2004 Best Practices Study

REVENUE SIZE CATEGORY HERE AGENCIES WITH REVENU S UNDER $500,000

EXECUTIVE PERSPECTIVES

EXECUTIVE PERSPECTIVES

Keys to Their Success For decades industry pundits have predicted the demise of the small agency. Yet, agencies with revenues less than $500,000 continue to survive and thrive as evidenced by those in this year's

PROFILE

Best Practices Study. This study group achieved a net revenue growth rate of 10.4%, in spite of a softening market, and enjoyed a 26.0% Pro Forma Pre-Tax Profit. They most often attribute their success to their good customer relationships, the quality of their employees, and their use of technology. Because the majority of the agencies are located in smaller communities with populations under fifty thou- sand, relationships tend to be very personal. Customers are friends, neighbors, and business acquaintances. Employees are part of the agency "fam- ily" whose customer interactions reflect their commit- ment to service and mirror the trust, authority, and respect they are given by the agency principals.

Factors Most Critical to Agency's Success (Top 5 Listed in Order of Frequency Mentioned) 1. Personal service that results in strong customer relationships 2. Experienced, knowledgeable long- term employees 3. Use of technology and automated systems 4. Ability to satisfy and retain good carriers 5. Niche marketing

REVENUES/ EXPENSES

FINANCIAL STABILITY

EMPLOYEE OVERVIEW

Technology is used heavily to support personal customer interactions. Whether it is the use of their agency management systems or internet access to carrier systems, technology allows these agencies to be able to respond quickly and decisively to customers' needs. Challenges They Face

PRODUCER INFO

SERVICE STAFF INFO

75% of the agencies in this revenue cate- gory listed carrier relationships as their number one challenge. Although they cur- rently represent an average of 12 carriers, three more than the number reported in the 1993 Best Practices Study, the agencies in this study group find it increasingly diffi- cult to get markets, meet minimum vol- ume commitments, work with changing carrier appetites, and adjust to shrinking commission rates. The second most fre-

Top Challenges (Top 5 Listed in Order of Frequency Mentioned)

1. Meeting carriers’ minimum volume requirements 2. Attracting / keeping adequate number of stable and competitive markets 3. Adjusting to decreasing commission rates 4. Hiring and developing young producers 5. Increased competition

TECHNOLOGY

INSURANCE CARRIERS

quently mentioned challenge was finding and grooming new producers that could successfully take over the business. Facing this challenge may be the reason that 20.8% of the agencies indi- cated that they plan to sell their agencies to a third party within the next 10 years. Another 29.2% plan to sell to a third party in 11+ years.

APPENDIX

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