Have you EVER seen a business “shrink to success”? You can certainly make more profit by eliminating expenses, people, facilities, marketing – but will that profit be sustainable?
Whether you acquire agencies, set up service centers or grow the old fashioned way, selling insurance to more customers each year, customer growth is the only sure-fired way to long term success in the insurance business.
Believe it or not, there were paupers in the gold fields of California during the boom years of the gold strike. These were people who were not willing to work the fields and sought ‘short cuts’ to success that rarely bore fruit. These people KNEW that the streams and mountains were laden with gold, but they wanted the success without the effort.
Many agencies would love to acquire other agencies to grow their businesses by hundreds and by thousands of clients. Yet they are not willing to ‘prospect the field’ every day. They want the results but aren’t willing to put out the effort that gives them the best chance of achieving the desired outcome.
Agency Consulting Group, Inc. get calls every week from agents who have used our consulting services in the past, get their agencies valued regularly and have heard me speak on the subjects of agency growth and agency success. The most common request is, “If you hear of any agencies available, let me know. I’d love to buy an agency.” When I ask the agents what they do every week and every month toward acquiring an agency, I usually hear an embarrassing silence followed by “Well, we called you. And, anyway, I’m too busy taking care of my customers and my agency to spend time prospecting for acquisitions. Can’t you do that for me?”
Yes, of course one of our roles is ‘searching and screening’ for acquisitions for our client agencies whose Strategic Plan includes acquisition strategies. But those clients have spent the time and effort to make sure that their agencies were capable of absorbing a large volume of clients in a single transaction. It makes little sense to acquire an agency if you can’t properly service your current book of business. And those clients use our Search & Screen as only one of many methods of ‘striking gold.’
So we only conduct our S&S process for Agency Consulting Group, Inc. clients who we know can handle a book of acquired customers and have a set of objectives and action plans that include but are not limited to the Search & Screen.
While acquisitions are not appropriate for all insurance agencies, none can claim that they can’t manage one additional client at a time throughout the year. Most agencies would be overjoyed to have a steady flow of new customers to a) offset uncontrollable customer losses (death, retirement, sale of business), b) to offset controllable losses (price shoppers and clients who simply disappear, lapsing policies), and c) to grow the client base and revenue base of the agency.
But, like acquisitions, customer growth also requires steady, regular marketing and sales activities. Getting a brilliant idea and sending out several thousand letters or e-mails, then awaiting the rush of calls for insurance usually leads to more free time and lighter pocket books. One-shot marketing efforts are as useful as taking your money and betting on your favorite single number at the casino roulette wheel in the hopes of winning 35 times your bet. For the most part, you might as well flush the money and tell your friends that marketing doesn’t work because you tried it and it didn’t pan out.
Like acquisition prospecting, marketing is a STRATEGY, not an activity and you must plan it carefully, monitor each step to determine what works and what doesn’t and do it over an extended period of time to determine whether you generate new client prospects from these efforts. Marketing can only deliver prospects, not clients. You see, marketing DOESN’T SELL INSURANCE – PEOPLE SELL INSURANCE.
So even if you have a strongly planned, logical marketing program in place, nothing will work if you don’t have PRODUCERS who are incented toward growth and active enough to be successful in the numbers game of sales.
Many agency owners were once the key producers in their agencies. But, as they were called upon to become accountants, IT experts, negotiators with insurance companies and HR professionals, Relationship Building and Management, the keys to selling and retaining clients, went by the wayside. We have encountered many agencies that had wonderful products and marketing plans, but sold very few of the accounts because their concept of a sale inevitably boiled down to price comparisons.
Price quoting is the desperate grasping at whatever straws are available for so-called producers to try to win customers. Yet these same producers don’t buy the cheapest cars they can find, nor do they wear the cheapest clothes they can find. They are more discriminating about their personal possessions than they are about protecting their customers’ assets. They only go after the low hanging fruit of price competition instead of exercising their knowledge and abilities to differentiate themselves from the masses (and direct writers). Instead, most producers jump right into the pricing mud-hole in direct competition with those lower forms of insurance entities.
We have even begun believing in the hype and sales pitch of the mass marketers that insurance is a commodity and all policies are alike. The professional agents know this is hogwash! But the rest of us are yielding the insurance buying customers, personal lines and small commercial lines, to the gentle treatment of the commodity marketers – even though we know that there are differences in the way the customers will be treated by some carriers after the sale than before and even though we know that subtle differences in policy forms can spell hundreds of thousands of dollars of losses or uncovered claims for unsuspecting insurance buyers.
The answer to growing customers is a combination of Strategic Planning for growth, organizational development to support that growth, marketing strategies that fully use both internal skills and the best products of our carriers. We must educate the insurance buying public about the real importance of a proper insurance program before the rude awakening of the ramifications of another Super-storm Sandy-type event. Being a New Jersey resident, I assure you that hundreds of thousands of residents “thought” they were properly protected until the limitations of their policies were explained by claims reps after the fact! Yet some did have professional insurance agents who provided all of the forms of coverage that covered the financial losses that occurred in the wake of that disaster. These agents earned their wings, as did many other agents along the Atlantic Coast last year and the Gulf Coast of Florida, Louisiana and Texas.
So the final ingredient is the hiring, training, management and motivation of a producer force that will sell insurance alongside of the seasoned veterans now and will be the next generation of owners in the future. Finding good producers is no different than finding gold in California in the 1840’s and 1850’s. The gold was there as the customers are still here. But if we don’t have the right producers and regularly prospect and market giving them a steady series of opportunities, we will be paupers in the wealthiest nation in the world.
Here are the steps to take. Agency Consulting Group, Inc. can help you with one or all of them, but it cannot give you the intestinal fortitude to progress your business. That must still come from you, the independent agent – one of the last vestiges of entrepreneurial spirit left in the United States. Take these steps or don’t. Either way, you will probably have a comfortable lifestyle. But if you don’t move your business forward, you will become a statistic at the end of your career and your business will be melded into another agency to assure their continued survival.
1. Create a Strategic Plan to determine whether you have the human assets to pursue either acquisition, merger or regular individual customer growth.
a. If you don’t have a Plan, create one.
b. If you don’t have the human assets, the attainment of those assets is your number 1 priority.
i. Management ability to assume control of an acquired agency and retain the customers.
ii. Service knowledge and ability to keep your customers, old and new happy with the service you provided.
iii. Producers who are motivated to grow the agency. Too many producers generate sufficient revenue to ‘Retire In Place’ and simply service what they have. They have become Account Executives instead of producers and we are fooling ourselves expecting substantial growth from these staff members.
2. Create a Marketing Plan that uses the unique set of skills, talent and experience within your agency to address the customer base that can use these traits in your marketing area.
a. Work with each carrier to definitively identify the lines of business and target markets that they have a 70% chance or better of writing if you can deliver them the customer relationships.
3. Prospect for acquisitions the same way you would prospects for new clients.
a. Identify the targets
b. Familiarize yourself with them and familiarize them with you
c. Make friends – agencies don’t sell to enemies and are more likely to sell to friends than to strangers.
d. Touch them frequently.
4. Gaining more clients en masse isn’t necessarily only done by acquisition. Keep an open mind to mergers, service centers that can eventually become acquisitions and associations of other types as long as the result is building a larger client base and maintaining a strong ownership position in the resultant organization.
Your job as an agency owner is to grow your asset for your family and staff, protect your customers properly and enrich your carrier partners. The steps above are simple to state, but difficult to implement. They must be pursued by agency owners who are dedicatedly focused on growth for the purposes stated in the first sentence of this paragraph. If you are not ready or energized to pursue these courses to grow your agency, don’t begin the trek. But if you can dedicate yourself to customer growth for these reasons, we can still create success, value and perpetuation for our agencies in the long term.