2001 Best Practices Study

Analysis of Agencies with Revenues Between $500,000 and $1,250,000

F INANCIAL M ANAGEMENT

“We are from the old school. We are not afraid to send out a cancellation notice if the payment is late.” “Everybody in the agency knows what it takes to make a profit because we continuously talk about how much we spend of each dollar of commission for staffing, overhead, automation, office expenses ... so when it comes time to spend money on a ‘great idea’, we all know there are going to have to be some trade-offs.” “Just a year ago we got into a joint venture with a credit union that is paying some real dividends. I just think the opportunity for independent agencies to align themselves with a variety of people is incredible. And I don’t mean sell out, I mean align.” “We keep our producers so focused it drives them nuts. We have ongoing sales training so that everyone has the same focus on the sales process.” “We got rid of the data line between the two offices and replaced it with a virtual private network that someone else runs. Now we just go out to the internet.” “We have started to store digital pictures. It really helps when we market to a company to be able to email a color digital picture so they can see the property first-hand.”

The key financial management practice to surface with this group of agencies was invoicing agency-billed transactions on a timely basis. This was done to expedite collection of the premium in order to increase the agency’s float and interest income, as well as to minimize the internal cost of collecting past-due balances. Most had a procedure in place to binder-bill transactions as soon as the estimated premium is determined.

R EVENUE G ROWTH Revenue growth is one of the challenges that causes this group of agencies the most concern. They actively solicit referrals, have established strategic alliances with a wide range of entities, have turned to the internet to sell specialized niched products, and in many cases have expanded their products and services beyond insurance in order to add new revenues. Another common strategy is to cross-sell life, health, disability, long- term care and retirement planning products to round out their P&C accounts. Surprisingly none of the agencies in this group turned to merger or acquisition activity as a way to accomplish growth.

T ECHNOLOGY U TILIZATION

Technology is a critical success factor for most of these agencies. They make extensive use of their agency management systems to extract data for client servicing, communications, and marketing. Many have installed scanners to supplement data entry and have integrated fax capabilities into each workstation. Most employees have desktop access to the internet and email is used extensively, both internally and externally.

38