Growth potential lies in your DNA
What is it costing your agency to Do Nothing About growth-inhibiting behaviors?
By Roger Sitkins
We continually hear from independent agencies that are having trouble growing their top-line revenue. In fact, that's the reason most agencies join us. The typical lament is that "it's really tough out there." I can't argue with that because, yes, it really is tough out there. The economy is uncertain, the stock market unpredictable and the bipartisan nonsense going on in Washington makes this a very tough economic environment for almost everyone.
However, here's what hasn't changed: Individuals and businesses are still buying insurance. We know this because there are 30,000 to 40,000 independent agencies (and who knows how many direct writers and Internet-based companies) out there selling insurance, so someone is still buying! That's why I believe there are just too many people who are using the economy as an excuse to hide behind while they wait for things to change.
In times like these, I think we must ask: "Why are we making it so tough on ourselves?" The economy may be tough, but so what? I'm reminded of the Serenity Prayer: "God grant me the serenity to accept the things I cannot change, the courage to change the things I can and the wisdom to know the difference."
While we may not be able to solve the nation's economic problems, it's counterproductive to sit and fret. Let someone else remember the good old days and recount the many reasons why they can't grow—because they're right. (Remember, if you think you can or if you think you can't, you're right!)
I think the number-one reason agencies and producers are making it so tough is their DNA: The things that they Do Nothing About! I've compiled just a few of the common examples of growth-inhibiting behaviors that average agencies and producers Do Nothing About.
DNA Service Trap. DNA producers spend 70% to 80% of their time dealing with current clients and very little time and energy pursuing new clients. It should be the other way around! Get out of the Service Trap and into the Sales Game.
DNA Unmanaged Client Experience. Most agency owners and producers give little thought to what the client is experiencing. If they did, they would understand that you get only one chance to make a great first impression.
Have you ever observed a service person who acts like clients are an inconvenience rather than the main reason the agency is in business? Have you ever seen a producer "over-promise" and then "under-deliver"? How about the way the office looks, the phone is answered, or the quality of submissions? Letting the client experience become a random event instead of a purposeful, planned and branded event is a huge and pervasive problem.
DNA Price-only Selling. DNA salespeople really believe that everything is about price. They're selling a commodity and doing so in a bad economy, when everyone wants to pay the lowest possible price for insurance. Certainly, price is important. But you know that if you live by the sword, you die by the sword. You know that you shouldn't be basing everything you do on price-only selling, but you can fool yourself into doing it anyway. Your agency is giving tons of quotes and not providing any value beyond price.
DNA Differentiation. What distinguishes one agency from another? Here's what DNA agencies will tell you: "We give good service" (so does everyone). "We have great people" (so does everyone). "We represent all of the best companies" (so does everyone).
Recently I was talking with a friend whose son meets daily with independent agency owners and producers, trying to drum up more business for the wholesaler that employs him. The son told his father he's noticed that virtually all the producers and owners he's met say they're different. However, after calling on hundreds of them, he says he realizes that at least 95% are exactly alike and yet they do nothing about it. They don't have a branded customer experience, they don't have a set offense and they still sell on price only. There's absolutely nothing that differentiates them from their competitors.
DNA the Energy-draining Producer. This is the same producer everyone talks about at every management meeting. It's the same one the service team complains about nonstop. Still, we typically do nothing about it, believing that "the devil you know is better than the devil you don't know."
Another popular DNA defense of the energy drainer: "At least we have a producer who is generating $30,000 to $35,000 a year of new business." By the way, that producer is losing the same amount. This is an energy sucker for the entire organization, and we do nothing about it.
DNA Automation Mavericks. Employees who use your automation system "their way" aren't likely to be making the most of it—if they're using it at all. We still see producers and service people who talk to a client, scribble down some notes on paper and then later, if and when they get a chance, enter the information into the system. That's what they should have done first, not last. So even though we see it, we don't do anything about it.
DNA Managing Carrier Relationships and Contingency Income Contract Results. We know we should be working on this and getting more proactive, but we're pretty busy right now. However, just as soon as we get a chance, we'll definitely do that. As a result of DNA management, agencies are leaving hundreds of thousands of dollars on the table each year. You are, too, if you're doing nothing to manage your carrier relationships and contingency income results.
DNA Retention Issues. A retention rate of 92% to 93% probably seems okay in the whole scheme of things, doesn't it? The reality is, we're not installing exit barriers or doing stewardship reports, which is not okay. According to all the studies I've ever seen, every 1% increase in retention = up to a 6% to 7% increase in profit. Doing nothing about boosting your retention rate is sure to stunt your agency's growth, profit and value.
DNA Unacceptable Operating Profit. So many agencies are far too dependent upon contingency income for their overall profit. They lose money selling and servicing insurance, but they make up for it with contingency/profit-sharing income. Because we allow ourselves to have less than acceptable top-line growth and less than acceptable bottom-line growth, we don't have the operating profit we need. But we're still doing okay overall, so we do nothing about it.
DNA Multiple Offenses. In many agencies, every producer has his or her own way of going to the marketplace. As we have often discussed, so many of them employ the look/copy/quote/pray approach. Although every producer does it a little differently, they typically show up with a yellow legal pad, take copious notes and obtain copies of policies. There's no agency brand to distinguish it from the pack and consequently no branded experience for the client. The producers are all just winging it.
As I've said a million times before, it's imperative to have a set offense. Unfortunately, far too many agencies do nothing about the fact that they have multiple offenses.
DNA Single-policy Accounts. We know that our most profitable accounts and the ones that will stay with us the longest are the ones that place all of their insurance with us. But we still allow people to call in and buy an auto policy without talking to them about their homeowners policy. Or they'll call in wanting a quote on their commercial insurance, which we quote as a BOP policy without broaching the subject of employee benefits or VIP personal lines. But we did write one new policy, so we must be doing okay.
The bottom line
When you consider all of these areas that we do nothing about, you'd think that everyone would want to jump on them. You'd be wrong! The reason we have so many average agencies out there is that it's really easy to be average, which is defined as the best of the worst and the worst of the best, as close to the top as you are the bottom.
However, the main reason most agencies have allowed DNA to continue is that once upon a time, they could avoid dealing with these issues and still make a lot of money and enjoy a great lifestyle! All of that is being challenged now.
In case you haven't figured it out, the economy is not going to improve drastically any time soon. Also, for those of you who regularly recite the Average Producer's Prayer ("Dear Lord, give me just one more hard market before I retire. I promise not to squander this one!"), the soft market is not going to do an about-face overnight.
That's why now is the time for your agency to get a reality checkup. What have you allowed to be a DNA in your agency, and what's been the cost? What have you lost in Top-Line Revenue, Bottom-Line Profit and overall Agency Value?
I believe that the cost of DNA for most agencies is about 50% of their revenue. In other words, had they dealt with the DNAs as they appeared, those agencies would be 50% larger today. It's hard to say exactly how long it would take to reach that percentage because of the chronic nature of DNAs in our industry. But if the average agency would just get in gear today, it could start recouping that lost revenue. Although it may be a long journey, you'll never reach your destination if you don't take that first step.
Is your agency growing as much as it could or as quickly as you would like? If not, will you choose to DNA, or will you decide that the high cost of inaction is NLA (No Longer Acceptable)?
As always, it's your choice!
Roger Sitkins is founder and chairman of Sitkins International, a private client group and membership program for some of the top independent insurance agencies and brokerages in the United States, Canada, and Latin America. Members participate in training, advising and networking opportunities focused on innovation, sales, growth, profitability and value. Sitkins International is inventing the future of the independent agency system by providing intellectual property that empowers agents and brokers to become innovators.