PUBLISHED ARTICLES

Take Control or Take a Chance
Take control of your destiny or the market will. Organic growth
is all about taking charge, not relinquishing your future to chance.

Fast Focus

• High-performing agencies have a strategy to grow in hard markets and soft.
• Survey shows most agencies lack key characteristics that ensure growth.
• High performers employ a consultative approach, establish cross-sell strategies and benchmark customer loyalty.

Every good farmer knows that success relies on “making hay while the sun shines.” Late summer is the time for harvest, whether in agriculture or insurance agencies.

The dog days of summer are nearing their end. Vacations are ending. And you’re picturing how to cultivate a good crop of business in the last quarter of the year. If so, you’re a person outstanding in your field.

Whether it’s parsnips or policies, it’s still a business and, as such, affected by both internal and external conditions. In the last two issues I wrote about organic growth and the guidance of Scott Addis and Addis Intellectual Capital (AIC), who counsels agency owners on how to get the highest yield from their agency. His techniques on high-performing organic growth agencies are in sync with practices I’ve been advocating for years; although, he has put the theories into a quantifiable, replicable system.

WAITING FOR THE RAIN
I’ve been spending a lot of time on organic growth issues, which is why it’s so distressing to have conversations with agency owners like the following. It leads me to believe that some people will truly never get it.

Agency owner:  “I am beginning to feel better about the future.”
Me:  “Why do you say that? Business is as competitive as ever.”
Agency owner:  “Didn’t you see? The most recent statistics show that the hard market is on the way and should be here by the end of the year.”
Me:  “And why does that make you feel better about the future?”
Agency owner:  “Are you kidding me? My business is going to start growing again! I am surprised by your question, as I thought you were the industry guru.”
Me:  “So, you are telling me your growth strategy is to follow the hard market wave?”
Agency owner:  “What’s wrong with that?”

You would be surprised how many discussions have followed this reasoning. The agency owner is counting on the market to change, on the rains to return and soak his parched land. That is the basis, if not the sum total, of his growth strategy. Counting on the hard market to deliver your growth is an absolute joke. Yes, it will help, and we all hope headwinds will turn into tailwinds. But is that a strategy?

I just completed our annual M&A and Organic Growth seminar tour and talked with more than 300 agency owners and senior management leaders. While everyone was clearly interested in what is happening (or not happening) in the M&A market, there also was high interest in growth strategies.

Unfortunately, an AIC survey revealed astonishing results that go a long way toward explaining why many agencies struggle to achieve organic growth. The results are based on responses from more than 3,000 participants in addition to AIC’s interviews and meetings with hundreds of agency principals, sales managers, account executives, customer service representatives and producers.

source A/C

Unless you read the survey answers closely, you might wonder what I find so astonishing. Let me break it down.

• 65% of those surveyed could not state that their reputation or brand differs in the marketplace.
• 80% say their sales process does not protect them from the commodity trap.
• 90% do not have a process to measure and benchmark customer loyalty.
• 65% do not have a disciplined, results-oriented, cross-selling system.
• 75% say their prospect system is unable to screen out commodity shoppers.

What I get from these answers is that many firms must rely on market conditions to dictate success or failure.

COMMON CHARACTERISTICS

When AIC broke down the results and focused on the best practices of agencies and brokerages that demonstrated consistent organic growth, it found high-performing organic-growth agencies shared many of the same 20 characteristics:

1. They apply a consultative and diagnostic sales and sales management process focused on uncovering the “issues” of their customers.
2. They have mechanisms to screen out commodity shoppers.
3. They cultivate a culture of creativity and innovation; they think outside the box.
4. They establish benchmarks for customer appreciation, loyalty and intimacy.
5. They utilize a disciplined and strategic prospect research and qualification system.
6. They view carriers as valued business partners.
7. They know how to create value.
8. They apply a disciplined, results-oriented cross-selling system.
9. They give back to the community and industry.
10. They always strive to enhance their brand.
11. They benefit from an active network of engaged, enthusiastic clients and centers of influence that create a steady flow of qualified referrals.
12. They understand the lifetime value of a customer.
13. They have a stakeholder intimacy system that touches clients and centers of influence that create a steady flow of qualified referrals.
14. They attract and retain top-notch talent.
15. They deliver differentiated, value-creation initiatives to enhance the customer’s experience with their agency.
16. They have a management team whose leadership style supports and nurtures rather than directs and dictates.
17. They understand and support work/life balance.
18. They encourage producers to be consultative and diagnostic, not product-oriented or transactional.
19. They have a mentoring system in place.
20. They have fun!

OK, so those characteristics all sound great, but how do they translate into tangible numbers? These 20 characteristics of high-performing organic growth agencies translate into “performance indicators” that differ significantly from the average agency. These include:

• New business “hit ratios” of 80% or more
• Book-of-business “loss ratios” under 40%
• Retention rates of 98% or greater
• Referral-based new business opportunities of 80% or more and
• “Revenue per employee” in excess of $200,000.

In my 20-plus years of industry experience working with many, many agencies, I have learned that there are common characteristics of agencies delivering these types of numbers. Such a high-performing agency truly has a sales-oriented culture, a results-driven environment based on responsibility and accountability, and the ability to grow revenue, profits and shareholder value regardless of market conditions.

Six areas of best practices touch on all aspects of the business, from relationship management to sales techniques to technology. Take another look at this list, and see how your agency measures up. Those focus areas are:

1. Stakeholder intimacy and relationship management
2. Consultative sales and sales management
3. Cross-sell strategies
4. Prospect research and qualification
5. Customer intimacy, appreciation and loyalty benchmarking and
6. Brand and brand management.

While you may appreciate the upcoming hard market we expect during 2010, you should take charge of your own future and use organic growth strategies that ensure increased revenues, profitability and shareholder value over the long term, regardless of market conditions.

Robert Lieblein is a contributing writer and managing partner of Hales & Co.