Winning Strategies

Are you an employee or an entrepreneur?

One’s viewpoint matters

By Roger Sitkins

In my opinion, one of the greatest obstacles to producer success is that most producers do not view themselves as entrepreneurs. Rather, they see themselves as agency employees. I believe that their attitude of “I work for…” (the agency/someone else) really hurts them.

What exactly is an entrepreneur? By definition, it is “one who assumes the responsibility and the risk for a business operation with the expectation of making a profit.” An entrepreneur is further defined as “the person who decides on the product, acquires the facilities and brings together the labor force, capital and production materials.” If the business succeeds, the entrepreneur reaps the reward of profits; if it fails, he or she takes the loss. So as an entrepreneur, you assume the risk, but you get the return.

I had a much harder time finding a good definition for employee. But the general description is: “a paid worker,” or “somebody who is paid by somebody else to do a job.” As such, an employee doesn’t assume risk for the operation, other than possibly a personal one (e.g., wage loss).

Producers must understand that they “own” their own business, known as “Me, Inc.,” which we’ve discussed before. Although it is part of “We, Inc.” (i.e., the agency), their own book of business really is their company. From what I’ve observed, the producers who look at it that way always get the best results.

The roles and responsibilities of the producer in Me, Inc., include:
• Chairman
• CEO
• President
• CFO
• Sales Manager
• Sole Producer

Note: The entrepreneur is not the service person. That function is outsourced to the agency.

It’s all about freedom

What’s so great about being an entrepreneur and the owner of Me, Inc.? In a word: freedom.

Time Freedom. Entrepreneurs don’t have to punch a clock and stay in one place from 9 to 5. As we all know, one of the beauties of being a producer is the ability to “go on an appointment” when you’re having a bad day or simply need to get away from the office. Other than showing up for scheduled sales meetings or pre-briefs and de-briefs for the week, producers have total time freedom.

Financial Freedom. Those who don’t have total financial freedom should have it. We define this kind of freedom as the ability to do what you want to do, when you want to do it, how you want to do it, with whom you want to do it, and as often as you want to do it.

Producers have the ability to achieve financial freedom as quickly as possible. Want a raise? Take one! Just go out and sell something else and you’ve earned it. You don’t have to wait for a performance review. You simply retain your clients and then obtain new ones and voila! You get a raise!

Work Freedom. You’ve chosen this career; therefore, you have the freedom to work on what you want to work on. Some days you might be focused on service; other days it’s sales. If there’s something you really like to do, you can make it a priority and hand off the tasks you dread to someone else. Many producers continue to focus on work they don’t like and don’t do particularly well; but the point is, they still have the freedom to choose what to work on.

The “employee attitude”

Obviously, there are a lot of great things about being the owner of Me, Inc. But what about those producers with the “employee attitude”? What do they think is in it for them? Here’s the typical mindset of a producer with the employee attitude:

It’s the agency’s responsibility to train me. “If they want me to go to some training program, it’s their responsibility to sign me up, get me there and pay for everything. That’s THEIR job, not mine.”

They should pay all my expenses. “I know that when someone gives me a referral, I should do something nice for them, but that’s something the agency should pay for.”

Historically, producers do not go into their own pocket to promote relationships with clients; they almost always turn it in as an expense to the agency. This occurs even when a center of influence gives them a great lead and they know that that person is a wine connoisseur. Rather than personally buying them an expensive bottle of wine as a thank-you, they’ll expect the agency to let them expense it. If they’re making enormous commissions, they should gladly pay for it out of their own pocket. Most don’t.

Of course, if the referral results in a huge amount of business, the agency owner might want to reimburse the producer as a bonus. But even so, I would want my producers to have skin in the game up front.

I hate accountability. “Don’t expect me to tell you how I spend my working hours.” Unfortunately, without accountability, most of us will do the wrong things if left to our own devices. It’s human nature. The entrepreneur appreciates that someone is helping him or her stay on track; employees don’t like it and, in fact, usually resent being held accountable.

Why should I do that? They’re listening to WII-FM (What’s In It For Me). If I’m preaching to the choir, I apologize. However, what we see all too often is that the average employee does just enough on the job to avoid being fired. They’ll do their basic job and nothing more.

Remember, the difference between ordinary and extraordinary is just a little extra. Entrepreneurs know that and will always go the extra mile. The employee won’t do anything above and beyond. They’re out the door at 5:00.

The entrepreneurial attitude

Going back to the definition of an entrepreneur, it’s all about taking responsibility and assuming the risk for a business with the expectation of making a profit. Being an entrepreneur in an agency is a little bit different because you don’t assume the same amount of risk as the actual owner.

As a producer, the risk you assume is pretty low. You aren’t responsible for creating the product, acquiring the facilities, assembling the labor force or providing the capital. What’s more, you aren’t responsible for hiring or compensating the agency’s service, accounting or administrative staff; you don’t have to buy the automation system; and you aren’t required to pay the lease or mortgage on the office itself. You don’t even have to pay for the office supplies! The owner assumes the risk and when the agency succeeds, the entrepreneur reaps the profits.

Consequently, your only risk lies in not making sales and creating revenue or, more important, personal profits. And there’s always that risk of generating decent revenue without making a personal profit. So how do you measure profit at Me, Inc., vs. a regular agency?

Profit and Loss. Your profit and loss statement is unique, particularly when comparing Me, Inc., to most businesses.

In every business, you have income and expenses, as well as profit and loss. However, at Me, Inc., the income is created at work in the form of commissions. Conversely, all of your expenses are created at home, not work. Me, Inc., has essentially no expenses, other than what it costs to support your way of life. At the end of the month, what’s left is profit and loss.

Return. What would be an acceptable return for your time and effort? What’s the bottom line of your Me, Inc., when you look at how much money you make at work and how much money you spend at home?

Remember, it’s not what you make that really counts—it’s what you keep. Most businesses aim for a 15% return, although I believe that at the helm of Me, Inc., you should be able to realize a 25% return. Are you managing your company in a way that enables you to earn an acceptable return for the risk you assume as the head of your company?

Balance Sheet. Everyone assumes that producers have their finances automated in Quicken®, QuickBooks® or some similar program. They also often assume that producers not only run a monthly personal cash flow statement of income vs. expenses, but that they maintain a personal balance sheet.

As you know, a balance sheet is simply a calculation of net worth: Assets - Liabilities = Net Worth. Are you managing to that equation? Do you have the proper ratio of liquid vs. non-liquid assets in your portfolio?

One of your key roles in your Me, Inc., is chief financial officer. And yet it always amazes me how many producers are not managing the finances of their own company. Are you investing in your future—your company—at a high level?

A matter of choice

As always, it all boils down to choices. If you’re going to think, act and look like an employee, then you’re going to get paid as one. Granted, you have little or no risk, but you sure don’t have a lot of reward on the upside.

On the other hand, if you think, act and look like an entrepreneur, you’ll assume risk, but you’ll reap much greater rewards than the employee. That’s because your Me, Inc., will be a for-profit— not a not-for-profit—corporation.

As always, it’s your choice.

The author
Roger Sitkins is founder and chairman of Sitkins International, which offers The Vertical Growth Experience™ exclusively to its membership. The programs focus on continual improvement of agency/brokerage operations, providing members with ongoing development and strategies that literally force vertical growth in the critical indicators of closing ratios, revenue per employee, revenue per relationship, and revenue per producer.