WINNING STRATEGIES
By Roger Sitkins
Is your agency positioned to stay successful
when the market turns soft?
Begin to think about the "what if" and prepare for the future ... [and] you've got a great chance to make 2003 your best year ever while guaranteeing your financial independence.
Last year should have been one of the best or absolutely the best year ever for your agency. If you are a producer, you should have had your greatest growth in gross commission income ever. Assuming these two are correct, I have a major concern. I am concerned that too many agency owners and producers will become--you've heard the expression--FDH: Fat, Dumb, and Happy. Fat because the hard market generated higher commissions. Dumb because you got a big raise and you thought you really had something to do with it. And you're Happy because you're making lots of money. Are you living in a false world of security? Will the market change? Absolutely! You had a great year--market conditions guaranteed it. You renewed most of your commercial accounts at 25% to 75% plus increases. Yes, you worked hard, but you got a huge raise! Your personal books have grown and your personal income has soared. Will the market stay hard this coming year? Probably. Next year? Who knows?!
The real key I see is to understand that there will be a soft market sometime in the future. Let's look at this from the perspective of an agency owner and a producer. Take this test and see how prepared you are for the future.
If you could not answer "yes" to all of these, now is a good time to take stock in how you are preparing for the future. Be careful not to fall into the false world of security that a hard market brings. Take away the revenue from the top 5% of your accounts and eliminate your profit sharing/contingency income--now how are you doing? If your personal book of business has $500,000 of commission income and the market becomes soft, are you prepared for $400,000 of commission income, a huge loss? Have an AMP, Agency Master Plan--a three-year plan that anticipates a down turn. React proactively instead of waiting until conditions do change and having to react defensively.
Let's take a look at these strategies individually.
Agency Owners:
Are you investing in your future? Everyone is making more money: the producers, the agency and the principals. But as a firm, are you re-investing back into the agency with respect to people and planning? You've heard me say before that the best never graduate. There should be continuous training programs for all levels of the agency. That is how you stay on the leading edge of the business world. If you do not grow and cultivate your team's abilities, your agency will stagnate and become victim to competitors.
Are you actively recruiting for the next producer? It takes time and focus to identify and recruit prospects for new producers. There should be a continuous process to actively drive the recruiting and hiring process. Just as producers must fill their prospect pipelines, managers must fill their producer pipelines. Are you: creating a database of candidates; introducing yourself to them; marketing to them regularly so that when they are ready to make a move they have a relationship with you and you're their next logical choice? To accomplish this, your agency has to establish a recruiting culture. In today's world, everyone in your agency has to help identify your next great hire. It's no longer the responsibility of just the owners or agency leaders. Why not?
When was the last time a million dollar producer knocked on your door and asked for a job? Remember, your best prospects are happily employed somewhere else and don't know what a great opportunity they could have in your agency. Someone needs to tell them! The follow through is the toughest part, primarily because of the busy owner schedule. Make sure you have a right-hand person who is your implementer and helps you maintain focus and follow through. Immediately establish a continuous recruiting culture.
Are you investing in the best automation? While you have this influx of additional income, now is the time to invest in the latest and best in automation. Automation may cost less in the future. However, isn't it better to invest now and gain the increased efficiencies? Becoming active in your users group and maintaining upgrades are crucial.
Are you recruiting for the next great internal staff member? Just like having your prospect pipeline full, you want to have a hiring prospect pipeline. Your other team members should want to tell their friends about working at your agency. Be a workplace that encourages fun and creativity. Have an ongoing recognition program for your internal team. One agency in Virginia has a special SWAT Team that focuses on agency issues. At one meeting they talked about not tolerating negativity. A team member, who had been previously prompted, stood up and spewed negativity. The SWAT Team became a force and drew out water pistols showering the negative person. They had great fun doing this. All team members were given empty water pistols as a symbol of dampening negativity. Be a workplace that team members want to openly invite others to join. Be a place where there is a waiting list of team members wanting to join.
Are you building a "rainy day" fund? This is your own insurance plan. We have to be careful not to run our budget so close to the line that any disruption or loss of one major account may paralyze your agency. While you have this increase in profits, do what the advisors tell you to do personally by stashing away about 5%--just in case. Based upon recent occurrences, we now realize how many businesses exist and spend close to the profit margin with no "rainy day" funds. We should learn from history and do our best not to repeat the mistakes of others or ourselves.
| Check the boxes if you are doing any of the following:
Agency Owners: ___ Great profits now and--it is hoped--great contingency income this year--Are you investing in your future? ___ Are you actively recruiting for the next producer? ___ Are you investing in the best automation? ___ Are you recruiting for the next great internal staff member? ___ Are you building a "rainy day" fund? Producers: ___ Are you paying yourself first? Have you made arrangements for investments and for your future retirement income? ___ Are you focusing on your Vital Few Relationships, working on your top 20% accounts? ___ Are you practicing those behaviors and skills that earn you a referral? ___ Are you a "Navigator" for the state of the industry? (Or an "Apologist?") ___ Are you positioning yourself as a Trusted Advisor? (Or a Commodity Broker?) ___ Is your Prospect Pipeline full? ___ Are you prepared for a rate decrease of 20%? What if? ___ Are you investing 5% back into relationships? ___ Are you concentrating on your COIN (Centers Of Influence Network)? |
Producers:
Are you paying yourself first? A great book to read is Smart Couples Finish Rich, by David Bach. I suggest you read this to learn how to make sure you are being smart about your future. In addition, as Bach says in an article in Business Week (April 2, 2001), you may have money right now, but do you have a plan? You rank your love and time for your family as a high value, but have you made appropriate plans for their future? Do you have a will or trust? Are you properly insured--or are you like the shoemaker's kids with no shoes? Bach recommends first defining your values. Next, take action. Make a list of the next five actions you have carry out to begin putting this in place.
Are you focusing on the Vital Few Relationships? Do you have a formal Client Relationship Program for the top 20% of your clients? You should have a formal visitation schedule and "touch" your clients at least quarterly with phone calls, birthday cards or an outing--like lunch and occasional major events like golf, hunting, or fishing.
Are you navigating your clients through this hard market and making recommendations to them, positioning yourself as an expert in the field and trusted advisor? Or are you making excuses and apologizing for the state of the industry? One way to position yourself as an expert worthy of giving advice is to provide articles of interest about your client's industry or specific articles relating to risk management in their field. Providing Value Added Services will proactively position you as one of their inner circle. They will seek your advice as they do other professionals instead of seeing you as an order taker.
Is your prospect pipeline full? Considering current market conditions, now, rather than later, is the time to nurture relationships. Are you meeting regularly with prospects? Continually remind your prospects that you want to be their next logical choice when they are ready to make a change in their present agent. Producers' unique abilities are sales and what goes with that, and the internal staff has abilities that lean toward more structure and method. Working together as a team to keep the prospect pipeline full and ripe will pay off.
Are you prepared for a rate decrease of 20%? As the commissions have increased with the rate increases, you want to be prepared for the inevitable change as history repeats itself. Live within more normal means. Stash away what is the cream at this point. Easier said than done. But read the handwriting on the wall and be smart. Seek the advice of wise professionals for your personal finances.
Are you investing 5% back into relationships? Think about it for a moment--doing quick math, are you putting your own money back into the relationships? This would be organized at your team meetings, through the scheduling of regular events, dinners, or gifting at special times for your clients.
Are you concentrating on your COIN (Center Of Influence Network)? Your center of influence would consist of your financial advisor, accountant, attorney, spiritual advisor (pastor, rabbi, etc.), best friend, or anyone from whom you seek advice and respect. Keep in regular contact and schedule breakfasts, lunches, cocktails, or an outing to maintain these relationships. Send a note for no reason. Just keep in touch and nurture these relationships.
FDH is fun for a while, but like all carnival rides--it eventually ends and sooner than we want it to. Most producers today don't know a soft market. Who can predict what will happen? Begin to think about the "what if" and prepare for the future. With all this in mind, you've got a great chance to make 2003 your best year ever while guaranteeing your financial independence.
As always, it's your choice! *
The author
Roger Sitkins is the president of Sitkins Group, Inc., of Fort Myers, Florida. Sitkins Group has provided services to more than 2,000 independent insurance agencies, helping them to "force vertical growth" in their sales and marketing arenas. Sitkins Group offers a variety of training programs, including a Producer Training Camp--a one-year sales training program--and a CEO Training Camp.