How to Be a High Performing Agency
To be a high-performing firm, one needs to emulate what the best firms are doing and the traits that bring high-performance to fruition.
This article focuses on the top five characteristics the best agencies have in common.
1 – Growing a Sales-Oriented Firm
Everyone inside the agency should feel that sales are part of their job. Even employees in the customer service roles should be rewarded for bringing in new business and cross-selling existing accounts. In high-performing firms, retention of the business is quite good because of this, and customer loyalty is high. Clients regularly send referrals to the agency and are proud to tell their suppliers, distributors and even competitors whom they are insured with.
These great agencies stand out from the rest. You can feel a sales agency when walking into it. There is activity; noise, bells that go off, accolades given; the conference room has goal sheets posted, including prospects the producers are going after; and the staff knows what is going on with sales. They support the producers and it is a win-win team approach.
Despite the economy still being challenging, top-performing agencies are cross-selling more, when premiums drop due to lower rating bases. When there are savings, good agents will sell their clients additional coverages, such as business interruption, umbrellas and employment practices liability insurance.
Firms should be growing at least 15 percent to 20 percent per year to keep up with increasing expenses and attrition, and to earn profits for the owners and employees.
2 – Don’t be a Generalist, Specialize in Some Areas
Firms that specialize grow faster and also better serve their particular niches. They know what is needed, have markets and employees that understand these niches, and can set themselves apart. It is OK to write business that comes from other industries, but once a firm has written more than a few of a particular industry, the producers and marketers know how to beat the competition and serve this niche.
Most agencies have about five key classes of business. If these are identified by producers and for the firm overall, more focus can be placed there in targeting accounts, advertising and training. It would be easier to achieve the firm’s growth and profitability goals.
3 – Employ and Appreciate Great People
Employee quality is very important. The top-performing firms employ the best employees they can find and challenge them. Reward employees that bring in good, new employees. When an agency has really good people, it needs fewer employees. With this approach, total payroll costs tend to be less, thus productivity is higher.
Great, happy people are the key to success. If people feel appreciated and praise or accolades are regularly given, morale will be better. If employees are allowed to use their heads, present new ideas and have authority to make changes, they will enjoy their work more.
4 – Strategic and Sales Plans
The business without a plan is like a ship without a rudder. This is a common cliche and very true. Agencies without a plan are totally reactive to their environment and have little control over their future. Firms that incorporate an annual planning process tend to be more efficient, more profitable and highly valued businesses.
Top-performing agencies take the time to develop a business plan each year, monitor it and keep the firm on track. Planning sessions are an excellent forum for people in the organization to give their ideas, brainstorm with each other and come up with great solutions to areas that need improvement. Change is important and fosters growth.
A written sales and marketing plan is also imperative. Oak & Associates has templates, if assistance is needed.
5 – Know Your Agency’s Value
Value comes from the ongoing value of the firm’s operations, which comes from the earnings that come from the income statement. The firm’s EBITA, pro forma earnings before interest and taxes is multiplied by a multiple usually in the 5.5 to 7 times range, depending on the firm’s risk of the earnings continuing. To that value is added the value of the firm’s balance sheet, which is its tangible net worth. This value is added on a dollar for dollar basis and is calculated on the date of the transaction. Then about 30 to 60 days of working capital is deducted from this value to give a buyer the ability to run the firm for a period of time with this cash flow before the revenues become booked to the buyer.
It is helpful for owners to know each year if the firm’s value is actually improving. An annual valuation can give owners a great idea of the attributes of the firm that are important to a third-party buyer and what it is that drives agency value. It is also less expensive to do a valuation update each year then to wait to do it every few years.
Owners know that making decisions based on the effect they have on the firm’s value is a very astute way to run a firm as a high performer.
Summary
Remember. being a high-performing firm by having these key characteristics will set you apart from the competition.
High-performing firms work toward serving their clients well (through great service and attention). These firms also focus on their employees. They hire good people, treat them well and give them training and authority. Follow these key points to be a high-performing agency in 2014!
Oak is the founder of Oak & Associates, an international consulting firm that provides consulting and financial services focused on the insurance industry. Phone: 707-478-8527. Web: www.oakandassociates. com