Numbers Don’t Lie: Agency Best of the Best – Quality vs. Quantity

On a recent agency visit, I met with an account manager who was being paid a salary of $85,000 and a 5 percent to 7 percent bonus on top of the base. By industry standards, this customer service individual was overpaid, right? Wrong. The account manager was self-managing an $850,000 book of business with no producer involvement, acted as the lead relationship on another $150,000 of revenue with a producer involved and was responsible for agency-sponsored risk management seminars for an agency’s key niche.

The reality is that industry titles, responsibilities, performance and salary statistics can be deceiving. Adding necessary context to the role, agency, and title often brings more dynamic details on the agency’s success in staffing and compensation.

Regardless of agency type, role, responsibility, and geography, compensation costs represent the largest expenses of an insurance agency. Few components have a bigger impact on agency value than compensation. There is a misguided perception in the marketplace that profitability is driven primarily by lean payroll. Agency owners, who pay employees less, have significantly higher margins, right? Wrong again. The best agencies actually have higher total compensation expenses than the average (5 percent difference actually), but employ 10 percent less full time people.

The best firms that hire quality over quantity, pay their people more, employ less, and drive extremely high valuation metrics in the process.

Where do your employees rank against the best in the business?