56 / 186
EXECUTIVE PERSPECTIVES
2003 proved to be positive year for agencies in this category. Revenues grew by approximately 18.4% on
average and pre-tax profit grew by 14.1% on average. Eager to continue this momentum, these agencies
are adjusting to a soft market by clarifying their underwriting guidelines and streamlining procedures to
eliminate unnecessary work and expense. Those that have made recent investments in their production
infrastructure feel they will be better able to endure the changing market.
Keys to Their Success
As one might anticipate with a softening market, average revenue per employee decreased to $121,692
from $124,719 in 2003. However, compensation per employee is also down to $69,947, a dramatic
decrease from its 2003 level of $78,511. This pushed the spread
per employee up to $51,745. The spread increase may be the
result of leveraging the existing production staff more effective-
ly. Many agencies in this group are restructuring their sales and
service function by introducing a new intermittent service posi-
tion designed to support the lead producer. This has enabled that
producer to spend more time on new sales.
When asked about factors critical to success, one agency
responded, "Identifying the gifts and talents of every team mem-
ber, matching them to the right job responsibilities, and then giv-
ing them the opportunity to excel." As production talent
becomes increasingly hard to acquire, this new level of support
staff will become more valuable to Best Practices agencies in
attracting producers and providing an environment in which they
can succeed.
Challenges They Face
Compensation continued to be the largest expense for these Best Practices agencies, consuming an aver-
age 57.7% of the agencies' net revenues. As noted above, however, this percentage is down from the pre-
vious year indicating more productive sales efforts. At the same time, this decrease reflects a top challenge
for Best Practices agencies - acquiring new production talent - since having new, unvalidated producers on
board would negatively impact the compensation expense to net
revenues ratio.
Nevertheless, agencies in this category hired 1.4 new producers
within the last fiscal year, with a success rate (success rate being
defined as having achieved all of his/her goals) of 71.5%. About
one-third of the new producers hired came from outside of the
industry. Personality testing/profiling prior to hiring the new
producer helped asssure a fit in the agency and aided in the suc-
cessful transition into insurance. Most of the management com-
ments indicate that recruiting and developing new production
talent is the key to future survival.
REVENUE SIZE CATEGORY HERE
EXECUTIVE
PERSPECTIVES
PROFILE
REVENUES/
EXPENSES
FINANCIAL
STABILITY
EMPLOYEE
OVERVIEW
PRODUCER
INFO
SERVICE
STAFF
INFO
TECHNOLOGY
INSURANCE
CARRIERS
APPENDIX
55
AGENCIES WITH REVENUES BETWE $1,250,000 AND $2,500,000
Factors Most Critical to
Agency's Success
(Top 5 Listed in Order of Frequency Mentioned)
1. Experienced, dedicated and
motivated employees
2. Relationships with a good mix
of stable carriers
3. High account retention
4. New business development
5. Efficient workflows / effective
use of automation
Top Challenges
(Top 5 Listed in Order of Frequency Mentioned)
1. Acquiring and developing
new producers
2. Finding experienced, quality
service staff & management
personnel
3. Growing/maintaining
revenues in a softening
market/cuts in commission
4. Staying ahead of technology
changes
5. Having time to sell, manage,
and plan