President & Coach, Benefits Growth Network
Kevin Trokey is a coach and an implementer of business strategies. He works with agency leadership, department managers, and producers of benefits agencies to craft strategies and lead them to successful transformations by breaking down the complexity into manageable steps.
Hi everyone -
Here at BGN we’re in the business of helping others achieve greater levels of success – specifically we focus our energies on employee benefits agencies. However, what we talk about and teach can certainly be applicable to most other industries. Welcome! And we appreciate you all!
We cover a variety of topics as it relates to leadership & management of an insurance agency and development of the sales team & process, part of which is helping clients with strategic HR & benefits.
We bring this up because we’d like to hear from you – our readers. We’d like to know what you would like to read about, or questions you have about agency management, the future of the agency, dealing with a sales process, struggles with teams or business models. Whatever is on your mind, gnawing at you, or something for which you’re actively seeking an answer – let us know, and we’ll get to work on it for you!
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The more we all engage in conversations with one another, the richer the pool of information, the more ideas we have to draw from, and the better business people we all become.
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Don't let others determine your future
Now, more than ever, it's time for benefits producers to take control of their future.
During a recent discussion with the principal of an independent benefits agency, we talked about the variety of challenges typically faced by independent agencies. It was a lively discussion and he was very honest about the fact that he faces many of these challenges himself. Not surprisingly, his biggest concern is the financial challenge he faces as commissions start to be reduced and eliminated by carriers.
I was encouraged about his openness and honesty regarding his situation. However, my optimism quickly turned to disappointment when he stated, rather emphatically, that he already has a strategy to deal with his primary challenge. He is betting his future, and that of everyone else in the agency, on the hopes that someone will fix his problem. He has convinced himself that either through court challenges and/or additional legislation/repeals, health care reform and the threat it poses to his revenue will be cleaned up.
Wow! Here is a business owner, an entrepreneur, someone who has made his own way in the world--waiting for someone else to fix his problem!
But historically, like other entrepreneurial businesses, independent agencies have found success because we fix our own problems and believe much more in our ability to take care of ourselves than we do in someone else's ability to do it for us. We are successful because of our ability to find opportunities in every challenge and exploit those opportunities for our own advantage.
I have been reading the book The Big Short by Michael Lewis, which is about the subprime market and the catastrophic failure it brought to our economy. In the book, Lewis states that when an event or potential event is catastrophic, we have a way of convincing ourselves that it couldn't possibly become a reality. Catastrophes can and do happen, and here is a clear example of a business owner seeing a future impact to his revenue stream so catastrophic that he is trying to convince himself it can't possibly become a reality.
As a result, the business owner is putting his future into the hands of the system that helped create his problem in the first place. It's a little like the person who is looking to lose weight by expecting their favorite fast food restaurant to change its menu for their benefit. That isn't going to happen.
We know if we want to lose weight we have to take control and change our behaviors. Because just "one more burger and fries" doesn't seem all that threatening and because the effects of our poor eating choices are so gradual, it's hard to get a sense of urgency. Unfortunately, it often takes a medical crisis or a doctor declaring, "change your habits or you'll die young," for people to finally take control.
Well guess what? Our traditional business/compensation model is lying on an ER table and the doctor is looking down telling us "change your habits or you're going to die a premature death." It's time for some preventive measures. It's time to take control, now.
While I can't know for certain, my belief is that, regardless of what happens politically with health care reform, commissions will be less in the future than they are today. What I do know for certain is that the more you are in control of in your revenue stream, the better off you are going to be, period. Here are a few suggestions as to how you can take that control.
More often than not, we are being paid commissions for the placement of insurance products. It is those very commissions that are already coming under attack. Almost every day, I am hearing stories about carriers that are reducing/eliminating commissions. As business owners, it is inexcusable for us to continue to expose ourselves, and our employees, to this uncertainty. The only way to change the exposure is to start transitioning to a compensation model controlled by us rather than the insurance carriers.
Here is how you can gain that control:
Transparency. Start by having a conversation with every client and prospect about exactly how much you get paid and what you do for that compensation.
Documentation. It has to be very clear and well documented to your client exactly what you do for your compensation and how it will positively impact their business.
Transition. State your preference with clients that you move to a fee-based compensation arrangement. If the policies in place don't allow commissions to be netted out, you still need to follow through on the previous two points. It will make the conversation much simpler once the current commissions have been reduced or removed entirely.
This is also a discussion that will make your client relationships much stronger and will protect you from competition that tries to make you look bad by asking, "Do you know how much your current broker is making?"
Or, you can wait:
You can wait until you are forced into this conversation because commissions have been reduced/removed. However, by then your motive will be seen as completely self-serving and the conversation will be much more difficult.
You can wait until your competition has decided to exploit your problem as their opportunity.
You can follow the lead of the agency principal I mentioned above and wait for someone else to fix your problem.
When you think about it, isn't it a little odd that the amount of your compensation is determined by someone else? If the carriers decide you're making too much, they lower their compensation and there's nothing you can do about it. That's the problem with the approach too many benefits producers use. Because they, and their clients, see the placement of insurance policies as what they are getting paid for, the control of the compensation belongs to those who control the insurance policies, the carriers. It's time for producers to take control and to start getting paid for the value they create rather than the product/policy they place.
You can gain control by:
Transparency. Again, start with an open conversation about how much you get paid and what you do for that compensation. Are you starting to see that being completely open with your client actually gives you more control?
Business acumen. Understand your ability to make a difference in the business of your client and how to quantify that impact. (For example, if you can help them lower their rates of turnover at a cost impact of 50% to 150% of total annual compensation for each position that turns over, you can demonstrate a significant impact to their bottom line.)
Quantify. Be able to quantify and articulate the value you bring. Then have the confidence to ask for fair compensation for the value/results delivered.
Or, you can wait:
You can leave control with the carriers, wait for them to tell you how much you are going to be paid, and then make the necessary adjustments that will allow you to remain profitable.
You can hope that the carriers are so concerned about what you make that they will protect what they pay you at all costs.
It's unfortunate, but most benefits producers are competing with something over which they have no real control. The typical value proposition is based on:
It's time to make the focus of what you are selling something that is actually within your control.
You can take control by:
Delivering value. Start making sure there is value in your sales process. Your sales process should deliver value to your prospects even if they never do business with you. The litmus test is whether or not someone would actually pay money to go through your sales process.
Changing focus. Stop making the focal point of your value proposition the insurance product, reactive service, and a list of value-added services.
Emphasizing how instead of what. Don't get me wrong, the product, service and value-added services are all important, but they are your "what." And what you have to offer is almost always going to be the same as everyone else. "How" you work and how you use those same resources is what adds true value and is something you can actually control. (Hint: If at decision time, the prospect is comparing your spreadsheet to that of your competition, you're not in control.)
Or, you can wait:
You can wait until there are so few carriers in your market that you have no real options to offer.
You can wait until the Exchanges are in place and don't want/need you.
You can wait to be disintermediated because, with so few options, it is too easy for your prospects to do their own spreadsheet.
Convincing yourself that someone else is going to fix your problem is not a strategy. At best it's a hope. Yes, we are facing some real challenges as an industry, but for those ready and willing to take control, develop an effective strategy, and make the necessary changes, it is also a time of unprecedented opportunities.
Originally published in Rough Notes magazine December 2010.
It’s a new year and, with a new year, comes a clean slate, an opportunity to start fresh, purge bad habits and create healthy new ones to sustain a profitable and successful business. The temptation definitely exists to just jump IN to the business blindly before taking a little time to work ON the business. Not that the following exercise equates to proper ON time, but it has to be a part of that process.
If you were sitting here 3 years from now looking back to January 2011, what would have had to happen in order for you to be satisfied with your results? Now, dig a little deeper and more specifically into the following:
What changes took place within your industry that you were able to anticipate and turn from a challenge into an opportunity?
What unfulfilled customer needs did you identify that you are now fulfilling?
In order to survive/thrive, what has changed about your business model as a result of industry/economic/political changes?
What previous competitive vulnerability has been removed?
What behaviors that used to slow you down, or even derail your initiatives, have been eliminated?
What is your greatest competitive advantage over your competition?
How have you exploited that advantage?
What are you going to do over the next 12 months to take meaningful steps toward your answers to these questions? If you don’t have that clarity, chances are the time you spend IN the business will largely be IN the wrong areas.
Photo by iUnique Fx(c).
There are countless metrics you can be tracking in regards to your book of business and your efforts to build that book. Tracking the information and creating reports could become a full-time job in itself. Unfortunately, most of that information and the subsequent reports never result in anything meaningful. However, I do feel that you should track anything that allows you to make consequential adjustments to how you work, as long as the tracking and reporting remains manageable.
Current book – Total annualized revenue in your book and how it compares to where you were last year. I will guess that this is the only critical indicator that every producer reading this will already know.
Why? – Well, as a producer, this is the ultimate scorecard. It determines how much you get paid, how many resources you deserve, and documents (over time) how consistent and effective you are as a producer.
Retention – Don’t fool yourself with the increase in your book that came from additional revenue resulting from increased premiums. Measure your retention two ways: first, on the percentage of groups you were able to keep and secondly, as the percentage of revenue retained.
Why? – Just comparing revenue numbers won’t tell the whole story. Additional revenue from increased premiums may mask issues that need to be addressed. In other words, you may not focus on the 10 small accounts you lost for reasons that may lead to the loss of larger accounts this coming year.
Once you identify the lost business, be brutally honest with yourself as to why they were lost and learn what you can do to keep it from happening again.
Closing ratio – Measure your close ratio at the point you specifically give the prospect a chance to say yes or no. If you’re still competing with spreadsheets, measure your close ratio as the percentage of spreadsheets delivered that produce new clients. If you are competing by bringing an improvement plan, measure your close ratio as the percentage of plans presented that result in new clients.
Why? – New opportunities are too difficult to come by. Poor close ratios exponentially increase the work you have to do to refill your pipeline. Have the courage to go back to those lost opportunities and ask for honest feedback as to why you lost.
Conversion ratio – This refers to the percentage of prospects that move from one step of your sales process to the next. For example, in our process, producers use a 3 step process (Step 1 – Executive Briefing, Step 2 – Organizational Assessment, Step 3 – Improvement Plan delivery). The conversation ratios are the percentage of prospects that move from Executive briefing to Organizational Assessment and then again the percentage of prospects who move from Organizational Assessment to Improvement Plan delivery.
Why? – Tracking your conversion ratio is the only opportunity you have to learn where the weak spots are in your sales process. Just like I recommend in the close ratio, have the courage to go back and ask for honest feedback on those opportunities you don’t convert.
Revenue per relationship – This is the total amount of revenue in your book of business divided by the total number of clients in your book.
Why? – This is the single biggest predictor of your ability to continue to grow your book of business. If your revenue per relationship doesn’t grow year over year, your total book growth will be slowed or even stopped. You can only effectively service a set number of accounts. The higher the revenue per relationship, the more money you make.
It is up to each of you as individual producers to self-manage your way to personal success. And, as the old saying goes, you can’t manage what you don’t measure. Unfortunately, all the measuring and all the managing in the world won’t mean anything if you aren’t willing to make the behavioral changes necessary to move the numbers.
Photo by Aunt Owwee.