Suhr Risk Services: Driven to Excel
When a company loses more than half of its clients, that could portend a demise in business. But that’s not always the case, according to California-based Suhr Risk Services. After its January 2002 merger with Griffiths Insurance Agency, Suhr Risk Services had more than 7,000 clients. Six years later that number has fallen to about 2,500.
Yet SRS President John Suhr said the smaller figure is hardly a sign of a company in trouble. The reduction in clients was intentional; SRS consciously pared down its book of business to focus and retain the key relationships that drive its success.
“We decided we were going to dominate a few core niches rather than being generalists,” Suhr said. “We had producers with 200 to 300 clients, which tends to bring mediocre service across the board. Now those producers have about 45 clients. We’ve shrunk our restaurant down to a certain number of seats.”
Good clients, good service
So who’s sitting at the Suhr table these days? Grocers, nonprofits, wholesale plumbers, specialty construction and workers’ compensation clients, to name a few. And those clients are taking advantage of the entire SRS menu. Suhr said the typical grocer client places not only his package policy with SRS, but also workers’ compensation, health insurance and 401K, life insurance and estate planning, and personal insurance program.
“People get a concierge level experience when they walk through our door,” the broker said. “They’re coming into an exclusive, high-end experience.”
Suhr is a believer in the Pareto Principle, a business theory that 80 percent of the effects come from 20 percent of the causes, or more specifically, 20 percent of an agency’s clients generate 80 percent of the revenue. “We don’t allow our profitable relationships to subsidize unprofitable ones,” he said. “Hence, we have minimum account sizes for all divisions. We fully aligned with our niches and decided to focus on the relationships that were profitable.”
SRS keeps a close eye on the amount of revenue each employee generates. Suhr said his producers increase the revenue of their books every year. A key goal is to improve operating profit, which means agency profits are not driven solely by contingency income. It’s a modern approach to agency management from a business whose roots reach back more than 100 years to the company’s founding in 1906.
Growth through acquisitions
The Suhr family’s involvement in the insurance industry began shortly after World War II. John’s father, Robert, formed Robert Suhr & Co. in Santa Clara in 1951. John joined his father’s firm in the mid-1970s. Over the next few decades, the Suhrs bought several agencies that in turn had acquired several agencies. In tracing the acquisitions and mergers, one finds agencies as old as the Hyde Insurance Agency in Campbell, formed in 1906, and S.L. Griffiths Inc., formed in 1910. There’s also the Schoenheit & Moore Insurance Agency, one of the first female-owned agencies in California.
Many of the stories of those early agencies have been lost to time, but Robert Suhr can paint a clear picture of how much the insurance business has changed since the 1950s. “My dad says that in 1951 they did not have a homeowners policy,” John Suhr said. “It did not exist. People bought a personal liability policy, which cost about $10 a year, and they bought a fire policy — to insure a $10,000 house it cost about $20 a year. Then you could buy theft coverage, but hardly anybody bought it. People were worried about fire. And they were worried about lawsuits, but not like today.”
The agency’s annual revenues hovered near $5,000 — a lot in those days. “You were a big fish if you had $2,000 in premium with a company,” John Suhr said. “Dad said they would take you out for cocktails and wine and dine you.”
Commissions were higher in that era. Auto carriers, for example, typically paid commissions of 25 percent to 30 percent, Suhr said. Just as important, the larger agents were able to gain concessions from company special agents in the form of lessened underwriting requirements. “There was much more of a trust factor back then,” Suhr noted.
Numbers of expectations
Flash forward to today. SRS posts annual revenues of $7.25 million and maintains offices in Burlingame, Novato and San Jose, Calif. “Our goal is $15 million in revenue by 2015,” Suhr said. With that long-term goal in mind, management keeps a keen eye on all the key numerical indicators of performance.
Ask Suhr a number, almost any number, and he can tell you the answer. Average revenue for each of the firm’s 36 employees? About $201,000 each. Eleven percent of that revenue derives from personal lines, 16 percent from employee benefits and 73 percent from commercial lines. SRS’s revenue retention rate? That would be 93.5 percent, despite the fact that workers’ comp premiums in California are down a third. The closing rate on new business opportunities? A little better than 70 percent.
Behind each of those numbers is an agency strategy. Revenue and account retention, for instance, are supported through a formalized exit barrier plan that focuses on building strong personal and professional relationships with clients who place all their insurance with SRS. “We poll our clients on a systematic basis to make sure that our relationship is impenetrable,” Suhr said. “Our goal is client delight, not client satisfaction. Customer satisfaction is useless, customer delight is priceless.”
Similarly, SRS’s high closing ratio is an outgrowth of its “no practice quoting” policy. The firm is selective of prospects upfront and follows a formal selling system. Closing ratios also, no doubt, have been boosted by the credibility the regional broker has gained by earning the endorsement of a number of associations within its target niches, including the California Independent Grocers Association, Raise the Bar and the Western Suppliers Association. Suhr says SRS won those endorsements after making a conscious effort to understand those niches and demonstrate the ability and commitment as a trusted advisor as opposed to a typical vendor.
Another business metric Suhr follows is employee retention. “People who come into the business today don’t have that long-term shackle to employees like in my father’s day,” he said. Suhr believes it’s up to business owners and managers to create a climate that inspires employees and brings out their best, while encouraging them to stay. That takes more than just throwing money at employees.
“You have to keep up with salaries, but we also are very active at recognizing, encouraging and nurturing our employees,” he said. “An environment like ours with active employee mentoring programs and solid vertical career paths leads to challenged and happy employees. We also are considerate of people’s needs and foster a healthy work/life balance.”
Suhr is a believer in hiring good people, giving them the tools they need to excel, communicating expectations clearly, and then getting out of the way. “You help people become leaders, and then they need minimal management to perform their responsibilities,” he said. “People are mature — we brought in the right people. We provide the platform, the automation structure … and they’re in touch with what they need to achieve their mission.”
SRS characterizes itself as a “learning company.” Formal training programs build pride and competency among staff. “Everyone is expected to continuously be growing their intellectual capital so that they can professionally serve their clients and dominate the knowledge base of our competitors,” he said.
Given that philosophy, it’s no surprise that more than 60 percent of the staff have a professional designation; the majority have more than one. The firm has also built a reputation for leadership within the industry. Robert Suhr served as president of the state agents and brokers association in 1975, SRS Executive Vice President Ed Stark was elected to that office in 1970, and John Suhr’s business partner, Kevin Baker ,takes the helm of Insurance Brokers and Agents of the West in 2010.
Community involvement
In addition to professional volunteerism, the brokerage nurtures an atmosphere of giving back to the community. A Community Impact Committee identifies underserved local, needy populations and then supports employees’ efforts to make an impact on those communities. Last year, SRS spent the day at a homeless shelter in the Bay Area, visiting with the residents and helping to paint and improve the facility’s appearance.
“We participate in annual food drives and are active in the Toys for Tots program,” Suhr said. “We have a charitable matching program where our company matches the dollar donations of our employees for the charities of their choice, and we also invite our employees to spend a minimum of two days a year volunteering in some capacity for a needy cause that touches their heart. This time off is with pay. We are about to sponsor a needy family through the Make a Wish Foundation and we are getting involved with Project Linus, which involves making blankets for sick children.”
Whether reaching sales goals or working on a philanthropic mission, SRS tries to provide a “high five” climate. A Good Times Committee aims to make the brokerage a fun place to work. The committee fills the year with offsite events like bowling, go-kart racing and visits to the horse track. Birthdays and anniversaries are celebrated, as are most holidays. “For years, we had our Christmas party in Las Vegas,” Suhr said, “more recently we stay local.”
Evidently, staff feel good about their company and its philosophy. A few years ago, the San Francisco Business Times and the San Jose Business Journal named SRS the 7th Best Place to Work in the Greater Bay Area for firms with less than 100 employees, Suhr said. He said the company has been nominated again for 2008.
Even in a tough economy complicated by a soft insurance market, SRS continues to grow. Suhr said the company is careful about who it brings into the SRS community of employees.
“We want people who have a real distaste for mediocrity, people who’ve excelled in other areas of their lives — it can be in their personal life, professional life or volunteering,” Suhr said. “If I’m going to put my competition in the back seat, I have to harness the collective genius and competition of my people. Motivation doesn’t come from legislation, it comes from people … who have a drive to excel.”