One of the keys to ensuring the longevity of your insurance agency is having your finances in order and ensuring that you are generating a profit.
That’s easier said than done as often the commission checks roll in sporadically during the year, or all at once after peak renewal seasons. Besides the obvious issue of managing trust accounts properly, agencies have to budget carefully throughout the year to ensure they keep the lights on and meet payroll.
And with costs increasing for most businesses, it’s important that you turn a profit that covers all of your expenses, tax payments and any debt financing you may have. There are steps agency owners can take to ensure they are not overextending their finances and are turning a profit.
Assess your profitability
Different clients require varying levels of involvement. Some require a more hands-on approach throughout the year, and that means you have to devote additional resources to caring for them. Some smaller clients may have an outsized need for assistance and the money you spend servicing them can cut into your profitability on that account.
Likewise, larger clients usually require more customer service, but some may not.
There is software in the marketplace that can help brokerage owners to measure the profitability of each account. To get the most out of these apps, you will need your staff to log all of the time spent servicing your accounts.
You also need to track how much you spend landing clients. If you are shelling out more on landing smaller clients, you may not even turn a profit on them until the second or third year if you retain them. You can expect to spend more money on wooing larger clients than smaller ones, as well.
By tracking what you spend on servicing and landing clients, you can understand the return on investment and if you are indeed notching a profit. You will also get a handle on how you can better direct your resources in the future and make decisions that can boost profits.
Keep track of efficiency
You can also track expenditures and profitability by examining productivity and operational efficiency.
There is technology in the marketplace that will allow you to track the productivity of your sales and customer service teams to make sure they are spending their time wisely. A number of programs can track the time your employees spend working on policies, applications and records. Other software can track how productive and profitable your agents are.
One of the biggest efficiency-killers in an insurance brokerage is data entry, particularly if you have a clunky agency management system, which unfortunately is the norm.
Training can go a long way towards improving your staff’s productivity. That’s particularly true for the employees who are using the agency management system.
While you’ll have to spend time and money training them, it will pay off down the road with staff who can efficiently do their jobs without sacrificing quality. Those who are well-trained are less likely to waste time, money and resources.
Cross-selling insurance is tough, mostly because it can make customers think that you just want more of their money. But that concern is overblown, particularly if you have a strong relationship with the client. Studies have found that on average, 80% of an insurance agency’s future profits will come from 20% of its existing customers.
Cross-selling insurance offers several benefits to an insurance agency:
- Marketing to existing customers takes less effort.
- By delivering more value to your clients, you improve satisfaction and retention.
- You increase overall revenues in the process.
- You grow your brand as an insurance agency by expanding your portfolio.
However, the biggest benefit you gain from cross-selling insurance to existing clients is improving the relationship you have with them – and that leads to greater revenue and profits.