Menu

From “Mom & Pop” to Professional Shop

CRACKING THE INVISIBLE CEILING

It used to be the $1 Million ceiling. That was the level of revenue at which and individual performing agent with a few helpers had to become a business with different people handling different clients and responsibilities. Everyone still worked for the agent, but the agent no longer made every decision in the agency.

However, a running an agency as a business does not result in automatic growth and professional service at high levels. By the time the agency reaches $2 Million, it runs into another ” invisible ceiling”

The two million dollar revenue mark around which many agents hover for a number of years is one in which a change in management must occur in order to break into the next level of company growth. Owners who have been “jacks of all trades” and who spend their productive time filling the gaps and assuring that service takes place as needed by the customer must convert themselves into managing partners with an eye on the most productive use of their time (based on their current or desired compensation). For instance, if you would not spend $100,000 for a personal lines customer service representative, it behooves the agency to staff properly to manage customer service at the desired level while permitting the high income owner to use his time in a way that justifies his compensation and skills level.

The key to the movement into the next generation of management is the formation of a belief in management. Management is a productive profession, not a luxury that can be obviated in favor of sales or service. But how do you explain appreciation of fine painting to a blind man? He knows he can live without it and can’t understand the fuss about applying some textured paint to a canvas. If he were able to SEE the fine paintings of the world, he would develop an appreciation for the art and would know that it adds a dimension to his life that he never knew existed. That’s the gap that most owners of small agencies experience when facing the $2 Million ceiling without the knowledge of what management can do. They know that it has been nearly impossible to break through to the next level of growth, but the only way they know to grow is from their own experience in the business. Since that no longer works, they are at a loss. They prefer the methods that they know and consider new ways “risky”. They simply don’t realize that they are not re-inventing the wheel. It simply takes a review of all of the similar companies who grow through the $2 Million mark and “double-digit” growth thereafter. They find that these companies hire the right people (in sufficient numbers) to manage the daily workloads and they focus their managers on growth, profitability, productivity, and monitoring and managing many people to accomplish more than the managers could ever hope for by themselves.

Intestinal fortitude builds businesses from scratch. Leverage builds large businesses from small ones. The reason that 93% of all businesses never grow beyond their owner’s ability to personally produce is that they refuse to invest in people and learn the arts of delegation and management. They feel that their 20+ years of experience puts them beyond the “learning” stage. And they are right! That 20+ years permitted them to be as productive as they personally could be. However, the special 7% use their historical success as a springboard to a different level of success and understand that they will never cease learning their business. At each subsequent level new challenges and responsibilities will be faced.

If you are facing the $2 Million barrier to further growth, consider taking the following steps:

1. Formulate a Strategic and Tactical Plan and Budget. Nothing happens until it is written down.

2. Relieve your owners and key managers from daily process-driven work. If necessary, hire people to accomplish the administrative tasks at lower compensation levels than the owners.

3. Determine the most productive thing that each owner could do to justify his/her compensation and focus them on those (rather than on the mundane) tasks.. Growth, productivity, or profit to twice the owner’s compensation level is THE MINIMUM. Triple justification is more likely to sponsor profitable growth.

4. Delegating functions does not mean delegating control. Maintain control over the day-to-day operations through a reporting system that informs you a) how much comes in, b) how much goes out, and c) how much and how old are the items remaining undone.

5. Knowledge about your business is not just an important thing, IT IS EVERYTHING!! “I’m too busy” is a poor excuse for not knowing how much new business or how many lost policies have occurred. Evolve a Management Information System to tell you about new business, renewal status and lost business.

These steps are the preliminaries for a Professional Agency as compared to the “Mom & Pop Shops” that still dot the landscape. The professional agency knows how to grow and needs to drive his agency in the right direction. The “Mom & Pop Shop” feel that the fates control their destiny and trust in luck to grow. Which would you prefer?