P R A D

chapter 11 Additional Thoughts for Smaller Agencies

In this study, we have talked about the successful hiring and development of producers and have referenced data that is focused at times only on those firms hiring six or more producers over the past five years. In doing so, it is important to recognize that 85% of all of the independent agents and brokers in the U.S. have under $2,500,000 in commission income and 75% have under $1,250,000. Rarely would the majority of these firms look to be hiring more than one or two producers over the course of a five year period. In light of this fact, what do the results of the study suggest to the principals of these smaller firms? Is it relevant to them? The definitive answer is a rousing “yes” – the results of this study mean every bit as much to smaller firms and may even be more important for several reasons, including the following: • Being behind in producer recruiting and development for larger firms can negatively impact their ability to grow. For smaller agencies, the inability to bring on the “next generation” will not just limit growth but may actually preclude the ability to continue operating and will more materially impact the relative value of the smaller organization. • For larger firms, investments in producers may represent 1½% to 2½% of the firm’s revenues and will reduce their profits by 10% to 15%. For the smaller agency, the investment in a new producer may cut the agency’s profits in half or more. It is a big investment for the owner. If the producer is not successful, the owner has taken a big financial hit and is still left without the producer (and agency perpetuation) that they were looking for. Producer failure is much more painful for smaller agents. • For the smaller independent agency, the six Critical Success Factors apply every bit as much as they do for larger firms. The small agency principal will address the same issues but will focus on those solutions that are best suited for them. For instance, in the training and development of producers, smaller firms will be less likely to create training capabilities internally but will draw on the wealth of outside resources available through their carriers, agent’s associations, consultants or independent vendors. So, for the principal of the smaller firm, don’t procrastinate on producer recruiting and development. You have less margin for error and more riding on your ability to bring on the right people at the right time.

61 Producer Recruiting & Development Study