Today's Viewpoint: A MarshBerry Publication

Driving Momentum – Connect Fall Summit Recap

Twice a year, hundreds of insurance agencies and brokers commit to taking time away from their business to work on their business. The semiannual Connect Network Summit, with a theme of Momentum, was held last week September 21-25. The virtual format provided an opportunity to exchange ideas with peers and to learn from one another: arguably during one of the most important times – uncharted waters of a pandemic.

Mid-way though summit week, Momentum continued with a live broadcast State of the Industry presentation from MarshBerry’s Chairman & CEO John Wepler. Wepler’s main take-away: Don’t be a sloth – be a cheetah. A picture of a sloth flashed on the screen, but the message was less literal. Sloths are slow moving and not quick to adapt. Being sloth-like could be the demise of many insurance firms across the country. Conversely, a cheetah is aggressive, driven and fast. John challenged members and guests to implement three things to build a plan for scale and remain in control of the future: vision, ownership, and profitable growth.

Create a Bold Vision

Plan for a number, or an event, and develop that plan. For instance, how large do you want your firm to be and in how many years? What is it going to take to get there: a five year forward looking organizational chart reengineered to today coupled with aggressive growth goals? Whatever the plan is – develop the blueprint with all the elevations, believe it, brand it and announce it to the world to keep everyone on the same page about the vision.

Broaden Ownership

As an industry, the weighted average owner age (“WAOA”) is too high; in fact, the WAOA in the industry is 52 according to MarshBerry’s proprietary benchmarking system – Perspectives for High Performance (“PHP”). Compounding the problem, ownership opportunities are either non-existent, hollow promises or released too slowly to those deserving. “You shouldn’t just hire people, you should hire the best and only retain those that you believe will eventually be of ownership quality,” says Wepler. The opportunity for ownership creates a gravitational pull for talent, collaboration, an alignment of purpose, long-term thinking and long-term value. Pulling those deserving in the boat keeps everyone rowing in the same direction, thinking about the unified bold vision instead of thinking selfishly or only about the short term.

Build Predictable Profitable Organic Growth

Average firms are growing organically at 5%, but the best 25% of firms are growing organically at 14% according to PHP. And while the average firm achieves an EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) margin of only 19.6%, the best 25% operate at 30.6%. Contrary to popular belief, growth and profit are not mutually exclusive. The best firms achieve both and operate with a gravitational pull that creates wealth, opportunities for advancement, better carrier contracts, relevancy in the community, access to capital and an environment where people want to work. The best firms have a plan to grow at 15% and double in five years compared to sloth-like firms growing at 5% that will take almost fifteen years to double.

Beyond the challenge to be a cheetah, the State of the Industry presentation addressed universal challenges in 2020 and how those challenges may or may not affect the insurance industry. The pandemic, presidential election, supreme court appointment and civil unrest have done nothing to reduce the desirability of the industry. As a litmus test, 80% of buyers report still being extremely interested in completing acquisitions, valuations of platform brokers have actually increased, public broker valuations are up over 15% year to date, over $8B in debt capital was been raised by brokers in the past two quarters, the yield spread is very thin and the fourth quarter of 2020 could be the most active deal quarter in the history of the industry.

Overall, Connect Members are encouraged to look beyond the pandemic and election cycle to control their own future, and avoid being a sloth. Being a cheetah does require an intentional vision and a commitment to growth, but firms across the country are doing it successfully to take control of their own ownership destiny.

If you have questions about Today’s ViewPoint or would like to learn more about how peer exchange can help your firm grow, please email or call Brooke Lugonjic, Vice President at 616.828.0741.

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Platform: High level transaction for a buyer, typically due to new geography niche, expertise, size, talent, etc.

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Contact Brooke Lugonjic Liu
If you have questions about Today's ViewPoint, or would like to learn more about how MarshBerry can help your firm determine its path forward, please email or call Brooke Lugonjic Liu, Senior Vice President, at 616.828.0741.

MarshBerry continues to be the #1 sell side advisor in the industry (as ranked by S&P Global). If you’re considering selling your firm, we are the best choice to help you through the complicated process. If you don’t hire MarshBerry, hire a reputable advisor that can help you navigate one of the most important business decisions you will ever make. You will be much better off having an advisor in your corner that knows the industry than trying to do this on your own.