For the past 25 years, the Big “I" and Reagan Consulting have partnered to produce the Best Practices Study, a comprehensive examination of the top-performing agencies across the country. The study compiles benchmarking data on key metrics of agency performance and value, including revenue growth and profitability, financial stability, expense management, and sales and operations productivity.
An article in last week's News & Views focused on organic growth—how to evaluate where your agency falls, and how to respond. This week, let's look at what you can accomplish by focusing on producer development.
Simply setting the new business bar higher for your producers is a growth improvement strategy that may cost you nothing—and yes, this includes agency owner-producers, too. This type of “no-cost" strategy is one of the best solutions, as every point of additional sustainable growth with no change in your profit margins generates an agency value that is roughly 4% higher.
There is a 1:4 relationship between growth rates and value improvement if your profit margins do not change. Want to increase your agency's value by 10%? Accelerate your growth by 2.5% without reducing your profit margins.
How do you know whether this strategy makes sense for your agency? Start by understanding what a good new business result looks like for a producer. If your producer's numbers lag the norm, raise the bar. If your producer is at or above the norm when it comes to new business generation, look to increase their production by:
- Purging their books (moving smaller accounts to the house).
- Adding more support staff to free up more of their time to produce.
- Pushing more cross-selling.
- Teaming younger producers with older, more experienced producers.
As reported in the annual Best Practices Study, here are the average annual new business results for producers, by agency size and line of business:
Are your producers operating at or near these levels? If not, begin setting sales objectives that better reflect the potential for an agency of your size. Then, start holding your producers, and one another, accountable for results. If your producers are operating at less than these industry levels for legitimate reasons, such as lack of training, tools or resources, get to work to provide your producers with everything they need to thrive.
In 2019, commit to successfully addressing your agency's growth deficiencies. The time and capital you invest to do so will likely more than pay for itself when it comes to your agency's valuation.
Identify your agency's benchmarking numbers and other data available across six different revenue categories with the 2018 Best Practices Study Update. Questions? Email Best Practices staff.