P R A D

producer has a $750,000 book of business and your projected total revenues are $10,900,000, it is possible to determine the number of validated producers needed (i.e., 14.5). The determination of the number of producers needed by book of business can be used to validate the number determined by Sales Velocity or the two can even be averaged. This type of analysis provides specific projections of the agency’s hiring needs over the near-term. The accuracy of these projections will be as good as the assumptions used. Obviously, this approach requires frequent updating to ensure that it captures an agency’s actual objectives, business performance and expected attrition. The Sales Velocity analysis or the book of business analysis can both provide clarity to producer hiring, but they do not illuminate the entire picture. For example, while the Sales Velocity analysis may determine that four new producers are needed, it does not describe any vital attributes of those producers. Beyond just the number of hires, agents need to consider the health of their existing producer demographics – the age and stage of the production force. If an agency has an adequate number of producers, but all are 55 or older, the agency will hit the wall unless it begins hiring with an eye for the future. For years, we have used an agency’s Weighted Average Shareholder Age (WASA) and Weighted Average Producer Age (WAPA) as two helpful metrics. Each of these metrics assists firms in assessing and understanding their relative age. WASA is determined by taking the sum of the product of the ages of agency owners and their agency ownership percentages. WAPA is similarly calculated, using the sum of the product of the firm’s producers’ ages and the percentage of the agency’s “produced” commissions handled by each producer (house business is excluded). WASA and WAPA

WASA Scale

WAPA Scale

Current Industry Measurements:

A WASA over 55 begins to limit perpetuation options

Healthy agencies have a WAPA under 50

55

50

WASA 53.3

WAPA 48.7

50

45

Weighted Average Shareholder Age

Weighted Average Producer Age

Source: Reagan Value Index

The higher the results for WASA and WAPA, the older a firm is and the greater the need to bring on new producers and owners. We have consistently seen that firms with lower WASAs have an easier

11 Producer Recruiting & Development Study