Ready, Set, Grow: How to Build an Independent Agency and Avoid Common Pitfalls.
You are a seasoned producer who is confident in your skillset. You have built a strong book of business and after a few years, you decide to go out on your own and open an independent agency. As your new business begins to come together, you have many new decisions to make. Fortunately, by following best practices and avoiding common pitfalls, agents can put themselves on a solid path for a future of success.
Start Off Strong
Before launching an independent agency, take a moment to really plan to help ensure you start off strong.
Consider these best practices:
Secure cash reserves. Cash reserves are a crucial part of making sure an agency can withstand the first few years of business. Roughly 20% of small businesses fail in the first year, as reported by Fundera.
As agents begin to build a steady flow of income, client roster and prospect pipeline, cash reserves will ensure the business is afforded time to organically grow those relationships and facilitate long-term business.
A business plan will also help to guide agency operations, ensuring that agency team members remain organized and working toward their goals.
Prioritize marketing. Marketing, particularly for those coming from the captive agent side where their organization provided marketing and technology support, must also be a priority. An independent agent will need to take an aggressive approach through marketing to reach new people and markets. A new independent agent should consider a proactive and long-term approach to marketing as the agency gets off the ground and begins to ramp up.
Consider an agent network.
Independent agents, at any stage of their business, should consider aligning themselves with an agent network. Such organizations can provide unparalleled support in terms of developing a business plan, assisting with marketing, and introducing a new agent to peers who can function as mentors or experienced sounding boards.
Invest in your team. New agency owners may find themselves overwhelmed by their various responsibilities and in need of staff. Talent recruitment has proven difficult in recent years, so agents should view investments in their team members’ careers as investments in their business. Take time to understand what potential hires are looking for in a job and how an agency can fill those needs. Foster an environment that offers training and growth opportunities, and explore ways to engage with your employees to make their days more enjoyable, as well as professionally rewarding.
Avoid Pitfalls
Along the way, agents will surely encounter challenges. Fortunately, there are a few common mistakes that new agents can learn from. As you set out to build your agency, be wary of these common pitfalls:
Placing all your eggs in one basket. New agency owners are going to be faced with challenges and they will need to shift their mindset to tackle those obstacles. Someone who began their career as a producer, for example, will need to suddenly think like a small business owner who also produces business. Marketing, technology, operations, and much more must be considered.
New agents who come from captive environments tend to place too much business in one or just a few limited carriers. As a result, they put their fate in the hands of a few carriers or one big loss. Working with many carriers can give your business breathing room in the event of a loss or changing carrier appetites.
Taking a narrow view of the business. When the whirlwind of navigating a small business takes over, new agents may be tempted to fall back on what they know, whether that is producing, actuarial work or another aspect of the business. Balance is a key asset to any new business, and new agents must maintain a broad view of their business to ensure all aspects are nurtured and understood.
Failure to ask for help. No one expects a new agent to know how to do everything, and they should not expect that of themselves. They should not be afraid to tap into their contacts for help. Independent agents should leverage their networks, find ways to explore new ideas and take calculated risks that drive the agency forward.
It is a big undertaking, but agency ownership can be an incredibly lucrative business. So, take a step back, plan for the future, and utilize the resources at your disposal to ensure your agency’s success.