward them for significant ideas and sales? Does your agency have a profit-sharing plan for all employees ...

...tuation according to the following scale: Little risk involved and very...ions (company relations, computer installation, sales or customer-service trai...

...ar Regular producer commissions scale for new and renewal business with a '...

... amounts to a handful of alternative risk financing techniques. Methods range from guaranteed cost (for risk-averse firms) to self-insurance and captive insurance (for firms seeking the ultimate in control over the risk management and financing process) . These techniques include: &# 160 Guaranteed cost Retrospective rating Large deductible Self-insurance Captive insurance This chart summarizes the main features of these alternatives: Analysis of Key Risk Financing Alternatives Rating Scale 1-5: 1 = least favorable; 5 = most favorable Guaranteed Cost Retro/Rating Large-Deductible Self-Insurance Fronted Cost Non-Loss Administration 1 2 4 5 3 Maintenance 5 4 3 2 1 Organizational Control 1 2 3 5 5 Guaranteed cost insurance. Guaranteed cost remains an attractive option, particularly in a highly competitive insurance market. "Guaranteed cost" means that the insured pays a one-time premium based ... ) . The only risk of guaranteed cost insurance is that the insurer might become insolvent or otherwise unable to pay losses covered by the policy. However, for a mid-size company, guaranteed cost insurance might not always be a bargain because underwriters can assess substantial risk charges due to the greater volatility of the loss base. Guaranteed cost programs also have few cash flow benefits for a buyer, other than installment payment plans. There are a number of variations on guaranteed cost arrangements. Many of these use a loss-sensitive formula to calculate the final premium. Examples include both incurred and paid loss-rated and dividend programs. Incurred loss retrospective rating plans. Retrospective rating plans (" retros") have been filed in most states for Workers Compensation and other lines. Usually these are loss-sensitive plans in which ...