The Cost of a Sale & Producer Compensation
This is no longer a cost plus industry. Agencies have to do far more work than ever before, which is why even some large accounts now cost an agency more than it makes. To be adequately profitable, agencies must know and control their cost of sales. Otherwise, like some agencies who have already failed, an agency may find itself writing plenty of new business while simultaneously going bankrupt.
The key is increasing sales AND simultaneously decreasing the cost of writing that business. The solution is not one or the other, but a combination of both. This detailed presentation covers how to measure the cost of a sale, how to minimize the cost of a sale, proper producer compensation, and producer requirements. Each of these factors is critical to an agency’s success.
How much do your sales cost?
Is your agency spending more than it makes on every sale? Most agencies are without even knowing it! According to the most recent APRS data, the average agency spends as much as $1.11 for every commission dollar earned. These unprofitable sales are often hidden by profitable house accounts, contingencies, and other revenue sources. Wouldn’t it be better to make a profit on each sale in the first place? Imagine how the agency’s profits and value would skyrocket!
This seminar will include the following topics:
Every agency is unique: The cost of a sale is determined by the agency’s cost structure and methods of doing business, therefore costs are different for every agency and every line of business
Common sources of costs and ways to pinpoints and decrease costs
Minimum hit ratios and minimum commissions
Producer compensation: Improve profits and productivity, while enabling good producers to increase their take-home pay
Audience members will learn how to lead their agency down the road to greater profits by making profitable sales. They will learn how to identify costs and how to magnify their profits!
Stop Unprofitable Sales
I recently surveyed a group of top performing agency owners regarding producer compensation. The question was, "Should producers be compensated for all sales?"
The unanimous answer was "No." These owners know that some of their sales are not profitable. Some sales cost the agency more than it makes. The follow-up question was, "How many of you compensate your producers for all sales?" About 80% raised their hands.
Whether it's culture, tradition, habit or a perceived necessity, if an agency owner knows they should stop paying producers for all sales, especially unprofitable sales, the agency needs to find a way to achieve that beneficial goal. But how does an owner say to a producer, "I'm cutting your paycheck, but I hope you remain a happy, content, hard-working employee?"
This is never an easy situation. So to help owners clear this significant hurdle, Chris outlines a step-by step solution during this seminar. Topics covered include:
Ways to identify unprofitable sales
Suggestions for gaining producer buy-in
How to cost an account
Methods for determining minimum account size
Alternate compensation methods
Setting up support producer (or "farmer" producers) or a small business unit
The vast majority of agency owners pay producers to make unprofitable sales. It is a significant hurdle, though, for most agency owners to put an end to this unprofitable practice. This seminar offers a plan to help.
Producer & Staff Management
Understanding that sales are the cornerstone of all agencies, what is the number two opportunity agencies can focus on to be successful? Quality producers? Efficient Staff? Enforced procedures? How about all three? The number two opportunity to agency success lies in the operations management executed within your agency in ways that support sales. In this seminar, you will learn how to leverage the tools already available to you in order to manage your agency successfully and profitably.
There is more than meets the eye as you prepare and sign a producer contract. Did you know that well written producer contracts can help an agency achieve higher profits, higher morale and faster growth? This seminar will provide the lessons necessary for creating the best producer contract for you or your agency, including setting appropriate expectations and rewarding for the right results.
Which is the better strategy: acquisitions or developing producers?
At first glance, this is a classic question asked and discussed in an MBA finance class. Regardless, the answer cannot be found in any text book. The primary issue is which strategy is most likely to be successful culturally, not financially, because very few agencies have the ability to successfully use both strategies.
This presentation covers the requirements of each agency to accomplish growth through the right strategy for them: either producer development or acquisition. As we review different agency capabilities (both culturally and financially) as well producer behavior, processes for each strategy are discussed. Which opportunity is best for your agency? Find out how you can capitalize on your right-fit strategy for long-term success.
Understanding that sales are the cornerstone of all agencies, what is the number one opportunity agencies can focus on to be successful? High quality producer management. Producers are the number one cost to an agency. Excluding acquisitions, they are the most expensive investment agencies make and historically have had the highest failure rate. Producers create approximately 50% of all E&O claims. The reward associated with managing producers extremely well can only be ignored at an agency’s peril.
This presentation will cover how to manage producers if an agency’s goal is true business success as it will detail contracts, compensation, compliance, hiring, and expectations.
Increasing Profitable Sales
Increasing sales is an obviously common topic in the insurance world but for all the emphasis placed on sales, the industry success rate is marginal for a variety of reasons. First, the focus is too often on any sale, not profitable sales. Second, most of the time, insurance consumers follow Newton's First Law of Motion: objects at rest tend to stay at rest unless an outside force acts upon them. Most customers are reluctant to leave unless they have a serious problem or they can get a significantly lower price.
Few producers truly work the former in a positive context, so the result is unprofitable sales and a price driven relationship. Third, too often agencies follow a "Field of Dreams" attitude, "If we build an agency or hire a producer, the customers will come." This, however, is the insurance industry. Not Hollywood.
The key to increasing profitable sales is to manage the sales process very intensely, something very few agencies, even large ones, do well. This class will cover managing the sales process in addition to increasing sales because it is truly pointless to do one without the other. Class members will learn the whole picture, enabling them to lead their agencies down the road to much greater success.