Is DIY worth it?
Updated: Aug 25, 2020
Over the last four weeks, I've had a series of interesting experiences involving larger and otherwise more sophisticated agency leaders failing. The common denominator was their Do-It-Yourself (DIY) approach. Failure is expensive in both money and time. These DIY leaders spent between $100,000 and $500,000, all in, for their failures and wasted a minimum of one year's hard work -- others' mistakes consumed more than a year.
On the other hand, the clients I have assisted did not waste any time or money and are now at least a year ahead of where they would have been and a dead minimum of $100,000 wealthier. Additionally, my clients have achieved additional growth and profits. DIY projects put agencies far behind their more successful competitors. These statements are not hypothetical scenarios or hypothetical numbers. In one case, the leaders of one DIY agency agreed that over $1,000,000 had been wasted and would have been realized had they asked for help.
Asking for help is key. I understand how hard and frustrating it can be to ask for help. I understand how and why a leader may think they "should" be able to do these projects themselves. I understand the desire to save money. I understand the leaders' egos telling them, "No, you can do this yourself!" I understand the frustration of even having to consider that you need to ask for help.
In addition, I definitely understand the frustration of having asked for help in the past and having an attorney, accountant or consultant give you bad advice. I definitely appreciate how that makes one gun shy about asking others for help.
I've been working with agencies for almost 35 years. Honestly, 30 years ago there was much more that was doable on a DIY basis, but not today. Asking your peers, especially peers in informal networking groups, is often not a much better solution. The advice received is more often advice by folklore rather than expert advice. I see this reality often when fixing folklore advice mistakes. Smaller agencies with tight budgets are more vulnerable to try to DIY with peer assistance, but many larger agencies have the same problem.
While the following is completely self-serving in the sense that I assist agencies on a professional basis, it is solid advice as to when to hire a true professional that specializes in insurance agencies. These tasks are far beyond DIY projects for 98% of agencies.
1. Valuations. One is not allowed to value oneself for anything to do with legal or estate purposes and often self-valuations are not legally permitted. Furthermore, like so much, independent agencies are unique and need industry specific insights. Several times in the last year I've had clients and agents tell me how they've spent tens of thousands and even hundreds of thousands of dollars on generalist accountants and attorneys where much of their bill was spent educating them on insurance agency idiosyncrasies. If you don’t believe me, try educating a generalist attorney on agency bill accounting.
2. Producer Agreements and Hiring. The producer failure to succeed rate in this industry is and has historically been around 80%. In and of itself, one should recognize agency owners are horrible at hiring and developing producers. Clearly, hiring and developing producers is not a DIY project with much hope of success. Many factors are involved and different third-party professionals can help.
Hire a high quality head hunter. Only a few good ones exist in this industry.
Use a high quality producer test. Producer tests are far different than CSR tests. The same tests will not work for both. I don't offer head hunting services and I don't have my own testing services, but I know that if clients follow my advice on these two points alone and on which vendors to use, their success rate increases by several orders of magnitude.
Have the right contract. Using boilerplate contracts and hiring attorneys that know little about insurance are probably equally bad choices. Producer contracts are absolutely not a DIY project. Thirty years ago it might not have been a good idea to draft these contracts yourself, but many got away with it. Now the legal environment is tighter, competition to steal quality employees is at an all-time high, and the margins for error are smaller. I help clients all the time with drafting quality practical contracts (though not legal advice) that are customized to their particular agency and for far less money than many attorneys charge.
3. Carrier Management. One simply needs a third-party with far more experience and context than an agency leader can ever gain in their confined world. This is true even for large organizations and leaders who sit on many carrier advisory boards. I work with some of the largest insurance distributors in the U.S. and they have taught me the value of my broad experience to them.
4. Family Perpetuation Planning. Family agencies usually cannot be perpetuated successfully without outside assistance. Even those that succeed will most likely undergo unnecessary pain. Several factors again apply:
The IRS basically requires an accredited third-party complete the valuation.
Similarly, the transaction terms probably need the assistance of someone familiar with IRS’ rules.
A good consultant will help with the internal leadership changes too. This is next to impossible to do without assistance. I completely understand how one would think this is an obvious DIY project, but the reality is that it is not.
Family perpetuation requires a consultant that specializes in family business succession planning. This is a specialty type of consulting. For my money, I think every family agency perpetuating to the next generation should mandatorily hire a family business succession consultant. This advice has nothing to do with tax planning or that sort of thing. These consultants focus 100% on the family dynamics, and I have never met any family owned agency that did not have family dynamics. Agencies that are successful in perpetuating on their own are in the minority and suffer unnecessary pain as a result.
I feel like a failure when I can't get agencies to hire me, and not because I lost a sale. I feel like a failure because I know I failed to convince them to take the easy, more successful journey. As a parent I might say, "They have to learn on their own." With businesses and their leaders, learning on one's own is extremely expensive and often results in a deeper hole that prevents learning. The hole gets so deep the lessons learned no longer apply. If they focus on fixing the situation themselves, most likely because now they have even less money but more urgency, the hole just gets deeper. While the advice to hire consultants like me is self-serving, this advice, if followed, can save tremendous heartache, thousands, hundreds of thousands or even millions of dollars, years of wasted efforts, and the unnecessary expenditure of considerable emotional energy. Allow yourself to hire help.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.