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The Rough Notes Company Inc.



September 24
09:51 2020

Winning Strategies

By Roger Sitkins


Small leaks can become large crises

Recently I noticed a roof leak in the covered porch at my vacation home. Even though I knew the roof was in good shape overall, there was some storm damage that needed to be addressed. There were two ways I could deal with it: (1) I could hope it would go away; or (2) I could deal with it as soon as possible. Ultimately, I decided it was time to find the source of the leak and fix it, since it wasn’t going to stop leaking by itself. That’s when I contacted a respected local roofer for help. My goal was to stop the leak before it became a major problem.

That experience got me thinking about the small leaks that occur in so many agencies every day. Much like a leaky roof, there are little things that are noticed but typically not dealt with early enough to prevent a bigger problem. Usually these leaks are confined to specific areas within the agency, while other areas are completely sound/solid. Regardless, now may be a good time to look at your overall agency to identify and plug the leaks.

[M]ost agencies continue to have leaks in several key areas, including time, clients, technology, profits, and overall agency value

Most agencies are semi-successful and doing okay. They seem to be making it through the COVID-19 crisis and realize that this truly is a great business. It’s been my experience, however, that most agencies continue to have leaks in several key areas, including time, clients, technology, profits, and overall agency value.

By the way, I’ve noticed one thing that’s not leaking at most agencies—pipelines. That’s because things that are empty cannot leak! As you fill them, however, be sure to focus only on future ideal clients, thereby eliminating any references to prospects or suspects.

Common causes of leaks

  • Time Use. The number-one leak in most agencies is the use of time. Time is our only diminishing asset, and once it’s gone, it’s gone. One Key Performance Indicator (KPI) we measure in our producer and chief revenue officer programs is time spent selling (TSS). If you’ve followed me at all, you know about The 12% Factor. Following our producer’s perfect schedule, the goal is to get the producer to spend at least 20 hours a week in face-to-face meetings with clients, future ideal clients, and centers of influence. Of course, these days, most of these meetings take place virtually. But the bottom line remains the same: 20 hours a week is only 12% of a total week!
    Assuming you’ve heard this before, what are you doing about it? How much time is being leaked because of: producers being caught in the service trap; the lack of a high-performance team; the lack of a selling process that differentiates you in the marketplace; and the consistent hiding behind activities vs. producing results? What’s your ROT (return on time)? Every producer, even the average ones, will do something that easily will earn them upwards of $1,000 (sometimes as much as $3,000) in an hour. But then they’ll turn around and do things for which they are grossly undercompensated. That’s why it’s so important to understand that time really is money. Those who embrace this concept value their time. As a result, they focus their attention on activities that will maximize their ROT.
  • Clients. The next big leak is clients. One of my overall themes is ROI (retaining and obtaining ideal clients). The reality is, most agencies have a very high retention rate, typically in the 85% to 90% range. This requires selling at least 10%—if not 15%—more than you sold last year just to be even. You’ve probably heard, “We’re really busy. It’s coming in the front door and going out the back.” Without an effective exit barrier strategy in place, you will continue to have clients leaking out of your agency bucket. It goes without saying that the number-one exit barrier is full-time clients only. Assuming you already know this, what have you done about it?
    Other issues to contend with include increased competition from the direct writers and the fact that your best competitors are getting better and pursuing your best customers. Remember, your best customers are your best competitors’ best prospects. What are you doing about proactive retention? Do have a defined client experience that gives you an edge over the competition?
  • Profits and Agency Value. It’s pretty straightforward: Your financial model should start with your bottom line becoming your top line. What amount of operating profit are you targeting?
    One of my best friends built one of the most successful CPA and consulting firms in the Southeast. His business model, which drove everything he did, specified a minimum annual profit of 40%. That way he would always have at least 40% of revenue available for partner distribution. The only way he and his team could do that was not to spend more than 60% of their income! It’s really that simple.
    You may have heard me discuss this before in one of my podcasts or in a previous article, but an agency should be making at least a 30% operating profit. This, of course, means we do not include contingency income or investment income in our operating statement. All of that money is 100% profit. Consequently, the only way we can get to a 30% operating profit is to spend no more than 70% on expenses, right?
    The reality is that in today’s world most agencies operate at a 15% to 20%profit, although the best ones report an operating profit that exceeds 30%.Their true operating profit, however, is usually 6% to 8% lower.
    What’s yours? Are you like the average agency that allows profitable accounts to subsidize unprofitable accounts, and profitable producers to subsidize unprofitable producers? If you are not looking at literally every employee as a profit center, then you’re not looking deep enough into your agency’s operations. Certainly the easiest KPI here is revenue per employee and, more important, spread per employee. If you’re not consistently comparing your results to those of the Best Practices study, how do you know how you’re really doing?
    Keep in mind that in today’s acquisition-frenzied world, every $100,000 of unrealized profit is a loss of $1 million of agency value! Again, I know you’ve heard it before, but why do you continue to leave millions of dollars on the table? What are these leaks actually costing you in profitability/owner’s reward and long-term agency value?
  • Underused Technology. Productivity, professionalism, E&O protection, and so much more are negatively affected by the underuse of technology. Angela Adams, founder of Angela Adams Consulting and my content partner in our Better Way Agency program, says the average agency uses less than half the capabilities of its management system and other available technology.

How well is your team using your technology? How often are you checking up on them? Think of the hundreds of thousands of dollars of cost/investment you’ve made in your agency’s technology. Why would you allow your employees not to maximize it? Underuse negatively affects your overall productivity, your revenue per employee, your spread per employee, and your operating profit and agency value. That’s why it’s critical to make the use of technology non-optional in your agency.

There are countless other leaks within agencies, but I’m hoping this will prompt you to examine any small ones that exist in your agency today and realize they could result in major leaks in the future. Maybe you’ve heard that a problem left unattended becomes a crisis. I’m suggesting that a leak left unattended could easily become a crisis that has immediate and lasting negative impacts on your agency. Are you willing to plug your leaks without further delay?

As always, it’s your choice.

The author

Roger Sitkins is the chief executive officer of Sitkins Group, Inc., and developer of The Sitkins Network and The Better Way Agency program. Roger began his career by working in his parents’ agency in Wyandotte, Michigan, and after nearly 40 years has become an icon in the industry. He has trained and mentored thousands of insurance professionals. producers, CEOs, and sales managers with diverse levels of experience.

Roger was inducted into the Michigan Insurance Hall of Fame in 2017 and that same year also received the Dr. Henry C. Martin Award from Rough Notes magazine. Roger is among only six individuals to receive this prestigious award.

Recognized as the nation’s top agency results coach, he believes that if you improve the life of one person, you improve the world. To learn more, visit

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