P R A D

Velocity and client retention, it is unlikely that an agency will be able to accurately assess its producer hiring needs.

“If we are going to hit our growth objectives, we have to increase our producer count by 10% per year. We can dig ourselves into a hole if we miss hitting these hiring targets.” The primary means to driving higher Sales Velocity is to hire more producers. Like cars with undersized engines, many agencies are limited by too little horsepower. The driver desires a certain amount of speed, but the engine is too small to produce it. A stated organic growth goal of 10%, for example, may require sales velocity of 20%. For a $10 million firm with 10 producers, a sales velocity of 20% means average new business per producer of $200,000. If increasing Sales Velocity is the objective, expecting a team of producers, especially later in their careers, to materially raise their new business production is unrealistic. However, agencies can use the Sales Velocity concept and its relationship to organic growth to calculate the number of producers that they need to hire. We have developed a model to assist with this analysis. To begin, we need to quantify some easily established variables. They are: • Organic growth goals – what is the desired annual organic growth rate? • Account retention rates – what percentage of business is retained from year to year? • Sales Velocity – what is the current Sales Velocity of the existing sales team? • Book capacity – what size book of business can the typical producer effectively manage? • New business – what is the average new business per producer? • Actual number of producers – what is the total number of producers currently? • Producer hiring success rate – what is the agency’s success rate historically with producers hired? • Projected producer attrition – how many validated producers will we lose each year over the next five years (due to retirement, termination, etc.)? With these numbers, we can start with an agency’s growth goals and, using Sales Velocity, solve for the number of producers needed to meet the growth objectives. The process is relatively simple: an agency decides how quickly it would like to grow and then determines, based on estimated client retention rates, what Sales Velocity is required to meet growth targets. The required Sales Velocity, expressed as total dollars of new business, can then be divided by the firm’s anticipated new business per producer to generate the total number of producers needed. Using the firm’s producer Sales Executive with Top 100 Firm Weak Sales Velocity is a common problem. Agency leaders deploy myriad carrot and stick tactics to try to get more out of their producers. Accountability initiatives, compensation plan modifications and production contests are used to try to elevate the games of producers. While these efforts are necessary and worthwhile, there are limits to how much results can be improved, particularly as producers’ books of business continue to grow larger and they themselves grow older and begin to slow down.

9 Producer Recruiting & Development Study