The Goal

We come into contact with hundreds of businesses each year. One of our initial questions to each business is “What Is Your Goal?” The answer continues to amaze us.

You see, it’s a trick question. We already know the answer. Those agents who also know the answer are already successful, or are well on their way to success, notwithstanding the way that the insurance industry is changing.

Unfortunately, more often than not, we get answers like, “Our goal is to service our clients,” or “Our goal is to be the best agency in the area.” These agents may be successful, however it is likely, that their profits are marginal. And they are likely to remain in a rather dismal, demoralizing position until and unless they get the message about the real GOAL.


No, this is not a cynical answer — and it is certainly not a given, not with the ways we have seen agencies operate around the country. The goal is often at the forefront of our minds when we are hungry and the mortgage payment is riding on whether or not we can maintain our existing accounts and sell new ones. But what has happened as the business grew? We depend more on others and blame others when things go wrong. We generate enough income to live comfortably. In Maslow’s Hierarchy of Needs we have moved from the lowest rung, subsistence living, to a higher plane. However, the more esoteric our goals become, the further from reality we are. You see, THE GOAL has never changed — just our motivation for achieving THE GOAL.

If you lose sight of THE GOAL in your efforts to build an organization, satisfy the clients (carriers as well as customers), achieve more personal free time, become more influential, or do good for the sake of bettering humanity, you lose both the ability to MAKE MONEY and to achieve these secondary objectives. You need only look at the wealthiest families in the United States to realize that their largesse supplements their primary need to make money, not replace it.

“Service” is not all we have to sell. Automation and procedure are tools, not goals. Even personnel and their skills are only useful to you insofar as they help you achieve THE GOAL.

So how do you know that you are achieving THE GOAL?

Now I get to use that hated “M” word — Measure!!

What do you measure??

Start by measuring the results expected – Profit and Cashflow. If you earn your desired profit with a continuously growing positive cashflow, you are achieving THE GOAL, aren’t you?

Next measure the three primary ingredients of THE GOAL, Sales, Sales Expenses and Operating Expenses. No, this isn’t your budget or financial reports.

1. Sales

This is ringing the cash register, agency style. Every policy sold, new and renewal, must be counted as though they are your heartbeats (because they are!). Measure sales in the number of accounts and policies sold and revenue generated (annualized – Your budgets and financial statements will take care of the booked dollars) against the Objectives that you have established (in your strategic plan) that would achieve THE GOAL, and against last year (to determine if your are progressing).

2. Sales Expense

This is rarely measured and controlled in a pro-active way.

How are you generating sales (new and renewal)? Are you spending enough money in the right places to promote the agency’s sales efforts? Do you telemarket, target market, advertise, cross-sell, media market? If not, why not? If your answer is you don’t have enough money, the logical question is whether you have developed a marketing and sales campaign to generate sales — or do you wait for sales to come to you?

Sales Expenses for this calculation include compensation for sales, T&E, Auto and, especially, Advertising and Promotions.

3. Operating (and Administrative) Expense

Again, this is not your budget work.

Operating Expense is all of the money you have to spend to turn your Sales Expense into Sales. Yes, service is included in this category. Yes, people are included in this category. Without a high grade of service and high quality people, what would happen to your Renewal Sales?

But the measurement of THE GOAL is how your operating expense and sales expense relates DIRECTLY TO SALES. This is not as difficult a concept as it sounds. Try this out —

What was the ratio of your sale expense to your sales (new business and renewals) last month? How about year-to-date?

What was the ratio of all of your other expenses against sales for the same periods?

Here’s the key — The more you spend on the sales process and the less you spend on all other expenses (not the other way around) while still achieving THE GOAL (profit and positive cashflow), the better off your organization. In many agencies, this is the reverse of the trend. Growing amounts are spent on Operations (including labor) while diminishing amounts are spent on the generation of sales. This is eventually self-defeating causing lower productivity under any guidelines.

Relate the amounts you are willing to spend on support functions (anything not causing insurance to be directly sold — new and renewals) to the amounts of money generated from sales. If sales diminish then your people are unproductively busy.

Please understand the concept of being Unproductively Busy. If your agency is not profitable, or if you suffer months of negative cash flow, your Revenue per Employee, Compensation per Employee and Spread, the recognized productivity factors measured in many agencies, are invalid. Your people may be very busy, but they are not productively so, since THE GOAL is not being achieved.

Re-think your GOAL and your measurement methods. Call us to assist you in re-developing the focus in your agency that will lead to the achievement of THE GOAL. Don’t let your external influences lead you away from the fact that if you don’t make money and if you don’t achieve continuous positive cash flow, the degree of service you provide matters very little.