2016 BPS Study

Brokerage Industry Perspectives How Best Practices agencies are leading the way

As more and more agencies address these questions, the need to specialize becomes increasingly obvious. Customers  benefit from being “targeted,” since a broker that is truly knowledgeable about their risk management needs can do a  far better job for them. Hence, the tremendous rise in specialization by agencies in recent years.   Today, most BPS agencies are deriving a significant portion of their revenue from areas in which they are specializing,  finding that focused expertise can differentiate the firm in a crowded marketplace. For the largest firms, nearly half of  their revenue comes from industries in which they specialize. 

BPS Firms' Specialty Revenue as a % of Revenue

42.7%

39.7%

39.2%

BPS  Average:  34.7%

36.0%

27.5%

23.3%

< $1.25M $1.25M‐ $2.5M

$2.5M‐ $5.0M

$5.0M‐ $10.0M

$10.0M‐ $25.0M

> $25.0M

Developing a Growth Culture 

BPS agencies recognize that growth is the key that unlocks the achievement of nearly all of their goals. Growth enables a  firm to better serve its clients by driving innovation and investment in client resources. Growth makes it possible to hire  top talent because it attracts those seeking continuous opportunity for advancement. Growth benefits the community  by consistently providing an agency with more and better resources with which to serve the local community. The list  goes on and on – and BPS agencies understand the value of growth instinctively.  For most BPS agencies, consistent  organic growth  (non‐acquisition growth) is the most important goal. Yet achieving  organic growth is unpredictable since it is impacted by several variables including new business, lost business, premium  pricing and economy‐driven changes in exposures.   Sales Velocity is the term Reagan Consulting has created to measure the single most important driver of organic growth  – new business. Sales Velocity is defined as New Commissions Written as a percentage of a firm’s Baseline (prior year)  Commissions and Fees. Thus, a firm that writes $1 million in new business on top of a baseline of $10 million in  commissions and fees is generating a Sales Velocity of 10%.  BPS firms know that a superior Sales Velocity can create organic growth, even in a struggling marketplace. BPS firms  generate a Sales Velocity averaging about 15%. This is well above the industry norm of approximately 12% and helps  explain why BPS firms tend to outgrow the rest of the industry.  

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