Before you discard younger generations as unrelatable, unmotivated and entitled, consider if this may be hurting your firm’s performance in the long run.
CounterPoint is the proprietary publication of MarshBerry. The magazine offers eleven editions annually and is published for independent insurance agents and brokers, national brokers, private equity firms, banks & credit unions, insurance carriers and specialty distributors. MarshBerry's consultants author content focusing on trends in mergers & acquisitions*, organic growth best practices, benchmarking, financial consulting and strategic business planning.
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How Modern is Your Firm?
Before you discard younger generations as unrelatable, unmotivated and entitled, consider if this may be hurting your firm’s performance in the long run.
Chances are, not many, if you’re anything like the average firm in MarshBerry’s proprietary Perspectives for High Performance (“PHP”) database. The average age of the workforce across position types (ownership, production, service and support) are all up 2-3% when comparing 12/31/08 to 12/31/18. This may not come as a surprise to anyone. In today’s post-Great Recession economy people are working longer, so the average age of staff across all agencies should be increasing, right?
Did you sideline your strategic planning meeting last quarter? Are new business meetings and carrier incentive trips taking precedent?
Even when you are winning, you still have to practice blocking and tackling.
Think selling to an aggregator is the only answer? Try exploring alternative capital providers that may be the key to allowing you to continue operating your business.
You’re the second generation managing the family business — carrying on a legacy, proud of the organic growth the firm has realized and its potential for the future. Your father, who founded the agency 30 years ago, is ready to retire and gain some liquidity from his life’s work. But, selling the business directly to you isn’t so simple because of the market’s high valuations and the differential between what the business would fetch from an outside buyer vs. internal perpetuation. The family wants to continue operating the business....what is the key?
Connect to a Platform and tap into the business intelligence, healthy accountability and technology resources to take your business to the next level — and beyond.
We all can agree making the effort to build a sustainable growth engine capable of predictable double-digit growth is a worthwhile endeavor. However, clearly articulating and delivering a value proposition to clients (and prospects) based on you firm’s thought leadership and exclusive deliverables continues to prove elusive for many organizations.
Let go. These two words might be the hardest thing for a leader to do.
As an owner, are you prepared to be completely vulnerable and honest — to share what you really value in life, and in your organization? Are you willing to put your thoughts and ideas out there for everyone to see? Are you ready to start connecting with your employees about what they care about outside of the office?
People are the lifeblood of your organization — and when the people “run out” a company won’t survive or perpetuate. When a business fails to advance its people, recruit fresh talent, constantly upgrade human resources — then it grows stale.
If you are like many insurance agencies in today’s market, the answer could be “looking to sell.” A robust Merger & Acquisition (“M&A”) market has afforded even average agencies a seat at the deal table with high valuations. For progressive agencies with an M&A strategy, there has never been a more dynamic time in the industry for merging, acquiring and selling… if that’s the plan.
Imagine starting your agency from scratch. You’ve got a completely blank slate and an empty bench to fill. What positions do you need — what skill sets would you seek out? Would you hire more producers or support staff? Would you recruit strategic thinkers or practice leaders? And, how would you develop your talent? Would you invest in more training and communicate more openly about career opportunities?
With a record M&A deal count in 2018 and following large transactions by big, public brokers, many insurance firms are wondering whether they should cash out today. But the question isn’t really sell or stay — it’s, are you willing to commit to growth?
As an owner seeking to grow your business, you want flexibility. You want to maintain ownership. But you don’t want to assume exorbitant debt. You have been reinvesting most of your profit with only limited cash liquidity… and you aren’t prepared to cash out because you believe the business has terrific long-term growth potential.
Do you rely on a good, old “set some goals” approach and hand the rest to your team to make it happen? A sales process will help provide a consistent experience for the people you’re selling to, which will make them more receptive to your value proposition.
Taking the pulse of your employees is crucial to helping you find out what you can do better.
What do your people really think? Do they appreciate the way they’re recognized — do they like the way their performance is evaluated? What’s their opinion about communications and how managers deal with issues? Do they feel like communications are clear?
You don’t know until you ask.
There’s spending and there is investing — they’re not the same thing. Read about four strategies for smart investing by agencies, to help position your firm for growth.
So you’ve decided that something needs to change in your sales team dynamic. Growth is stagnant or nonexistent.
Leadership is wearing a lot of hats, growth is slow, and your sales culture is virtually non-existent. If only there was one person who could put all their energy into reinvigorating the team.
It’s the ultimate sales management conundrum. And three out of four agencies are facing the issue today. The reality is that there are basically four options, and all of them have major drawbacks.
How many people in your business have the same responsibilities that you do? Who else is charged with the demands an owner faces — attracting and managing talent, growing the company, overseeing operations, making decisions that impact the lives of your staff?
As an owner, you bear the emotional and financial burdens that business brings. You’re the one who ultimately decides whether to change how producers are compensated. You have the last word on whether to hire this person, or fire that person. These are tough decisions that can be difficult to navigate, especially when you live, breathe, sweat and bleed the business. You’re too close to it.
So, what’s the answer?
You must fight the comfort of complacency. Even the average firm continues to grow, produce increased returns and, by-in-large, not felt the pain necessary for change.
I have an automatic recording of every Seinfeld episode that airs, building an inventory of television wonderfulness for sleepless nights. “The Bizarro Jerry” episode recently aired and continued the trend.
As our industry moves through 2018, you face interesting opportunities and new challenges related to growth, value, and achieving your goals. These challenges range from more capitalized competition, and shifts in carrier to broker compensation, increased talent demand with (perceived) limited supply, changing buyer needs, new insurance distributors, and InsurTech.
These are everyday challenges swirling around an industry that continues to produce stable results.
Consistent growth improves agency value. What processes are in place to help ensure your business hits the benchmarks?
It’s April and the first quarter of 2018 is behind us. Maybe you went into the New Year with specific objectives for your business, or perhaps your resolutions were broad and more visionary like “growth.” It’s an automatic goal — of course, as businesses, we want to grow and produce a profit, and we want to grow more than we did last year.
The question is, how will your organization accomplish that? What's the plan?
- Feature Article: What's the Plan?
- You Don't Have to Sacrifice Value to Perpetuate
- Metric of the Month: Ratio of Service to Production Staff & Productivity
- Creating Value with Insurance Programs & Reinsurance
- Peer Exchange Network News: MarshBerry University Webinar Series
Be resilient in today’s changing marketplace and challenge the industry status quo.
Now is an inquisitive time in the insurance industry — Merger & Acquisition (M&A) activity is positioning the owners of profitable, successful agencies to realize the value of running a progressive business. And, we believe, 2018 shows no sign of a lull in the acquisition arena, with investors and growing agencies looking to the market for possible opportunities to expand.
- Feature Article: Think Differently and Grow
- Spotlight on Tax Reform
- MarshBerry 360 Preview: Agenda & Meet the Speakers
- Broker Spotlight: Esser Hayes Insurance Group
- 2017 Insurance Agency Transaction Multiples
- Taking a New Look at Recording Revenue
- Metric of the Month: First Year Production Personnel Termination Rate
- Peer Exchange Network News
- Quarter in Review Q&A with John Wepler
- Q4 2017 Broker Tear Sheet
In many ways, the insurance industry can be characterized this way — consistent renewal business gives most agencies a comfortable cushion to rest on, no matter what the market does.
The challenge is, firms have a false sense of security — why fix what isn’t broken? Sure, renewal income helps maintain business, but what about driving growth?
- Feature Article: Think Differently About Growth
- Broker Spotlight: Oswald Companies
- Employee Benefit Spotlight: Value-Added Services
- 2018 Retail Market & Financial M&A Highlights
- What it Takes to Drive Agency Value
- Metric of the Month: Producer Turnover
- Peer Exchange Network News
You’ve heard the story about the owner who promised he’d never sell—it was practically a company mantra. He told his people, “Don’t worry…,” and he assured clients that the firm would perpetuate. He was building a legacy. And then succession time arrived and the owner did the one thing he said he’d never do: sell.
You’ve watched the story play out. So have we — countless times.
- Feature Article: 2017 State of the Insurance Industry
- Brokers Spotlight: OneDigital Partners with Zenefits
- Growth & Deal Value: Cause or Coincidence?
- Does Your Agency Have a Sales Culture?
- Metric of the Month: Is the Purchase Price Dependent on Organic Growth?
- Peer Exchange Network News
- Quarter in Review Q&A with John Wepler
- Q3 2017 Broker Tear Sheet
Why are agents and brokers refraining from InsurTech investments while venture capitalists and carriers pile on?
Until recently, the insurance industry ran predominantly product-centric businesses. Carriers developed insurance products that could be sold to large swaths of consumers and businesses.
Insurance brokers took those same products and educated their clients on which policies might best fit their needs. If a consumer or business suffered an insurable loss, then a generic one-size-fits-most claims process was instituted to partly or fully remunerate the client.
A customer-centric model emerges...enter the InsurTech industry.
Data and statistics show that agencies with gender diversity are performing better, growing more. Is it time to take a look at who — and how — we are inviting people into the insurance industry to grow our talent pools?
Look around the board room. Who’s sitting at the table during the producer staff meeting? Who is applying for jobs in service? Sales?
Now more than ever, we believe it’s important to evaluate the people who make-up our talent pool — because growth, success, and perpetuation are driven by the individuals in your firm.
Get a handle on what it takes to create a strategic plan that’s focused, relevant, aligned and actionable. Yes, we’re talking about a strategic plan you’ll actually use and that your team will execute. Ready to get started?
Successful business owners and industry leaders will tell you that strategic planning is essential to helping achieve goals.
We also know that many strategic plans are created with enthusiasm and good intentions, and then they are set aside. They fall deeper to the bottom of a pile of daily tasks and fires that must be put out. The energy generated during the strategic planning session quickly fades and there’s failure to execute.
Many top performing firms already understand how the service model with true trusted adviser resources can help elevate new business production, long- term retention, remarketing inefficiency drains, and establish
long-term client commitment.
Carriers are continuing to tweak their distribution models and in some markets, in some lines, carrier to broker compensation has dramatically changed.
We are seeing that the individual benefits marketplace is no longer a focus for the traditional employee benefits firm and those writing a large amount in small employer groups have lost value. Human capital management consulting and technology are constant strategic initiatives for customers of all shapes and sizes and they are looking to you as a resource. Compliance has taken firms to a whole new level in terms of capabilities. It appears that having on-staff analytics professionals is becoming the norm.
The iCAP plan for continuity alignment considers culture and incentives combined with both internal and external funding to make perpetuation a reality.
We talk to agency owners about “what’s next?” for their business, and many have a strong desire to perpetuate internally. After decades of commitment to growing their firm, there is often the hope to carry on the legacy and transfer ownership to family members or key employees. But, for various reasons, perpetuation is not a viable option for many agency owners and they will ultimately end up selling. Ideally, we believe that every agency should have a choice of whether to carry on its legacy by perpetuating internally or selling externally to a third-party buyer.
What is the iCAP solution? iCAP is a MarshBerry product that helps enable internal long-term perpetuation.
Learn the secret to keeping control event when rate and exposure bases drop. Does this sound too good to be true?
What if we said there was a cure-all to help combat rate pressure and to manage issues related to flat growth, increasing expenses, employee attrition and a so-so EBITDA margin? What if we said you could stop obsessing over these numbers as “the problem” if you focused on one solution that would drastically change your culture, performance, profitability and sustainability as an agency? Does this sound too good to be true?
WE DIDN’T SAY THE SINGLE SOLUTION WAS EASY, BUT IT IS WITHIN REACH IF YOU’RE WILLING TO DO THE HARD WORK.
Your best producer candidates could be employed today in a different type of business all together. Here are three effective recruiting strategies for filtering through the job-seeker pool and finding people who can drive organic growth at your agency.
Rather than limit yourself to a pool of existing producer candidates – branch out.
LOOK BEYOND THE INSURANCE INDUSTRY.
Wanted: Someone who’s personable, driven and goal-oriented. Must work well under pressure and be willing to take risks. Helps to have a “hunter” mentality — comfortable cold-calling prospects, and building relationships from scratch. Qualities should include self-discipline, persistence, resilience and grit.
The job description here includes characteristics of a successful producer in the insurance industry. But notice, the words “insurance experience” are missing, and that’s not by mistake.
What appears simple and serene on the surface might not be. Let’s examine what lies beneath the surface in today’s M&A market and what to expect in 2017.
The M&A Market may appear to be calm, but beneath the stable deal flow is a churn resulting from several variables.
The market is currently stable and we see that continuing during the next ten years; in fact, deal flow in this period is expected to outpace that of the previous decade, and this presents opportunities for buyers and sellers. Demand from buyers is high, with incumbent players and new entrants setting aggressive acquisition goals. They’re looking to grow by tapping this supple Merger & Acquisition (M&A) market, and the strategy seems to be working.
Combine a simple, time-tested strategy, talented team and the commitment to execute the plan, and you’ve got a winning play. In the games of business and football, getting ahead is all about blocking and tackling.
You can devise complex strategies to outsmart competitors. But basic strategies that are well played deliver results.
What happens when we get too fancy? We fumble. We become so focused on a certain “move” that we lose sight of the game going on around us. Our teams get frustrated, morale deflates. A culture that lacks drive will not set any records.
Simple strategy. Talented team. Commitment to execute.
As with any industry, there are insurance professionals who promote philosophies to boost growth, attract the best producers, make your firm more attractive to private equity — whatever the goal. But at the end of the day, there’s no secret to getting ahead, growing organically or perpetuating your business.
The 2017 MarshBerry Retail Market and Financial Outlook Report uncovers talent as a top concern for growth, and technology as a tool for recruiting, engaging and retaining the next generation.
Technology is the key to unlocking some of the greatest challenges agencies face in our industry today.
Technology can help us tap into fresh, inspired talent. It can provide performance metrics so employees understand what’s next in their careers, so they recognize where they stand and how they can make a positive impact on the business. And, we know that this is something that Millennials value.
There’s a beneficial synergy between data and relationships that can give agencies a competitive advantage as they face today’s greatest industry challenges: talent acquisition, government regulation and technology. These findings come from MarshBerry’s annual Retail Market & Financial Outlook Report, a comprehensive study of external and internal factors impacting the insurance environment.
Are you willing to fight to make the promise of internal perpetuation a reality?
According to MarshBerry’s proprietary database, and other publicly available databases, more than 3,000 insurance agencies have sold over the past ten years. MarshBerry advised on more than 400 of these deals, or an average of three per month.
Given our experience, we believe that we know better than anyone why agency owners choose to sell.
While some of the continued consolidation reflects those taking advantage of opportunity or those suffering despair, many times consolidation can be blamed on leadership throwing in the towel given an awareness that perpetuation is not possible.
How do PE firms differ from other buyers and how can you try to position yourself to attract their interest?
The buy-sell environment in the insurance distribution industry has changed a lot in the past decade.
We believe the biggest reason for this may be the emergence of private equity (PE) firms into the space.
In fact, last year, nearly half of agency transactions in the U.S. involved PE firms in one way or another. This is up from almost nothing, historically.
In our expertise, pricing has never been higher — with PE firms being aggressive buyers. How can they afford to pay these prices? What has happened to change things, and what should you know about these firms? In the face of such a “sea of change” in the marketplace you may want to find out more about these firms and how they operate. Chances are, even if you are not looking to sell currently, a number of your closest competitors may soon be under their control — one way or another!
The 2016 presidential election is firing up uncertainty among business owners – what’s your business platform for success?
The political boxing ring this election year is dynamic and high-stakes with two party contenders duking it out in a highly divisive match. Come Election Day, a lot of Americans will simply breathe a sigh of relief that the contest is over. Presidential elections — especially this one — create a cloud of uncertainty. What does it really mean if Clinton is elected? How would Trump as president impact the way we live and do business?
Can we really answer these questions? Going back to the old “information is power” mantra, we believe the best way to dissipate uncertainty is to understand each party’s platform and how their proposed policies and overall visions could impact the insurance industry.
Stay disciplined and avoid the "upward spiral."
The competition is fierce — don’t get frustrated with the process and feel the need to stretch beyond your comfort zone in negotiating a deal.
We believe that the number of buyers looking for quality agencies is at an all-time high.
Based on our experience, the industry has never witnessed a time when pricing, terms and structures have been more favorable for a selling agency. It is easy to see how an independent agency with a strategy to grow via acquisition could get frustrated with the process and feel the need to stretch beyond its comfort zone in negotiating a deal. An acquisition strategy requires a delicate balance between both flexibility and discipline to be successful
If growth is your plan, it’s time to get to the foundation of what actually drives value.
Is growth on your agenda? In the next five years, do you envision running an agency that’s double the size of what you’re operating today? Do you want a business that will fund your retirement—that you can sell at a premium come time for transition? Do you hope to build a legacy that will perpetuate?
If you answered yes to any of these questions, then now is the time to focus on what matters to increase the value of your agency.
With a hot M&A market, acquiring growth has become an attractive option for many firms but ‘merging’ revenue into your business should not replace organic growth.
Healthy, progressive firms in the insurance industry recognize that they can achieve growth in two ways. Agencies can increase the amount of new business they write, or they can “buy” that new business by acquiring another firm. There’s a balance to strike between the two strategies — but the 2015 Merger & Acquisition (M&A) market is a clear indication that many agencies are looking seriously at acquisition.
Using technology to help your agency reach peak performance.
Your goal is to increase the agency’s annual sales – so you set revenue targets and monitor expenses.
The idea is to see the revenue climb and control the costs. So you watch those two numbers and producers are given their goals.
The problem is, come year-end, there’s a surprising gap between what the agency (and each producer) wanted and what was actually produced. Perhaps sales are up, but the numbers still don’t meet your goal. Maybe sales are stagnant, but retention remained high. No big wins, but no major losses either.
Does this scenario sound familiar?
“How should we pay our producers?” The answer to this important question is not always simple.
The first two numbers you learn at MarshBerry: 40/25.
Why? Because it’s the answer to a vitally important and commonly asked question by leaders all over the country… “How should we pay our producers?”
For decades “40% on new and 25% on renewal” was the simple, short and direct answer to the question posed above. As the industry has evolved, roles and responsibilities have changed and technology has altered the way firms do business — so must producer compensation. Few agencies adapt their business model and corresponding compensation to adequately align with the long-term plan.
MarshBerry opens eyes to a different kind of agency with a 360° approach to transformational change.
We hear this story almost every day from agency owners: They believed they were on the right track, until they realized they weren’t.
They thought they were successful because their firms had been around for decades, or because they continued to secure new business and retain longtime clients. They figured they were a healthy organization because their numbers were steady.
MarshBerry opens their eyes to a different kind of agency: One that is attracting aggressive, young producers and diving deep into niches—a firm that is implementing technology that empowers producers. A culture that is dynamic and includes diversity—age stratification so perpetuation is a reality. Then a light turns on.
Agencies can achieve organic growth and perpetuation when they adopt an “always hiring” mentality and focus on recruiting people with the “selling gene.”
Finding talent is tough. Without a plan to recruit, reward and retain employees, organizations will struggle to attract and keep professionals.
We know that hiring is more of a priority than ever before with 75% of agencies planning to increase production staff by an average of 8% in 2016—that’s nearly double of prior years, based on the MarshBerry 2015 Organic Growth Trends Report.
Agencies that adopt an “always hiring” mentality and commit to basic recruiting disciplines, stand the best chance for industry leading organic growth. This is very timely as many firms are looking for organic growth now more than ever.
MarshBerry’s 30th Annual Market & Financial Outlook report addresses top challenges insurance agencies face — talent, market dynamics and technology.
Renewal income provides comfort for many traditional insurance agencies. Most are happy if agency growth outpaces inflation and provides adequate shareholder return. Those agencies tend to “go with the flow” in terms of growth. They continue to operate their firm as they always have, rising and falling with the market and with no real significant investments in technology or assertive recruiting efforts.
Strategy is the game changer in valuation - is your agency driving a hard bargain?
Today’s dynamic insurance market is ripe with buyers chasing opportunities to acquire agencies, inspiring some owners to ask the question: What’s my business worth, anyway?
With a virtual feeding frenzy of private equity buying into the insurance space, some agency owners wonder if now is the time to sell. And, seeing the prices those buyers might pay push up higher than in the past, now certainly seems like an ideal time to cash out if that’s the succession plan. You might be wondering: Could my agency fetch an attractive price like that?
How bad will the valuation hangover be when the party is over?
You know that I know, that I know that you know that the valuation party will end. Even if the vast majority of people conveniently choose to ignore it and not talk about it.
According to our proprietary data, valuations for “high quality” firms have escalated to the highest level on record. In today’s market, it almost seems like a bad deal is better than no deal from the typical buyer’s vantage point. The question is not, if valuations will correct – but when, how fast and how far they will drop.
The acquisition market is hot —MGAs and Wholesalers looking to expand or planning an exit should focus on maximizing value.
There is significant consolidation going on in the Specialty Insurance Distribution space. Based on current market conditions, we believe this trend should continue for the foreseeable future.
Successful perpetuation calls for high-performers who desire ownership. How can emerging leaders prepare?
Am I ever going to have an opportunity to buy stock? Why hasn’t the owner asked me to be a shareholder yet? Is the owner ever going to perpetuate this agency?
The younger generation routinely asks these questions and too often are unable to get answers.
It’s time to take a good, hard look at your sales process — create a detailed roadmap that will guide you toward true growth.
So you just closed on an acquisition of another agency…
It’s a real win because it increases the size of your organization and brings in several new producers. Instant growth—a shot of revenue in the arm of a firm looking to accomplish an aggressive revenue goal. Victory! Or is it?
When was the last time you sat down and seriously considered what’s next for your organization?
We’re not talking about the next meeting, the next client, or the next week’s schedule—but next, as in what your agency could look like in five years. What does that picture look like? Is your organization twice the size? Are you still independent? Do you cover more territory, offer more services, employ more people? Are you still in business?
What’s the plan?
Over the last thirty years our businesses have evolved. To better accommodate these changes, MarshBerry is launching CounterPoint beginning in June 2015.
CounterPoint replaces our current four monthly newsletters — the MarshBerry Letter, Dealmaker’s Dialogue, For the Record, and the Broker Tear Sheet in a free, monthly magazine.
If you already receive one of our publications — you will automatically begin receiving the new publication.
We are excited about this latest venture – and hope you find the content thought provoking. If you have feedback, or content ideas, please email us at Editorial@MarshBerry.com.