Effortless Business Planning: Quick Insights – Part One
As the new year unfolds, it’s an opportune moment for agencies to reflect on their past performance and strategize for the future. With the holiday season behind us and end-of-year financial results in hand, it’s essential to consider whether operational adjustments are necessary to navigate a changing market. A concise business plan can serve as a powerful tool to kickstart the year. Here’s a straightforward formula for creating a one-page business plan that can be completed quickly.
Where to Start
Effective planning begins with a clear understanding of your current position, the journey that brought you here, and an assessment of what strategies have succeeded or failed. Once you have defined your current status, you can create a roadmap for the future. The key is to keep it simple.
The objective is to evaluate the agency’s performance and set future goals in five primary areas: Book of Business, Sales, Financial Performance, Employee Productivity, and Market Relationships.
To visualize this, take a single sheet of paper and draw a vertical line down the middle, along with two horizontal lines to create six equal boxes. Prioritize the five focus areas, placing the two most critical topics at the top of the first two boxes, the next two in the middle boxes, and the final topic in the lower left box. Leave the lower right box blank for now. Now, let’s begin planning!
Book of Business Composition
Examining the composition of your agency’s book of business annually is invaluable. This analysis defines the agency’s “personality,” which influences expectations in other review areas. For instance, a large urban agency focused on major commercial accounts will have different expectations than a small-town agency offering a variety of insurance lines.
Start by assessing the distribution of business across various lines: personal, commercial, life, group benefits, and program business. Calculate the average account size for each line and determine how much of the agency’s business comes from the top 10 accounts. Additionally, analyze the distribution of business to identify the firm’s top five industries.
In the Book of Business box, list the breakdown of your current book by line of business, top 10 accounts, and key industries. Include the current percentage of the overall book for each line, leaving space for future goal setting.
Consider whether the current mix of business is healthy for the agency. Niche selling can be more profitable but also riskier. If your agency has many small accounts, effective procedures for selling and servicing them are crucial for profitability.
Objectively assess your book of business: “Is it valuable as is, or should its composition change?” If adjustments are needed, identify target areas based on your team’s expertise and market appetite. Document these future targets alongside the current composition, and outline one or two actions required to achieve these goals.
Sales Review
Reviewing new sales for the agency and each producer is essential. An experienced producer should generate at least $50,000 to $75,000 in new commission dollars annually, depending on their book size. For larger firms, this figure may be significantly higher.
Evaluate each producer’s hit ratio. Ratios below 25% to 33% can lead to wasted time and resources. Producers with low hit ratios may need to refine their techniques, often failing to pre-qualify prospects or targeting businesses that align with the agency’s expertise.
Even with strong sales, high attrition can undermine efforts. Calculate the attrition rate for the agency and each producer, aiming for around 10% or less. Higher attrition often indicates transient business or clients who are price shopping.
In the Sales box, list the current overall hit ratio, average new business produced, and the average book of business. Next to these figures, write your targets for the upcoming year. Below this, outline two or three actions necessary to achieve these sales goals.
Stay tuned for part two of this two-part series on Business Planning, which will cover Financial Analysis, Productivity Analysis, and Market Relationships.
Oak is the founder of Oak & Associates, a consulting firm based in California and Oregon. The firm specializes in financial and management consulting for independent insurance agencies, including valuations, mergers, acquisitions, and perpetuation planning. She can be reached at 707-936-6565 or via email at catoak@gmail.com.
As the new year unfolds, it’s an opportune moment for agencies to reflect on their past performance and strategize for the future. With the holiday season behind us and end-of-year financial results in hand, it’s essential to consider whether operational adjustments are necessary to navigate a changing market. A concise business plan can serve as a powerful tool to kickstart the year. Here’s a straightforward formula for creating a one-page business plan that can be completed quickly.
Where to Start
Effective planning begins with a clear understanding of your current position, the journey that brought you here, and an assessment of what strategies have succeeded or failed. Once you have defined your current status, you can create a roadmap for the future. The key is to keep it simple.
The objective is to evaluate the agency’s performance and set future goals in five primary areas: Book of Business, Sales, Financial Performance, Employee Productivity, and Market Relationships.
To visualize this, take a single sheet of paper and draw a vertical line down the middle, along with two horizontal lines to create six equal boxes. Prioritize the five focus areas, placing the two most critical topics at the top of the first two boxes, the next two in the middle boxes, and the final topic in the lower left box. Leave the lower right box blank for now. Now, let’s begin planning!
Book of Business Composition
Examining the composition of your agency’s book of business annually is invaluable. This analysis defines the agency’s “personality,” which influences expectations in other review areas. For instance, a large urban agency focused on major commercial accounts will have different expectations than a small-town agency offering a variety of insurance lines.
Start by assessing the distribution of business across various lines: personal, commercial, life, group benefits, and program business. Calculate the average account size for each line and determine how much of the agency’s business comes from the top 10 accounts. Additionally, analyze the distribution of business to identify the firm’s top five industries.
In the Book of Business box, list the breakdown of your current book by line of business, top 10 accounts, and key industries. Include the current percentage of the overall book for each line, leaving space for future goal setting.
Consider whether the current mix of business is healthy for the agency. Niche selling can be more profitable but also riskier. If your agency has many small accounts, effective procedures for selling and servicing them are crucial for profitability.
Objectively assess your book of business: “Is it valuable as is, or should its composition change?” If adjustments are needed, identify target areas based on your team’s expertise and market appetite. Document these future targets alongside the current composition, and outline one or two actions required to achieve these goals.
Sales Review
Reviewing new sales for the agency and each producer is essential. An experienced producer should generate at least $50,000 to $75,000 in new commission dollars annually, depending on their book size. For larger firms, this figure may be significantly higher.
Evaluate each producer’s hit ratio. Ratios below 25% to 33% can lead to wasted time and resources. Producers with low hit ratios may need to refine their techniques, often failing to pre-qualify prospects or targeting businesses that align with the agency’s expertise.
Even with strong sales, high attrition can undermine efforts. Calculate the attrition rate for the agency and each producer, aiming for around 10% or less. Higher attrition often indicates transient business or clients who are price shopping.
In the Sales box, list the current overall hit ratio, average new business produced, and the average book of business. Next to these figures, write your targets for the upcoming year. Below this, outline two or three actions necessary to achieve these sales goals.
Stay tuned for part two of this two-part series on Business Planning, which will cover Financial Analysis, Productivity Analysis, and Market Relationships.
Oak is the founder of Oak & Associates, a consulting firm based in California and Oregon. The firm specializes in financial and management consulting for independent insurance agencies, including valuations, mergers, acquisitions, and perpetuation planning. She can be reached at 707-936-6565 or via email at catoak@gmail.com.
