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3. Seven Myths that Prevent Insurance Agencies from Becoming Automatic

Learn about some common misconceptions that could cost you $1,000,000 and 10,000 Hours or more over your career.

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Quick Summary

  • Contrary to popular belief, you don't need a huge insurance agency to create a successful Automatic Insurance Agency.

  • While having a few dedicated and knowledgeable team members is essential, the focus should be on having the right number of team members to support clients, policyholders, and prospects effectively.

  • Profitability is not solely dependent on production and focusing on it can enable agency owners to generate solid incomes, regardless of the gross income level.

  • Before investing in advertising, ensure that your agency is already converting and generating a positive return on investment.

  • It's never too late to automate and by gradually easing into fewer hours, building a supportive team, and focusing on client retention, you can create an agency that aligns with your desired lifestyle.

Full (Edited) Transcript


Seven Myths that Prevent Insurance Agencies from Becoming Automatic

When I talk to insurance agency owners about creating an Automatic Insurance Agency, there are a lot of beliefs they have about how it can happen or how it cannot happen, and a lot of these are not true. So today we're going to look at a few of the anywhere from one million dollars to ten thousand our myths that might be preventing you from creating the agency situation you most desire. The first myth is that you need a huge agency to create an Automatic Insurance Agency I've worked with Insurance agency owners that have agency books that are generating a million to two million dollars who can't seem to find to take time off.

And I've worked with Insurance agency owners who are grossing two hundred fifty to three hundred thousand and can find time to take time off. And of course there are also agency owners that are grossing a million or two million and can take time off. The main idea is looking at each person in the agency as a profit center. Looking at the overall is a profit center and making sure that profit comes first. Not getting too caught up in company goals or personal goals and being profitable at each step of the process rather than overinvesting overreaching or overcommitting on time resources when the results simply don't come back to you.

The second myth is that you need many team members to create an Automatic Insurance Agency. Now you do need a few in general. If you have an agency, you want to at least have one person who is what I would call a rock, a person who knows the Retention policies, who knows the service policies, who knows how to write an auto, write a home or a condo or basically order, take whatever comes in the door. And generally you also want another person that does that and can also sell.

But there are agency owners that have to total team members. And on the days that those two team members in the agency owner can afford to be out of the office, whether that means that agency owner is out of the office prospecting for new sales or they're simply taking the day off. So a lot of it's about who you have in the agency. Now, of course, it's also relevant to the size of your agency. If your agency needs to be staffed with five people and you only have three people, well, then that's not going to cut it.

So it's not so much about having a lot of team members as it is having the right number of team members to adequately support your clients and your policy holders and your prospects that are coming in and provide adequate service and sales opportunities and conversations. The third myth is that you need huge production to create an Automatic Insurance Agency, again, kind of like the many team members. It all depends their agency owners that are grossing half a million that are taking home anywhere from 20 percent to 30 percent or more of the agency.

Gross. And they're agency owners that are grossing a half a million, that are taking home five percent of their gross or none of their gross. A lot of it has to do with how well you manage profit. You can be grossing two hundred fifty thousand dollars and make a profit. Or you can tell yourself that you need to have this huge production. And until you have a book of business, it's a certain size. It's grossing a half a million or a million.

You're not taking a profit. Well, that's your choice. But that doesn't mean it can't be something that you could achieve. And so what I'm going to suggest to you is the Insurance agency business is a long game. When we talk about long term Retention of our clients, we talk 10 years, 20 years, other business models that are based around memberships of software and so on. We'll talk about three month and four month relationships. So we really have a long term business model and the best agencies also keep their team members for long periods of time.

When you keep your team members for long periods of time, training costs go down, turnover costs go down, and it allows for a lot more efficiency that again, lets the agency be really as automatic as possible. Right up there with that is that you need a huge gross income, I've seen agency owners that are grossing two hundred fifty thousand a year that can figure out how to take home anywhere from twenty five to fifty thousand seventy five thousand, depending on their market and how they manage their agency.

And again, I've seen agency owners that gross a lot and are so concerned with what's the latest thing? They're spending money on ads over here. They're spending money on this project over here. They're invested in five, 10 projects and none of those projects are being followed up on. So they're just throwing a lot of money at things. Not to be very clear, paid advertising or any proactive project can be really effective if it has the attention it deserves.

But a lot of times when people start grossing a lot of money, they assume that they can just throw money at things and results will happen. The more you take a bootstrapping approach, a new agency owner approach and say we're going to focus on this one project, we're going to invest, whether it's five thousand, ten thousand, a thousand bucks a month, whatever it might be, we're going to make sure we really work that as opposed to throwing money at things.

And once you take on that mindset, you understand that you don't need multiples of millions of dollars or even more than half a million dollars to be making a solid income, creating great employment for the team members around you who want to stay with you, and growing an agency that is going to become a dynasty, that's going to continue to grow and again, become as automatic and it's easy to run as possible. A lot of people believe you have to spend a lot of money on advertising.

Now, what I'm going to suggest to you is in general, the more you have to spend on paid advertising, usually it means you're doing a weaker job at networking and connecting with people. Now, there's an asterisk next to that. If you're already networking with people, if you're already leveraging LinkedIn and your relationships and you're going to be in meetings or whatever it might be, and you've already maxed that out and you're profitable, then you scale that with advertising.

The whole idea is advertising is going to multiply or amplify what you're doing. So if your agency's not very profitable and you throw a lot of advertising dollars at it, it's going to simply continue to be not very profitable. And you're going to compound that by spending money on advertising and you're going to be having people running around wondering what should they focus on, the existing clients, the new clients, the leads that are coming in. Whereas when it's done properly, you have an operation that's already making money and you intentionally scale that to a certain level, using advertising to create greater leads, greater activity into a model that's already converting.

So if you're not sure what conversion ratios are for your agency, if you're not sure what percentage of time you close a sale, it's premature for you to be spending money on advertising dollars. You want to know if you're going to spend a dollar, how much is coming back? Is it a dollar 20? Is it 80 cents? Because if it's 80 cents, no matter how much money you spend, it's only going to get worse. So, again, paid advertising can be awesome, but it's not a cure all.

It's something that simply amplifies what you're doing. So you want to make sure that what you're doing first is profitable, scalable and sane. Many people think it takes a certain number of years for an agency to become automatic. The best example I can give to comment on this is the idea that I tell my kids when they say, well, so-and-so is an adult. Well, some of us who've gotten older might be physiologically an adult, but mentally might not be that adult.

Like getting older doesn't mean you get wiser. You might just get older. So just because you have a 10 to 15 year agency doesn't mean it's going to be automatic. And just because you have a five year agency doesn't mean it can't be. Again, it's all about understanding what your agency does, making sure that each part of the agency has a purpose, each team member each procedure, and creating a situation where everybody's profitable. And so each individual being profitable contributes to an overall profitable agency.

And then the last one that it's too late to create an Automatic Insurance Agency very often of Insurance agency owners that are five to 10 years away from their target retirement date. And they'll say, Wade, I've been doing this for 20 years, 30 years. If I couldn't figure it out by now, it's not just going to happen. And what I'm going to suggest to you is it depends how you run an agency. There are different ways to run an agency when you're starting out an agency, which is not very automatic at all.

There's a lot of hustle. There's a lot of energy thrown at things. And you might have a new sales rate of twenty five or thirty percent because your agency is very small. And so a lot of the energy's going into acquisition and there's a lot of turnover. There is a lower retention rate or a higher lapse cancelation or customer defection rate because you're really pushing to grow this business. But at a certain point, if you've been in it for a while, usually you're going to have clients that have more of a 90 percent retention rate or an eighty five percent retention rate or a 10 to 15 percent Lapse Rate if you were at the other way.

And those clients are going to stay with you six, seven, eight, nine, 10 years or more. And so a lot of it's just about making sure they're taken care of. And so rather than seeing retirement as this binary all or nothing, black or white thing where you go from working 40 hours a week, one day, and then on Monday you work zero, a lot of creating an Automatic Insurance Agency is about gradually easing into less and less hours, if that's what you want, building a team around you that supports that.

And yes, of course, honoring the math and making sure your lifestyle expenses can be afforded. But it doesn't need to be this extreme situation. It doesn't have to be that if you're a certain age or a certain stage, it can't be done. You can start making your agencies automatic as possible as quickly as possible. It's a continuum. It's not an all or nothing. So I hope you find this helpful. I hope you can see through some of these myths if you have questions on these and want to learn more about how we can help you with this, feel free to either send me an email or schedule a strategy session to go over your agency with you.

And what we'll do is we'll look at your agency numbers a little bit about what your goals are and see what's the best path to help you create what you most want to create next in your agency. As always, I look forward to helping you make more money, in less time, doing what you do best, so you can better enjoy your family, your friends, and your life and create the business, the team and the results you most desire. Thanks for listening.

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