AGENCY MANAGEMENT
I KNOW MY AGENCY’S VALUE - NOW WHAT? In many cases agency owners wait far too long to learn the value of their agency. This delay is due to many factors including time, cost, fear, and the worst of all – they really don’t think that they need to know. The reality is knowing the value of your agency goes way beyond knowing just a number, it reveals several opportunities for agency owners to work on their business, not just in their business. Over the past 8 months, I have completed over 50 agency valuations, here are the most common actions that agency owners take once they learn what is driving the value of their agency and realize that they have the opportunity and power to maximize it. 5. Re-evaluate your Carrier Strategy Concentration with one carrier creates risk inside an agency. If an agency’s lead carrier changes their compensation, appetite, or rates the impact to an agency can be significant. Many agency owners take a closer look at their carrier strategy as a result of going through the valuation process and explore alternative options. In addition, those agencies that are spread too thin across many carriers explore implementing a strategy to maximize their carrier relationships by focusing on areas that will allow them to place business with key carriers and put themselves in a position to be eligible for contingency. By focusing on a carrier strategy, and agency owner can reduce their risk over time as well as relieve some pressure on their staff who may be struggling to keep up with too many carriers. 4. Put Producer and Employee Contracts in Place 24 | DECEMBER 2021 |
wisconsin INDEPENDENT AGENT
Having a high concentration of your book with a single producer or account manager creates risk. There is even more risk when there is not contract in place with that employee. Agency owners that work to put in producer and employee contracts that define and protect trade secrets and also include non-compete and non-piracy language can mitigate their risk in this area. While the risk of losing business when a person leaves your agency still exists, these contracts if written appropriately can give the agency some recourse and also prevent an employee from attempting to take their customers with them just by making clear what the cost of this action would be. Any agreements that are put in place after the employee after the hire date will require consideration for executing the agreement. 3. Compensation Plans The largest controllable expense inside an agency is payroll. An agency’s staff is their most valuable asset and their biggest expense. Depending on the size of your agency, compensation and benefits will use over half of the agency’s resources. Understandably, this is an area that is most often adjusted in the valuation process. Many times, compensation plans are not tied to agency production causing the compensation to become out of proportion. It is difficult for an agency to invest in marketing, technology or additional staff when their current compensation plans are not healthy. Working to implement compensation changes requires time, great communication and a clearly defined pathway to success to do it correctly.
