2013 Best Practices Study

Analysis of Agencies with Revenues Between $10,000,000 and $25,000,000

Key Benchmarks Mgmt. Perspectives Profile Revenues Expenses Profitability Employee Overview Producer Info Service Staff Info Technology Insurance Carriers Appendix

Developing New Producers In recent years, Best Practices Agencies have ratcheted up their producer recruiting and hiring efforts in order to increase their organic growth rate while also preparing for the retirement of their Baby Boomer producers. This year’s Study includes a relatively new metric: the Net Investment in Unvalidated Producer Pay (NUPP.) The NUPP allows firms to compare their producer investments with their peers. It measures the degree to which an agency is subsidizing its developmental producers – within reason, the higher the NUPP, the better. The average NUPP for the $10-$25 million firms in this year’s Study is 1.2% of revenue. As firms have more aggressively invested in recruiting new producers, the success rate of those hires has become increasingly important. Historically, BPS firms have typically achieved a success rate of roughly 50%. In this year’s Study, the number has hit a surprisingly high level of nearly 60%. How are firms achieving this? The answer: A more concentrated focus on Producer Development. “We are paying more attention than ever before to ensuring that those we hire become successful. We’ve built a three year development program that includes a mentor and extensive skills training.”

Adjusting to Health Care Reform Despite the ebbs and flows of the politics around the Patient Protection and Affordable Care Act (“PPACA”) legislation, reform of the U.S. healthcare system is here to stay. For the $10-$25 million BPS Study Group, healthcare reform is a concern, but it is simply one of many. To put it in perspective, group medical commissions/fees and overrides represent approximately 17% of the average firm’s overall revenues. And if the most vulnerable small groups (under 50 lives) are isolated, they represent only 27% of that figure. Thus small group medical represents less than 5% of overall revenues (27% of 17%.) Many agencies view healthcare reform as a tremendous opportunity for growth, since clients are desperate for quality information from a trusted source that truly understands their business. As such, the industry’s leading agencies are taking aggressive steps to become the trusted advisor regarding the rapidly changing healthcare landscape. Keys to Developing New Producers (Top 5 Listed in Order of Frequency Mentioned) 1. Start with a recruiting strategy that is focused on a particular type of individual (such as industry outsiders, under age 30, but with sales experience) 2. Customize a development pathway designed specifically for the candidate pool being targeted 3. Set realistic sales goals from day one and monitor progress constantly 4. Assign each new producer a capable mentor 5. Use best in class outside resources (carrier schools, sales consultants) whenever possible

2013 Best Practices Study

Agencies with Revenues Between $10,000,000 and $25,000,000

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