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Winning Strategies The big questions for agency owners Answering and acting will enhance an agency’s performance By Roger Sitkins At one time or another, most agency owners have experienced those middle-of-the-night moments when their mental alarm goes off and suddenly they can’t stop thinking about The Big Questions. They’re the ones that can keep you up until dawn unless you have the answers. Most of them are prefaced with, “How will my agency…?” How would you answer the following? How will my agency … differentiate itself from the competition? If your agency’s sales efforts are based upon giving quotes and selling insurance, you won’t be any different from other “traditional agencies.” You’ve allowed yourself to become a commodity, and you’re not viewed as a Trusted Advisor. Telltale signs that you’re no different from the competition: • If the main selling tools you use at your agency are a yellow legal pad, a copy machine, some applications and a brochure • If your “value-added services” have not been named or packaged and, therefore, sound like clichés (because they are) • If your idea of differentiation is exactly like every other agency’s: “We give good service,” and “We have the best people,” etc. (Have you ever heard anyone brag about their inferior staff and bad service?) If any of the above sounds familiar, then it’s time to differentiate your agency from the competition. It’s imperative that you have a unique selling process. Our trademark selling systems—The Risk Reduction Approach™ and The Total Benefits Approach™—are unique because they help clients lower their total cost of risk and their total cost of benefits. Ask yourself these questions: Does my agency … fill up the pipelines? If you have no sales management, you never will! Empty pipelines are the number one problem facing most agencies and individual producers today. They simply can’t get enough at-bats, which is a symptom of poor sales management and a lack of accountability for the pipelines. Another reason for empty pipelines is that producers are afflicted with “head trash.” These are the ones who repeatedly tell themselves the same negative things about asking for referrals and introductions. For example: “I haven’t earned a referral”; “Asking for referrals makes me sound like a used-car salesperson”; “I’m just too embarrassed to ask”; or “What if they say no?” Instead, producers should be asking themselves, “What can I do to generate a referral or an introduction from this client?” or “How can I practice so that I will sound polished when I ask for a referral?” Producers who believe in what they do and what they sell recognize that referrals are a part of the job. They see referrals as a way to find new clients they can help, not as a source of embarrassment. It’s no secret that the very best introduction we can get is from someone we consider a Center of Influence (the CPA, attorney or director of a trade organization, for example). If your producers do not have a fully developed Center of Influence Network (COIN), they will always have empty pipelines. By fully developed, I mean they should have at least 10 COINs or trusted advisors with whom they are doing something proactive at least once a quarter. If they do that, they can expect to keep their pipelines filled at all times. Does my agency … maximize revenue per employee? As an agency owner, maximizing your revenue per employee should be one of the key critical indicators in your business plan (provided you have one). If you’re not focused on it, however, you’ll never be able to realize it. If revenue per employee is just a number you examine at the end of the year, that’s a reactive approach. Conversely, a proactive approach requires that all business decisions be made based upon the key critical indicator of revenue per employee. This includes the hiring of additional staff. Let’s say your goal is to get the agency’s revenue per employee to $175,000 and one of your managers asks you to hire an additional person. The first thing you should ask is, “How will that person directly or indirectly help us generate an additional $175,000 worth of revenue?” If your manager can’t specifically explain how the new employee will generate that amount of revenue, then don’t make the hire. If your agency is not truly a proactive sales organization and if it is not totally focused on obtaining and retaining ideal clients, you will never be able to maximize revenue per employee. Does my agency … improve its closing ratio? If you don’t measure it, you’ll never improve it. When I’m conducting state and national seminars, I’m always amazed when I ask how many people know their closing ratio. Historically, fewer than 20% raise their hands. Apparently, at least 80% of agencies haven’t heard the expression, “What gets measured gets done.” Some guaranteed ways not to improve your closing ratio: • Provide practice quotes to anyone who comes along. • Consider every account to be a “great” account because you don’t know how to super-qualify your prospects. • Agree to work on an account when the prospect tells you, “I’m just trying to keep my current agent honest.” • Don’t have a formal selling system that differentiates you from other agencies in the marketplace. Does my agency … retain key accounts? As we’ve discussed before, successful agents know the importance of obtaining and retaining clients. Exit barriers make it tougher for clients to leave, which is why you want to put in place as many as possible. But if you don’t have a formal exit barrier plan in place, you’ll never retain a satisfactory number of clients. • If some of your key clients are part-time clients, you won’t retain them. They must be full-time clients with all of their policies through you (personal lines, commercial lines, benefits, life insurance, financial services, etc.). At that point, it becomes extremely burdensome for them to switch to another agency and extremely unlikely that they will. However, if they have only one policy with you, it’s much easier for them to leave. • If you’re not differentiating your agency from your competitors, you won’t retain your key clients. Someone will differentiate in your marketplace—will it be you? • If you don’t have great personal relationships, you won’t retain your best accounts. It’s incredible to me that most agency owners don’t understand that THEY are the best exit barriers they could ever have in place. Regrettably, producers tend to be quite possessive of their accounts and often discourage agency owners from establishing relationships with them. Most successful agency CEOs understand the value of knowing their clients and cultivating relationships with at least the top 5% of accounts that generate 50% of their revenues. However, we prefer that they have a relationship with the key decision-makers at the top 20% of their accounts that represent 80% of their revenues. Does my agency … attract the best employees? We believe that your agency should be the agency of choice for the best employees in your market. But in order to draw top talent, you must have some fundamentals in place within your organization. • Culture. If your agency doesn’t cultivate the right culture, you won’t be able to attract and retain the best employees. By culture, I mean the behaviors that create a healthy and successful environment within the organization. An agency’s senior leadership drives culture. And as we’ve often noted, the agency does what the boss does. This bodes well for an agency whose boss cares about the employees and realizes the importance of teamwork. Many do not. You’d be surprised at the number of people I hear complaining about their agency’s culture and the bosses who treat them poorly. Often they’ll describe a thankless environment in which no one values—or even acknowledges—their hard work. Because this type of culture usually breeds feelings of hopelessness and powerlessness, employee turnover tends to be high. • Benefits. If you don’t have a great benefits plan, you won’t retain good people in your agency. You sell benefits to your clients, don’t you? Then there’s really no excuse for not offering the best available plan to your own employees. If you don’t, you won’t attract and retain the best people. • Upward mobility. If you don’t offer upward mobility (career tracks), you won’t attract and retain the very best employees. Although this may not apply to every staff position, shouldn’t your agency be growing to the point where people have the opportunity to enhance their career or become better at their job? Your agency should be a place where they can learn more and earn more. If not, they’ll go somewhere that offers the chance to advance. • Training. Similarly, if you don’t train your employees, you won’t attract and retain the cream of the crop. The most effective and productive workers don’t simply want a job; they want to become better at what they do. But because the average agency spends far less than 1% of its revenues on employee training, only a fraction of all agency employees receive the training they need to improve their performance. Does my agency … improve its operating profit? If your ability to create a profit depends on contingency income (a.k.a. owner’s bonuses), you won’t. Unlike overall profits, operating profits are derived strictly from the sale and servicing of insurance. Interest income, contingency income and bonuses are not part of the equation. As you know, contingency income has undergone some dramatic changes recently, with many companies either eliminating it altogether or radically changing the model. What if it went away completely? Would your agency be profitable without it? If you don’t maximize your revenue per employee, you’ll never create a significant operating profit. By the same token, if you aren’t managing your sales in a way that increases the agency’s revenue per producer, you won’t be profitable. If you continually allow profitable producers to subsidize unprofitable ones, you’re never going to make an operating profit. The same is true of accounts. If you allow profitable accounts to subsidize unprofitable accounts—which is the case at most agencies—you won’t maximize your operating profit. Does my agency … increase its value? For most agency owners, the agency itself is their largest personal asset. Just like stock in a publicly traded company, its value is tied to performance. Therefore, if agency value is a direct function of operating profit, then a low operating profit equals low agency value. Consistently, we find that agencies with the highest value share many of the same characteristics: high revenue per employee, high spread per employee, high revenue per producer, high growth, and a high degree of automation, among other things. If you can’t say the same for your agency, then don’t expect its value to appreciate. Does my agency … develop true high performance teams? If your sales staff and your service staff are constantly at odds, you’ll never have a High Performance Team. True HPTs consist of sales and service personnel working in tandem to obtain and retain ideal clients. However, if the sales people are spending more than 50% of their time on service and service-related issues, they’re not maximizing the team’s performance. According to the latest update to the IIABA’s Best Practices study, the average producer spends upwards of 51% of his/her time servicing existing customers. That’s a clear indication that the agency does not have a HPT or that the roles on the team are poorly defined. We define service as everything that happens between renewal dates. With rare exceptions, everything else is sales. If there is no division between your sales and service departments, you’ll never develop a true HPT. The bottom line I sure do hope that you and your leadership team can effectively answer these and other big questions. The key is to make continual investments in your agency. What could possibly yield a better return? The reality is that you’re going to work long, hard hours, punctuated by equal parts fun and frustration. If you’re going to put in the time, why not create a great agency? As always, it’s your choice. * |
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