Most agency leaders are well aware of the value of a good business plan. Besides the importance of knowing what you want to accomplish with the agency and how to accomplish it, business plans are essential for attracting and maintaining relationships with most insurance companies. A business plan is especially important for a new agency that does not have a documented track record. Much has been written on the subject of business plans in agency trade literature and there is no shortage of planning guide references that can help you create a very detailed and elaborate business plan. However, the purpose of this article is to simplify the process and lay out the elements a business plan should address in a straightforward way. As you create your business plan, write it as if your were going to pitch it to investors. When you think about it, insurance carriers are investors in your agency.

 

 

People Profile - At its core, the fundamental value of any agency resides in the capability of its people to execute its objectives. Therefore, your business plan should include information about the people who are responsible to execute it. At a minimum, include resumes on each of the key players that describe the professional and personal background relevant to the agency business as well as the knowledge, skills and abilities possessed by each. For start ups, a lack of a demonstrated track record may inhibit your ability to attract prospective employees, customers and carriers. To mitigate this uncertainty, include an explanation of who you know and how you may be known in the community and/or industry.

The Business Opportunity - Obviously, a key to agency success and of interest to all current and potential stakeholders is how the agency plans to acquire customers including with what products and services and with what advantages over competitors. This section should demonstrate that you know who your customer is, what your products and services are and how you will position your products and services to be selected over those of your competitors. While numbers have a place in this section, the emphasis should be on the elements of your particular model for success. However, carriers will be interested in growth projections and you will need a budget for sources and uses of funds necessary to execute your plan.

The Business Environment - Your business plan should demonstrate that you have a keen awareness of the external business environment in which you operate, that you understand its impact on your business prospects and how you will navigate and exploit it. The discussion should encompass regulation, the economy, labor supply, customer markets, suppliers, competitors and in what way the status of these factors are relevant to the operation of your agency.

The Risks - Many business plans, especially those that will be used outside the agency to attract other stakeholders, often make the mistake of painting only a rosy picture. However, risk is inevitable. The best business plan readily identifies and confronts the risks to be faced. Potential stakeholders, especially prospective carriers, will develop confidence in those agencies who pose them and provide strategies to resolve them.

 

Executive Summary (One page overview the plan)

Situational Analysis (Where we are now?)

  

 

The environment we are in today is marked by consumer sophistication, rapid technological change,  deregulation by governmental authorities, a consolidation of suppliers & competitors and a demand for quality employees that out-strips supply.  The consumer’s expectation of service has increased while the zone of tolerance for unsatisfactory service has shrunk.  A greater variety  of distribution channels available to the consumer has reduced switching costs.  Deregulation has ushered in new competitors with tremendous resources. 

 

Our response to these external factors has been to carefully define our client, balance our supplier composition and flatten our organizational structure. 

 

Consistent with our vision and mission, XYZ is organized around three client groups, in recognition of varying purchasing mentalities but related by a common appreciation for a consultative relationship with XYZ.  Our mission statement contemplates the need to take a holistic approach to risk management for our clients whom we divide into the following three client units:

 

·        Personal Lines - Families with a history of stability in work, residence & credit.

·        Small Business - Business with 1 to 25 employees whose management is focused primarily on the day to day functions of the organization.  Little or no administrative slack.  In need of standard, broad coverage policies with easy payment terms and limited evaluation attention needed from management for Risk management functions.

·        Large Accounts - More complex organizations with 25 to 500 employees.  More vulnerable to the competition and in need of more customized, sophisticated  solutions.

 

 

 

Our relatively low average account size and policies per account has a negative impact on operational cost structure.  Furthermore, our clients are concentrated mostly in the DFW metroplex. This makes our loss ratios particularly vulnerable to catastrophe losses. The recent strategy to divide our commercial book into a small business unit and a large account unit has helped position us to focus on larger accounts. Our plan objectives for this year must include additional strategies to address limitations in client size and geographic spread. Our agency marketing objectives for this year are designed to improve these factors. 

 

XYZ has taken a proactive approach to carrier management.  We have concentrated  our representation among a limited mix of national, regional and specialty sources of products and services allowing us to maximize compensation agreements and resource allocation.  We nourish these relationships through a formal carrier management program.   We have aligned our suppliers  with our client groups:

 

·        Personal Lines Unit: Primary markets are Safeco, Chubb and  Progressive.  Safeco’s focus is on stable, middle income families. Chubb targets high wealth individuals and families.  Progressive allows us to fill the gap when necessary to cover the life cycle of  our client base.  These carriers are supplemented by a limited number of financially stable life, health and disability carriers.

 

·        Small Business Unit: Primary markets are Hartford, Travelers and Safeco/American States.  Emphasis here is on the ability to provide technology enhanced 24/7 service and products with coverage breadth.

 

·        Commercial Lines Unit: Primary markets are OCG, Hartford, CNA and Aetna.  A wider degree of supplemental markets are maintained to afford us the customization tools this client group demands.

 

 

 

 

As our competitors consolidate and increase the concentration of business with suppliers, their relative power to influence will rise and present a threat.  Our ambitious marketing objectives recognize the need for us to increase volume with selected carriers. 

 

XYZ’s primary source of competitive advantage derives from the superior motivation of our staff and effective operational routines that have arisen from a team culture.  Because these attributes are embedded in our organizational structure, we believe our competitive advantage is not easily replicated by competitors.

 

In keeping with our philosophy that the people closest to the client are in the best position to plan and implement product and service delivery in a way that maximizes client experience, we have flattened our organization  ( Appendix) into work teams.  The teams meet regularly to discuss marketing and operational strategy.  Each team is composed of a team leader whose role it is to facilitate the meeting.  This position rotates among the members quarterly.  Each team also has a coordinator whose role it is to monitor group process and to link issues across multiple teams when the situation dictates.  A flatter organization has facilitated organizational learning, improved employee morale and made our company more attractive to prospective employees.  Our company’s purpose and values have been aligned with employee values to enhance motivation.  Production and expense control are incentivized through an agency wide gain sharing program based on revenue growth and cost control.

 

 

Given these external and internal factors, XYZ business plan has the following organizational objectives:

 

·        Increase revenue per account

·        Generate $5,000,000 in annual revenues by 2008.

 

The following marketing initiatives have been adopted by each client business unit for 2005:

 

 

 

Objective: Produce $350,000 in gross PL commissions by 12/31/05.

 

Strategies to Accomplish Objective:

·        Implement aggressive rounding program focusing on life, health, disability, long-term care and retirement needs

·        Improve cross-sell routines to commercial client units

·        Take advantage of workplace marketing opportunities

·        Implement Referral Program

·        Implement Senior marketing program

·        Develop VIP brand

·        Increase retention to 90%

 

 

Objective: Produce $100,000 in net new revenues.

 

Strategies to Accomplish Objective:

·        Conduct 4 niche marketing campaigns

·        Establish formal client contact program targeting top 20% of accounts

·        Position agency as advisor

·        Identify gaps & recommend solutions

·        Increase limits and values

·        Create EB & business continuation opportunities for producers

·        Develop & implement exit strategy for unprofitable accounts

·        Increase retention to 90% on accounts not marked for exit.  .

 

 

Objective: New business revenue goal $700,000

 

Strategies to Accomplish Objective:

·        Develop & implement Producer sales plans in consultation with professional sales coach (Appendix)

·        Detailed, targeted & accountable

·        Emphasis on larger account size

·        Focused on relationship marketing

·        Offer value added services:

·        Cobra service

·        OSHA & Employment Law Compliance

·        Develop competency in team selling and multi-media presentations.

 

 

 

·        Package agency story

·        Install Contact Management Program

·        Institute Telemarketing research function

·        Conduct seminars and other client/prospect seminars

·        Publish newsletter and trade articles in producer niches

·        Conduct niche mail campaigns

·        Participate in trade events as scheduled by producers

 

  

Resumes on Agency Leaders

Carrier Chart                                                                                                                           

Organizational Chart

Producer Sales Plans

Budgets

 

The Small Business Administration at www.sba.gov has a business-plan outline plus a list of links for additional Web sites that provide information for starting your own business.

 

 

The Arizona Secretary of State at www.azsos.gov offers information on Business Start-Up with a list of helpful links; information on business registrations, notary services, public records, and chapter laws.