Building a Dynasty, I’m gonna teach you how successful insurance agency owners staff their profitable multiline agencies so they are great for decades and the agency owner never has to retire. In any agency, there are two primary objectives. First objective is to get your renewal agency staffed profitably now. Regardless of whether or not you have great production even if you’re not hitting company goals, you wanna make sure you’re a business owner, not an employee.
As you’re constantly waiting on first year production or company bonuses to pay for the debts you’re incurring now because you’re not profitable, you’re always gonna be an employee. Second thing, once you’re profitable then you wanna create a profitable growth plan for your agency in the future. Decide how you want your agency to grow, know what positions you wanna hire and find the people to fit those positions, and let go of everyone else. Every other plan for the agency should answer to these two objectives. Wanna share with you an analogy here that relates to basketball, sales and how you create a dynasty, a team that’s great for years and years. In basketball, there are shot opportunities. Somebody gives you the ball and they give you a chance to score a basket so a score is putting the ball in the basket. And baskets divided by shots taken equals your shooting percentage and that’s one of the ways we measure the effectiveness of a basketball player is how well they can put the ball in the basket, what percentage of the time when they shoot the ball does it go in.
For multiline sales people, a multiline opportunity equals a P&C sale. Anytime they’re writing an auto or a fire sale or some sort of transaction, that’s like a shot opportunity in basketball. A score is equal to a multiline sale and their multiline sales divided by their P&C sales, their auto and fire sales opportunities is their multilining percentage. It’s like their conversion percentage. Now, some people can score, that is some people can multiline, others can’t and they’re better off just playing defense. That is servicing the business and handling renewals and retention. Those with the highest scoring percentage, the highest sales conversion ratios should get the most amount of scoring opportunities, the most amount of P&C sales and that includes add on autos because those clients have money and they wanna do more business with us.
If you can’t score, that is if you can’t multiline you shouldn’t be getting the ball. You shouldn’t be getting P&C sales opportunities. If you can’t score or defend, that is if you can’t sell or service you need to go. You can be a franchise player, an all star or a role player but you’ve got to be great and we’ve got to know what we’re getting from you. Your numbers let us know who you are and what you are. Don’t tell me you’re a sales person, show me. So, overall what we’re looking for is if there’s opportunities, I need to know that the person that I’m giving the ball to, the person that I’m giving those P&C opportunities to can make a multiline sale out of that.
If they can’t, I need to find them another position. Now many insurance agency owners have a generalist agency, so even though they’re multiline they’ll say that look, everybody’s gonna do everything so it looks kind of like this. You’ve got this generalist staff person and they’re making a base salary of whatever the market rate is and their perceived role is that they’re gonna sell and service. And let’s say their goals are that they’re gonna do 20 auto and fire and a combined four life and health. And actually these people, some of them are doing the 20 auto and fire and the four life and health so they’ve got 10 auto, 10 fire, two life and two health. If you looked at that overall, we say they have a 20% multiline ratio. Again, using that analogy of conversion rates in basketball, they sold 20 P&C products, 20 auto and fire and they also sold four life health products. So overall, 20% of the time they’re multilining, that’s good. The agency has another person just like this and they too are labeled a generalist.
So far so good. Here’s where we start running into challenges. The third person is also a generalist. They have the same goals to do 20 auto and fire and four life and health. Unfortunately, they’re doing zero life and zero health so their multiline ratio is 0%. Same thing with the other person on the bottom right here so what we have here is two people who were supposed to be able to convert P&C to multiline sales but they can’t. It’s kind of like playing basketball with somebody where you give them the ball and every time you give them the ball, they cannot put the ball on the basket. Well, pretty soon you decide I’m not gonna give you the ball. I’m gonna give the ball to somebody else but I can’t keep giving it to you if you can’t put the ball in the basket.
And so in this model, the agency owner has to write the four life and four health to hit the agency goals. It’s not catastrophic but it’s certainly not what we’re aiming for. If we make just one minor shift here, we might be able to see a huge increase in the life health production. If we take this first person and say look, we’re gonna have you be a multiline sales specialist. And actually what we’re gonna do is we’re gonna pay you a base salary that’s slightly below market but we’re gonna give you an opportunity to make huge bonuses. And so now, if you can continue to convert 20% of your P&C opportunities to multiline sales and if we simply give you twice as many P&C opportunities, well hopefully we’ll see twice as many sales.
Instead of doing 10 auto, 10 fire, two life, two health, this person is doing 20 auto, 20 fire, four life, four health. On the top right we’ve done the same thing with the other person that was able to convert at a 20% multiline ratio. Now on the bottom left, we’ve got this person who’s going to be a renewal sales specialist and we’re gonna say, look, your role is to service and retain. We’re gonna keep your base salary at market rate and your goals are to have a 10% lapse rate or to have 90% retention to set appointments and to free up the sales people, the multiline sales people so they can sell more. The other person on the bottom right is also gonna be a renewal sales specialist with the same objectives. What we’re doing is we’re taking the pressure off of them to multiline sell which they’re probably not good at and simply wanting them to focus on retention which we know is gonna be best for the agency.
They can stay in the role performing successfully for years on end without having to worry about the pressure for being a multiline sales person. If this works out, we can now get to our eight life and eight health a month without the agency owner having to sell anything. And so, what that allows us to do is the agency owner does not need to focus on production goals and they can focus on other ways of growing the agency.
Here is where a lot of agency owners stop growing their agencies. They don’t do it intentionally but what they don’t realize now is they’ve reached their market limit. It’s kind of like if you have a McDonald’s at a certain location and there’s only a certain amount of traffic that’s coming in. You’re not gonna get more sales simply by hiring more order takers or more people to do french fries. Similarly in this model, you’re not gonna have more sales if you hire another base salary service person because they’re not drumming up sales, and even most multiline sales people don’t generate sales so you need a different type of sales producer now. Now we focus on hiring a rainmaker. This is the person who solicits auto and fire, they make sales happen. They’re not working internet leads, they’re not working paid advertised leads or anything, they are making sales happen by their networking and generating things.
And so, that person allows the agency to grow. Now it’s a very specific type of person and there’s a certain way to pay the opportunity where you can give them a huge financial opportunity so they’ll want to grow the agency. But basically, this is a person that makes sales happen and they’re not focused on servicing the book, they’re not focused on multilining, they’re focused on simply making sales happen for the agency. Once you have this person, now you can start growing the agency and as the agency grows over time, what you’ll look to do is first you’ll wanna hire another one of them.
Once you have these two rainmakers in place, now they’re really adding a lot of P&C opportunities to the agency and you could hire another multiline sales person if you want, or if you’re able to develop this type of person you can bring on a client review specialist. Now this is not just a life health specialist that pounds the phone trying to get life health sales.
This is a person that number one, they can convert at a higher multiline ratio because they’re more skilled and they’re able to do things like conduct full client reviews, give mini seminars in the agency. This is a person with first rate expertise, maybe this is a person who’s aspiring to be an agent. Maybe this is a person who has the qualities or the talents of an agency owner but somebody doesn’t want to be an agency owner. This is a top level person and that allows you to have even more multiline sales opportunity in your agency which of course is helping you generate more life health sales, and retain the business that’s already in your book.
The rainmakers feed the P&C sales to that financial services representative slash review specialist to help you grow the multiline sales in your agency. And then finally, if you wanted to you could bring in an office manager slash personal assistant and that’s the person that can really help free you up as an agency owner and allow you to do what you want to with your free time. Sure, you’d still need to be involved in the agency but really that’s the person that make sure that the operations that you’ve set in place, the systems, the processes continue running, and that allows you as the agency owner to have the freedom. This is the simplest way to grow a dynasty in the most efficient and effective way that will lead to the quickest growth.
Many agency owners focus first on just writing a lot of auto and fire, and they’re not as focused on multiline. They say I’ll get to multiline later but what happens is if your lapse rates are really high, if your agency lapse rate is let’s say 25%, that probably means your lapse rate on your new business is closer to 40 or 50%, and you’re gonna grow at a very slow rate. All these energy and literally all your youth as a business person is being put into a machine or a business that’s not retaining. Whereas if you simply make sure okay, before we really scale up to grow, we’re gonna make sure we’re multilining at a good percentage, at least 15 to 20%. We’re gonna make sure that the clients like us and they stay with us and we have a good lapse rate.
We’re keeping 85 to 90% of our clients on retention and by doing that, you’re allowing yourself to keep clients longer so now when you scale up and turn on the faucet and really start marketing and paying for advertising and leads or whatever it is that you’re doing to drum up business, now that business is sticking and it’s worth so much more to you because the client that stays on let’s say with a 10% lapse rate, will stay with you for 10 years. A client that’s at a 20% lapse rate, that means they’re only staying with you five years. That’s five years lost at that 20% lapse rate. Again, first we get the agency efficient and multiline and then we scale it. Thanks again for listening. We look forward to helping you drive automatic production to maximize your agency income. Insurance Agency.