2016 BPS Study

Brokerage Industry Perspectives How Best Practices agencies are leading the way

Age Banding of Sales Velocity Example

8.6%

17.9%

Healthy

2.0%

9.7%

Unhealthy

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Up to age 35

36 ‐ 45

46 ‐ 55

Over 55

Notes:  Sales Velocity = total written new business as % of prior year’s commissions and fees  BPS Average Sales Velocity for all revenue groups is approximately 15% 

Many BPS agencies invest heavily in their own business. They recognize that the investment with the highest return  potential for most agencies is the recruitment and development of new producers. The  Best Practices Study  helps  agencies benchmark these investments with three important metrics: NUPP, Producer Success Rate and Effective NUPP.  

 NUPP (Net Unvalidated Producer Payroll) 

Expressed as a percentage of net revenue, an agency’s NUPP is the difference between what an agency pays its  unvalidated producers (producers in development) and what the unvalidated producers would earn under the  agency’s normal commission schedule. In other words, NUPP measures what the agency’s unvalidated  producers are paid versus what they earn. NUPP allows an agency to see if it is investing more, or less, than its  peers in its unvalidated producers. Most  Best Practices  firms report a NUPP of between 1% and 2% of net  revenue.   Although NUPP is a very helpful metric in gauging an agency’s overall producer investment level, it does not  speak to the effectiveness of the investment being made. To better understand the effectiveness of this  investment, we must consider the success rate a firm is able to achieve in developing its producers. We define  this Producer Success Rate as the percentage of producers hired during the past five years that have already  validated or are on track to validate by achieving the goals set out for them. Most BPS firms achieve a success  rate of between 50% and 75%. 

 Producer Success Rate 

 Effective NUPP 

Finally, to measure overall effectiveness in producer recruiting and development, we multiply the NUPP by the  Producer Success Rate to obtain a firm’s Effective NUPP. The Effective NUPP is the best indication of an agency’s  investment in producer development. 

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