What’s holding you back?
When you’re achieving good results,
it’s tempting to not raise the bar on agency standards.
By Roger Sitkins
During our training and coaching sessions, I always ask participants if they are making more money than they expected. Then I follow up with, “How many of you are making more than your siblings and friends? How many are making more than if you had a real job? How many would be fired if you had a real job?” That last one always elicits a big laugh and more than a few raised hands!
The reality is that leading and having ownership interests in an insurance agency, even one that operates mainly to support a lifestyle, provides good results and rewards. Through my years of coaching more than 500 agencies, their leaders, producers and service team, I’ve noticed there are several traps preventing agencies from becoming their Best Version Possible. Collectively, the various traps that generate good results are a trap in itself—one that keeps agencies from creating great results.
What level of results is your agency currently achieving? Poor, average, good or great results?
The reality is that you can ignore most of the Best Version Possible behaviors and strategies that we relentlessly promote and still achieve good results. Good-results leaders get rewarded with high personal income and agency valuation increases.
The best players in an agency will do very well no matter what, while the middle group will do just fine. But because of that, there is little incentive to change. At least that’s how things seem at the moment. But what happens if (and when) conditions change?
For the last few years, the hard market and inflation have resulted in record-high organic growth and profits for agencies. What’s more, contrary to predictions of an economic slowdown or even a recession, agency valuations continue to hold steadier than predicted, around 12.5 x Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
That’s all very encouraging news. However, as Warren Buffet is often quoted, “It’s not until the tide goes out that you discover who’s been swimming naked!” Based on early indications, the tide is slowly going out.
In his classic, Good to Great, Jim Collins writes, “Good is the enemy of great.” If so, it stands to reason that good results are the enemy of great results for insurance agencies.
I firmly believe and preach that there’s always one more level to attain. No matter how good your results are today, there’s a Best Version Possible waiting for you, as a leader, to arrive.
Assuming you agree that this sounds great, what’s holding you back? Typically, people are either not aware that they’re in a trap or unwilling to change because they’re comfortable where they are. Our goal is to help you escape the good-results trap and execute a Best Version Possible plan that will allow you to enjoy the rewards and freedoms normally reserved for the top 2% of agencies and their leaders.
There are several minor traps that collectively lead to the ultimate trap of “just good enough” results and financial rewards. Let’s examine some of the ones that keep agencies from achieving great results.
- No business model. You may have seen or heard this from me before: Your current business model is perfectly designed for you to achieve the results you are currently achieving. Far too many owners have a business model that is not intentional—it’s based upon winging it, so it just happens. They don’t have a concise, one-page summary of their plan that includes a vision, mission statement, critical success factors, accountability process, and key performance indicators (KPIs).
The beauty of the one-page summary is it’s something all team members can rally around. Without one, the average team member and some owners wonder, “Why are we here? What are we doing? Where are we going?”
- No financial model. As agency leaders, you look at your monthly profit and loss statement and balance sheet reports. But do you also have a dashboard for your KPIs? Do you have a financial model that has a laser focus on your GrowFit (a combination of your percent of organic growth and percent of operating profit)? Our BVP model specifies a minimum GrowFit of 40. What’s yours?
- No unique and repeatable selling process. If I were to reach out to your agency as a future ideal client (FIC), how would you answer this question: “What makes you and your agency unique?” Could you comfortably and conversationally explain your points of differentiation and the process you’d take me through?
As an FIC, would I be impressed by how different your agency is and want to know more? Would you open a new file in my brain? If not, you and your agency are still caught in commodity-based selling.
There are several minor traps that collectively
lead to the ultimate trap of “just good enough”
results and financial rewards. Winning Strategies
- Part-time producers. One of my biggest concerns for agencies is that most of their producers spend the majority of their time in non-sales-related activities.
Rather than having a laser focus on the Green Zone activities of sales, continuations, relationship management, and pipeline development, they get stuck in the Red Zone, the service trap. This encourages them to use the ITB (“I’m too busy”) excuse to prospect or sell new business. What are they too busy doing? Yet, even as part-time producers, they’re getting good results for which they are well compensated.
- Part-time clients. What percent of your clients purchase all of their insurance and risk management needs from your agency? This might be a better question: What percent trust you with all their insurance and risk management needs? Think of the lost revenues and diminished retention caused by part-timers.
First, because there are few if any exit barriers with one-policy clients, you’re making it easy for them to leave. Second, you’re going to lose money for two reasons: (1) lower revenue per transaction; and (2) the costs associated with servicing that single policy. Even with automation, it takes time and staff to deal with every client.
Also, keep in mind that the size of the individual books of business and the size of the agency overall are directly affected by the average size of their accounts.
- No culture or cadence of accountability. One of my favorite questions to ask agency leaders is: “How great would your agency be if 100% of your team members actually did what they said they were going to do?”
I’d say this is probably the greatest frustration among agency leaders. Often, they will announce an idea that everyone agrees is wonderful and then no one follows through. For example, they’ll say that from now on, producers will only work with full-time clients. They’ll assume that the producers are doing that, but they don’t really know because the leaders are so far removed from daily sales.
Leaders must lead the way. Unless the leaders instill accountability within their agency, most team members will think, “This too shall pass.” The problem is, they still generate good results even when they’re not accountable. They figure if it’s not broke, don’t fix it. What they don’t recognize is that it is broken. But without pain points to drive change, their results will stagnate and never improve.
- Ignoring the 80/20 Rule (Pareto’s Principle). In 99% of the hundreds of agencies and thousands of producers we’ve studied, the 80/20 Rule exists. Ignoring it makes you vulnerable. What if you lost the 5% of your clients that generate 50% of your revenues? Could you cut expenses quickly enough to survive? How many employees would you have to let go? What if you lost the top 20% that generate 80% of your revenues?
If 5% of your customers generate 50% of your revenues, it takes the remaining 95% to generate the other 50%. Realistically, you’re not likely to lose all of the top 5%. However, that doesn’t mean you should ignore the facts.
Instead, why not embrace the 80/20 Rule and use its power to your advantage? What if the top 20% of your customers gave you a referral? Agencies that ignore the 80/20 Rule risk being vulnerable, while those that use it are guaranteed to grow. In fact, by adopting the 80/20 Rule, the agency owners we’ve worked with have grown their revenues by 15% to 20% per year.
- Underutilization of talent and technology. According to the Best Practices Study, “it’s all about the people!” Yet, as I’ve discussed previously, agencies spend less that .25% on training and development of their team members.
We believe that the real goal should be to maximize the sales and service capacity of your team members. Salespeople must have the time and capacity to execute an improved sales plan. Also, service people must be able to handle a large increase in revenues. It’s not about the number of accounts, it’s the revenue they handle that makes the difference.
It’s vital that both sales and service staff maximize the agency’s management system and other technology. Unfortunately, most agencies utilize less than 50% of the technology that’s available to them. That costly mistake can result in hundreds of thousands of dollars of waste. After all, if you spend $100,000 on technology and use only 50% of it, you still spent $100,000! That’s not a good ROI unless you see improved results.
The bottom line
When you’re achieving good results, it’s tempting to not raise the bar on agency standards. The problem is, your frustrations will continue to mount, and you won’t enjoy many of the freedoms you sought, which will lead to plenty of regrets in the future.
Perhaps the biggest loss is unrealized agency valuation. Every $100,000 of profit creates a minimum of $1.25 million-plus of agency value. How much are you leaving on the table? Are you willing to challenge yourself and your team to escape the good results trap, execute a BVP plan, and enjoy the rewards and freedoms that come with it? It’s your choice!
The author
Roger Sitkins, CEO of Sitkins Group, Inc., developed The Sitkins Network and The Better Way Agency program. Insurance professionals with diverse levels of experience have benefitted tremendously from his training and leadership.
Roger was inducted into the Michigan Insurance Hall of Fame in 2017 and in that same year also received the Dr. Henry C. Martin Award from Rough Notes magazine. He is known throughout the industry as the nation’s top insurance agency results coach. To learn more, visit www.sitkins.com.
