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IS THE 4.5% MODEL HOLDING YOU BACK?

IS THE 4.5% MODEL HOLDING YOU BACK?

IS THE 4.5% MODEL HOLDING YOU BACK?
June 26
08:39 2018

Winning Strategies

Revenue and profits depend on full-time producers

We see that the average producer is a part-timer at best. Even though most of them will still do okay, they’ll never be great, and  at the end of their career they’ll have tons of regrets.

According to the Organic Growth & Profitability Survey conducted by Reagan Consulting, agencies experienced 4.5% growth in 2017. People got really excited because it was an improvement over 2016’s growth of 4.2%. This concerns me.

To me, 4.5% is not exciting, nor should it be to any true sales organization! What is exciting is growth that is two or three times the national average. That would be either 9% or 13.5%.

I fear that many agencies are blindly following the 4.5% Model. Although they’re not doing this deliberately, that’s the problem—they’re not aware that they’re doing it. But maybe this model is exactly what’s holding them back!

Now before I expand on this, I realize there aren’t many agency owners sitting out there saying, “I’m following the 4.5% Model!” Most simply don’t have a growth model other than the old way of selling (you know, the old Look, Copy, Quote and Pray model). Guess what? It still works! However, I believe most will agree that the distribution system and the industry overall are due to change dramatically over the next five to 10 years.

Accordingly, I think it’s critically important that we examine what 4.5% looks like over the next five to 10 years, based on each million dollars of current agency revenue. After five years that sum will grow to $1,246,182, and at 10 years it will total $1,552,969. That doesn’t look so bad, does it? Unfortunately, it’s just a little more than $55,000 per year.

The picture brightens considerably when we assume a growth rate of twice the national average, or 9%. At that rate, $1 million grows to $1,538,624 after five years and $2,367,364 after 10 years. Now I’m getting a little excited, because we’re averaging $136,736 per year.

Better yet, let’s go to the three times model   to see what $1 million can become at 13.5% net growth per year. At five years it grows to $1,883,559 and to $3,547,796 after 10 years. Now I’m excited and committed because that’s an average of $254,780 per year!

Think about operating profits of 25% plus valuations of 10 times EBITDA and you should also be excited and committed!

The crux of the matter

While that helps us pump up Quick Starts, we have to go back to the source of the problem if we hope to solve it. In this case, why have agencies grown at only 4.5%? What is this 4.5% Model? The reality is that in most agencies, there is no model. (Note: Even if you’re already growing at 6%, 7% or 8%, it’s still worthwhile to look at what’s holding you back from greater growth and profitability.)

A question I often ask at speeches and workshops is: “How many of you want to grow your business?” Naturally, all hands go up. My response: “Great! Now how are you going to do that?”

Typically, I’ll hear one or more of the following responses, some of which make absolutely no sense: “We’re going to sell more insurance.” (Really? How?) “We’re going to work smarter,” and “We’re going to work harder.” So why aren’t they already doing that?

That’s why it’s so important to evaluate the root causes of low organic growth. Based on my experience, it all starts with producer productivity—or the lack thereof.

The strategies we teach at Sitkins are aimed at producers actually producing! As we believe that you score points only when you’re in the game, we focus on the amount of time producers spend in “producing activities.” We see that the average producer is a part-timer at best. Even though most of them will still do okay, they’ll never be great, and at the end of their career they’ll have tons of regrets.

To achieve greatness, producers and their teams must have a structure that allows them to invest 80% of their time and energy in the Four Key Money-Making Activities: Sales, Relationship Management, Continuations (not renewals) and Pipeline Development (remember, you’re after Future Ideal Clients, suspects or prospects).

I hope you remember the 12% Factor, which is a huge litmus test for you and your agency. Are your producers spending (investing, actually) 20 hours a week face to face with clients, future ideal clients and centers of influence? For our younger “producers in training,” a lot of this time is spent smiling and dialing or using digital technology to build their pipelines. So, 168 hours a week x 12% = 20 hours, which is only 50% of an average workweek!

However, our research shows that the average producer spends fewer than 10 hours per week in those four key areas, and that’s less than 6% of the 168 hours in every week! You adjust for evenings and weekends, but how much time are you really spending doing things that will earn you money? Could the fact that our producers are not even close to being full-time salespeople be part of the problem? (Answer: Yes!)

At the first-ever Virtual Roundtable we recently held for agency leaders, one of our long-time clients and friends said that he now has two classes of producers: full-time and part-time. His part-timers (based on actual results) are paid substantially less on their renewal books of business, which I think is a good idea. If they’re not generating enough new business to offset the escalating costs of servicing their accounts, then they’re not really contributing to the agency’s growth and profitability.

Causes and cures

Here are some additional reasons why many producers are only part-timers:

  • Addiction to Distractions and Lack of Routines. Most producers start the day with good intentions. They tell themselves: “Today’s the day I hit the long ball. Today’s the day I work on my pipelines. Today’s the day I focus on my vital few clients.” However, if the first thing you do every day is look at emails on your smartphone, it’s extremely likely that you’ll continue to check it every time you get an alert or notification. Considering that the average person checks his or her smartphone 150 times a day, that’s an enormous distraction!
  • Do you have a morning routine that gets you started on a great day? If so, you’re distinctly in the minority. Most producers have no routine other than Hysterical Activity on the Way to the Grave. A routine is not reacting to stuff. Rather it’s what you do proactively to make every day a great day. What are you doing to start your day physically, mentally and educationally?
  • No Review. I’ve always been a proponent of the Sunday Night Review. It involves setting aside a specific time each Sunday to review what happened the previous week and look ahead to what you have planned for the upcoming week. These days, I realize the importance of doing that every day (either at the start or end of the day), not just once a week. It’ll give you a laser focus on the non-negotiables you need to accomplish that day.
  • Magnetization. Whether you know it or not (or want to admit it), you are magnetized! But what kind of magnet are you? Depending in part on your morning routine, you’re either going to be a CRAP Magnet or a Results Magnet. A CRAP (Can’t Resist Attracting Paper) Magnet will always use the ITB (I’m Too Busy) excuse for lack of achievement. “I’m too busy to get out there and sell/visit with my best clients/make random phone calls/send thank you notes/call underwriters/attend networking events.” These are just some of the things producers say they’ll do when they “get a chance.” I believe the reason they never do it is that it’s not a priority for them.

In contrast, Results Magnets always focus 100% on creating positive results. They refuse to hide behind activities and they demand more of themselves than anyone else ever would. They question everything they do by asking: “Does this have anything to do with creating a positive result or am I just being busy?”  Underachievers love being busy!  It’s their ultimate excuse. It’s how they justify their poor performance.

The 4.5% Model

  • A big part of the 4.5% Model is lack of accountability. No one is following up with the producers to see if they did what they said they were going to do. That’s prevalent at agencies that sporadically hold sales meetings. Oh sure, they have random bitch sessions about the service team and the carriers, but actual sales improvement meetings that include accountability don’t happen.
  • Clearly there’s no need to rehearse or practice before presenting to suspects or prospects. After all, if you throw enough stuff against the wall, something is bound to stick!
  • Gathering information on prospects is a waste of time in the 4.5% Model. Instead you start your initial prospect meetings with: “So what do you all do here? Tell me more about your company.”
  • The 4.5% Model allows empty or anemic pipelines occupied, at best, by suspects or prospects at best—not Future Ideal Clients! Furthermore, the life span of some prospects appears to be endless. How can you tell? Typically, you’ll hear a younger producer say: “I just met the owner of ABC Company and he wants me to work on his account,” to which an older producer will reply, “Hey, that’s my prospect! He’s been in my pipeline and I’ve been meaning to call him for (weeks/months/years)!” Of course, that hasn’t happened YET—and it probably never will—because he’s been “too busy” to make the call.
  • Just putting a suspect’s name in the pipeline is not an eternal reservation for that prospect. “Someday I’ll call” is not an icon you can click on in your CRM. Unless a producer has gained significant traction with a prospect in the last quarter and can report tangible results, that prospect is not theirs.
  • The 4.5% Model says that your Unique Selling Proposition—that which separates you from all other “me too” competitors and compels people to buy from you— is that you provide great service, represent all the major insurance carriers, have been in business for 100 years, have all the best people in the industry, and can save them money on their insurance. (Gee, they’ve never heard that before.) Also, there’s no need to know and live your Top Five Points of Differentiation (PODs), which further distinguish you in a crowded marketplace.
  • Client Experience. According to the 4.5% Model, delivering a world-class client experience consists of answering the phone by the third ring, replying to most emails within 24 hours, and reactively addressing service issues. There’s no need to proactively connect with your clients; they’ll call when they need you.
  • Promise Fulfillment. Followers of the 4.5% Model make numerous promises and keep most of them, though not all. They don’t see the need to under-promise and over-deliver, even though their best competitors understand the value of promise making, promise keeping and promise exceeding!
  • Planning Sessions. The 4.5%ers talk a good game about annual planning sessions, but anything that remotely resembles planning typically is relegated to the agency holiday party or some other yearly event. They know they should have a strategic planning session, but they’re “too busy” and they’re getting great results anyway, so why bother? And why worry about things like documentation and accountability? When you can grow by 4.5% anyway, good intentions are good enough!

The bottom line

By now you’ve probably gotten the message, which I want you to know is not meant to be negative, nor is it intended to berate or belittle anyone. However, if you recognize yourself, I hope I’ve gotten your attention.

As I’m sure you’re aware, having options is part of the beauty of this business. You can choose what you want to do. You can follow the 4.5% Model and do okay if you can accept the possibility of having some major regrets when you retire. Or you can commit to the 9% Model, the 13.5% Model or any other higher-growth model and have no regrets!

The best agency leaders understand the importance of high performance and the positive impact it can have on their clients, colleagues, carriers and the entire community. As a result, the best in our business strive to accomplish three goals: Sell More, Retain More and Earn More. You can do the same if you’re willing to lead more and invest more in your future.

As always, it’s your choice!

The author

Roger Sitkins, CEO of Sitkins Group, Inc., is the nation’s number-one “Agency Results Coach.” He established The Sitkins Network™, a territorial exclusive network of high-performing agencies, and The Better Way Agency, a web-based training program that shows agency owners ways to make significant improvements in all areas of the agency. To learn more, please visit www.sitkins.com.

 

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