Strategic Planning Basics

A strategic business plan is very important to make sure that the business is successful.  So why is it that only 15% of small businesses actually have a plan!  It may seem like a daunting task to write out the firm’s strategic business plan but after reading this blog it will be understood why the firm has to have one.

Strategic Business Plans are essential to proper agency management and are now often necessary to receive “preferred” status with carriers.  In today’s changing climate, to be a successful high-performing firm, an agency must have a Strategic Business Plan.

An agency’s strategic direction is the big picture or the vision needed to guide the firm along the way.  The best way to start the process is to create a mission statement.  The agency’s mission statement is a clear and specific summary that describes the firm’s purpose.  This exercise is a crucial first step to map out the direction of the firm’s future and assist in the planning process.

The next step is to determine the current status of the agency.  Owners and key employee need to look within the firm — a self-assessment of the agency and its resources including an inventory of strengths and weaknesses.  This allows the planning team members to create meaningful and reachable goals using appropriate tactics.

Well-written Strategic Business Plans capitalize on the strengths of the organization and strive to minimize or eliminate the weaknesses.  The major weaknesses identified can be turned into opportunities for improvement.  These opportunities then become the agency’s goals of the coming year.

So why is it important to go through all the steps to have a strategic business plan?  Well, there are many reasons but we are only going to touch on the ones that seem to be most important for an agency.

The first reason to have a Strategic Business Plan is that it helps managers set specific goals and objectives for the business.  When the firm knows what the plan is and what the firm wants to accomplish over the next year or so it makes it easier for management to make sure these tasks are completed.  Good management needs to set goals and objectives and they need to have a detailed plan to follow up on them.

Another reason why an agency needs to have a Strategic Business Plan is to see how much the agency is worth.  This is also called the valuation of the business.  Once all the steps Strategic Business Plan are done so will the valuation of the business.  This means that there will be a detailed plan of where the business is now and how much its worth.  Goals can then be set for the firm as to how much growth is wanted over the next year or so and how much the firm could potentially be worth once the goals are met.

This leads to being able to merge or sell a business, and in order to do either of these the agency needs to have a Strategic Business Plan and valuation.  If a book of business is trying to be sold to another agency, the better the business plan the more the buyer is going to want to buy the book of business.  If the buyer can see clearly how much the agency is worth the buyers are more likely to purchase this agency then another that doesn’t have such a plan.

One of the last and most important reasons to have a strategic business plan is to grow the existing business.  From the Strategic Business Plan an owner would know where the business could grow over the next year or so.  Because of this the owners will be able to focus on sales, acquiring new clients, and making sure existing clients are using the firm to its full potential.  By doing these things the owners are making the most money in the most efficient and effortless way.

In conclusion competition is keen.  Expenses need to be well controlled.  Market cycles continue to cause havoc and agency value is at stake.  This annual planning process and self-assessment is the key to success.  If owners don’t know where they are going, how can one possibly plan for tomorrow and know how to get there? Agencies without a plan are totally reactive to their environment and have little control over their future.  Firms that incorporate an annual planning process tend to be more efficient, more profitable and highly valued businesses.  Make a choice.  Take the time to plan ahead and be successful or be at the mercy of the winds of change. 

At Oak & Associates a perfect tool has just been developed to make planning easy!  We have just launched “The One Page Strategic Business Plan” through Oak & Associates’ website. The plan walks owners and managers through all the steps to make sure that the business plan is up to date and to has set goals.  This plan also shows owners how to achieve them.  Make sure to order a copy of “The One Page Strategic Business Plan” by emailing Oak & Associates at catoak@gmail.com.


Create a Sales Playbook

Imagine that you are the head coach of an NFL team and you are in the playoffs. Your team is down by nine points in the beginning of the fourth quarter.  What is your next move? Will you be creative and come up with some new plays? Or, will you go to your playbook and use plays that match the situation?  Plays that your team has practiced and know how to execute.

Like a playbook is to a coach, a sales playbook can provide an outline of the tools and next steps for a salesperson. Playbooks can focus the sales effort, improve hit ratios, streamline the sales effort, help with producer development, and optimize overall sales performance. In other words, they help salespeople win.

Sales playbooks are a collection of the agency’s best sales processes and the tools required from finding prospects to closing the sale. A playbook is designed for repeatable selling situations. Since much of sales are repetitive, the playbook is designed to reinforce repeatable winning behavior.

Creating a sales playbook for niche or program sales is a great way to get started.  The focus can be on a specific industry – telecommunication firms, or a narrow target – retail shops in the downtown area.  Focusing in on a target niche helps limit the scope of the effort required to create the playbook.

Keep in mind that there is the added benefit of actually sitting down and thinking about and planning sales. Critical questions about the sales process, agency resources and the needs of the client will need to be explored and answered.  The development of a niche market sales playbook will also help the sales staff create an overall sales strategy for the agency and bring clarity to their own goals.  The niche playbook is a building block to an overall sales and marketing plan for the agency.

Building A Sales Playbook

First, start with a three ring binder.  Building a playbook will be a combination of written plans, descriptions, processes as well as lists, copies of forms, documents, sample marketing materials, etc.  It is intended to be an off the shelf reference book – one that is used on a regular basis.

There are five main sections to include in a niche market sales playbook: 1) Define the Niche, 2) Understand the Niche, 3) Evaluate Agency Resources, 4) Presentation of Products and Services, and 5) Sales Tools.  Combined, these sections will allow a producer to know who the target is, understand the targets needs, know the resources and products the agency has available and consolidate the tools required to communicate and work with prospects.

1) Define the Niche

So, who is the targeted group for the focused sales effort? The description should be as specific as possible. Use a page or two to describe industry, size, location, revenue, number of employees, etc. of the target niche for prospects.  Clarity of vision is important in knowing whom to focus on. Once that is done, a master suspect list can be purchased or created.  Refine the master list even further for likely suspects, to create an initial prospect list that can be contacted right away. This takes away the excuse of not having any leads.

2) Understand the Niche

This section allows for the casual observer to become well acquainted with the salient facts of the niche industry. Summarize the key issues for the industry.  Describe the competition in the marketplace.  What is the history of the industry? What are the strengths, weaknesses, opportunities and threats for this niche?

Drill down into insurance related issues. Describe and list unique underwriting requirements, loss control issues, and any other special insurance needs. Include in this section an industry-specific questionnaire or supplemental questionnaires.  List any unique marketing and sales issues that the companies might have.

It is important to be able to speak the language and understand the issues of the niche.  In this section create an industry-specific glossary of terms.  Include current articles on topics of interest. Make sure that there is a list of target-related associations, affiliations,

subcontractors, vendors, trade journals, etc.  Identify current insurance “pains” and gaps that might exist.

3) Evaluate Agency Resources

Now the target is well defined, but can the agency deliver a product or service to the client?  This section needs to be an honest self-analysis of the resources in the agency.

If there currently is one, describe the agency’s program. What are the current available markets for the niche?  Which ones, if any, should be added?  Are there any unique policies and coverages for the niche?  Does the agency have any specialized customer service or value-added services for the targeted niche?

Perform an assessment of the agency’s program for the niche.  Evaluate the strengths, weaknesses, and gaps. How does it compare to the competition? If possible, rate the program against perceived customers’ needs and expectations.  It is helpful to get as much outside opinions as possible.

4) Present Products and Services

The next steps are to clarify how the agency will communicate and promote the niche market program. Use one page to define the sales and marketing strategy —  How, What, When, Why, Who, etc.

Refine the words to highlight key features and the benefits of program into a 30-second elevator pitch that the producers can use.  Create industry-specific brochures and marketing materials for the program.  Very often these marketing materials can be created and paid for by the insurance companies, especially if this is a niche they are trulyinterested in expanding.

Include in this section all customized marketing letters and e-mails, newsletters, sales scripts, etc.  This will be a quick reference for the sales staff. Also, include a list of current clients in the niche and get testimonials from the key accounts.  This helps build credibility and can be an opening to a conversation with a prospect.

5) Sales Tools

The last section is for sales tools. Create an industry-specific pre-qualification questionnaire.  Develop a sample of typical questions and objections used by this niche and then create answers and solutions.  Another great tool are scripts for role-playing as well as for the service staff.  Include general marketing tools and other resources the sales staff can use, such as time management tools.  A list of action items and calendar for closure needs to be drafted.

Part of this process needs to be a way to analyze results and make adjustments.  A system needs to be developed to track what is working and what is not working.  This includes sales techniques, methods of contacting prospects, marketing materials, products and services offered, etc.

Evolve the Playbook

The sales playbook is not a static book.  It will need constant updating to current industry trends, news, issues, as well as prospect lists and current insurance products for the niche.  This is why tracking efforts and results is so critical.

Once the first niche book is created, it can become a template for other focused sales targets. The agency should have one master playbook for each niche.  Producers can then copy it to create a personalized version for their own use.

A final thought

Sales playbooks are the roadmap to access the best approach and techniques for the sales process.  It is a reference book, checklist and bag of tricks all in one three-ring binder. Developing and maintaining a sales playbook is perhaps more important than the end result itself. Producing it encourages you to ask critical questions about how you sell. What you discover during this process will make you a better sales organization.


To Improve Profitability and Sales, ‘Fire’ Your Small Commercial Accounts

By Catherine Oak and Bill Schoeffler

We all know about the Pareto Principle, the 80/20 rule. It also applies when analyzing the profitability and the work required for an agency’s book of business. Roughly 20% of the accounts generate 80% of the revenue, and 20% of the accounts take 80% of the staff’s time to service them. Problems occur when the accounts that require a lot of service work are not the ones generating considerable revenue.

To improve profitability, the agency needs to focus on medium and large commercial accounts only. There is not much margin to sell and service small accounts. Many of those accounts could also cost the agency in profits.

When analyzing the profitability of a business, it is essential to consider the production costs and the servicing costs. “Costs” can involve time or money. There is a minimal amount of time required by the producer and the service staff to acquire a new piece of business. The smaller the account, the more likely the agency will lose money to acquire it. Once the account is a client, the amount of time required to service the account, and the renewal commission paid to the producer will determine its profitability. For a small account, a few hours of service work and a 30% renewal commission to the producer will not let the account break even for your agency.

Define Small

The definition of “small” will vary based on the geographic area (urban/suburban/rural) and the local business demographics (type and size of businesses), as well as the resources of the agency (talent of sales/staff and available carriers). In New York City, there are a lot of large accounts that can be written. In Truckee, Calif., (Lake Tahoe area), a good-sized account might be a local restaurant. Agencies without adequate resources (talent and market access) will not be competitive on large accounts, regardless of their location.

Each agency needs to establish its own definition of size. For example, a small account can be defined as one that generates less than $1,000 in commissions, or $10,000 in premium. The threshold can be adjusted periodically. As an alternative, the accounts in the bottom 20% by size in the book of business can be defined as the “small” accounts.

How to Handle Small Accounts

Once the small accounts are identified, a game plan needs to be established. There are three common approaches to handle them: 1) establish a Select Business Unit, 2) outsource the service work, or 3) sell or non-renew the small accounts (“fire” the accounts).

The first step to consider is the role of the producer for small accounts. It might be tough to implement, but producers should not be involved with small accounts. Going forward, commissions for accounts written should be subject to a minimal size threshold in order to be compensated, including renewals.

A book of business report for each producer should be run in descending order by commission. This will help establish how much each producer will be affected financially by not compensating them for the small accounts. It is also helpful to determine how much time they spend on those accounts.

If there is a real financial impact on individual producers, the level may need to be lowered, or their commissions might need to be grandfathered on existing accounts for a period of time. For new business, some agencies will pay a first year only commission on the small accounts, but nothing on renewals.

One noticeable benefit of removing small accounts from a producer’s book is the amount of time it will save the producers. Even if only a couple of hours per year are spent per account, that time will add up. This approach lets producers have more time for new sales and cross-selling. The time saved not handling small accounts can be spent to acquire one or two large accounts that could easily offset the income lost from the small accounts.

Set Up a Select Business Unit

It is very common for commercial accounts under a certain level to be handled only by service staff in a specialized commercial lines department. It should be called the “Select” Busines Unit (SBU) or “special” as opposed to “small,” as sometimes the business owner put in this department might feel they are less worthy of the agency’s attention.

The SBU service personnel have responsibilities similar to that of personal lines service staff. In other words, the SBU personnel completely handle the account once it is already on the books. They are often the ones to initially sell the accounts as well. Responsibilities include rating and preparing quotes, placement and marketing (new and renewal), day-to-day client service and insurance company relationships associated with client service.

If an agency chooses to let producers continue to sell new small accounts, once the account is sold, the producer should introduce the SBU service person that will handle the account going forward to the client. This can be done in a cover letter sent to the client with the new policy, or the service person will contact the client via the telephone to introduce themselves.

Outsource the Service Work

Instead of an internal small business department, some agencies will outsource the service work. There are a few different routes for outsourcing service work, so understanding the costs and types of service offered is imperative.

The first means of outsourcing to consider is the service departments that some of the insurance companies offer. These are reasonably cost-effective and specialize in the clients’ policies since they write them. The one downside is that most agencies will have multiple carriers, and not all carriers offer this type of service. That means only a portion of the small accounts can be serviced this way. Also, clients need to be “trained” to directly contact the insurance carrier for their service work rather than calling the agency first.

Another approach is to contract with businesses that provide outsourced services to insurance agencies. There are differences between these companies, but generally, they can provide full customer service to an agency, and it can be done seamlessly. Most of these services send the work offshore to India, China or the Republic of the Philippines. These services are usually not cheap, but with a large enough book of business, they can be cost-effective. Some services charge a split of the commissions and handle it from start to finish, as well as account rounding. Patra is such a service some of our clients have used, and they charge 50% of the commissions. Other services exist, such as ResourcePro and eDesk.

‘Fire’ the Accounts

Agencies should consider getting rid of some or all small accounts. This can be done by a combination of non-renewing the accounts or selling them. This will be a reduction of revenue, at least in the short term, but it will improve profitability and establish the platform for better future performance.

Often, the smaller clients can be challenging to deal with, take up a lot of time to service or can be a placement issue that usually ends up in an excess and surplus lines (E&S) market. As accounts renew, producers and service staff should be able to recommend the non-renewal of “problem” accounts. These would be accounts that are costing the agency a lot of time compared to the commissions generated. If there are just a handful of “problem” accounts, they can be referred to a competitor down the street. This approach makes the “termination” more amicable.

Although a non-renewal is lost commission to the agency, when the staff is allowed to clean up the book and rid the agency of these headaches gracefully, then the staff will have more time to focus on tasks that help the agency, including new business sales and cross-selling. It will also improve the morale of the staff.

If the agency has a sizeable book of small accounts, it can be packaged up and sold. Some agencies specialize and like to work with small accounts. New agencies are also willing to buy accounts to increase their volume. This can be a win-win-win for the buyer, seller and clients. Regarding price, everything is negotiable, but a 50% split of renewal commissions for two or three years is usually fair for the buyer and seller.


For an agency to make money on small accounts, they have to be handled less, more efficiently and by fewer people, i.e., no producer involvement. Also, using less expensive commercial lines service staff or account managers for the SBU is recommended if the accounts are handled internally. A specialized unit allows that service staff to gain more knowledge in small accounts since many are often harder to place and can end up being placed with an E&S wholesaler.

It is always recommended that producers are paid for what they do. However, it is equally important to make sure that what they “do” cannot be performed by a perfectly qualified commercial lines account manager or CSR. Producer compensation expense for small accounts often makes small accounts much less profitable for an agency.

Agencies that focus on medium and large accounts will find that producers and service staff have more time to improve service, generate new sales and cross-sell accounts. The best place to start is to “fire” problem accounts and delegate small commercial accounts to a specialized internal agency unit or to someone else outside the agency.

About Catherine Oak

Oak is the founder of the consulting firm, Oak & Associates, based in Northern California and Central Oregon. Oak & Associates. Phone: 707-935-6565. Email: catoak@gmail.com.


Internal Perpetuation Versus Sale of the Agency

By Catherine Oak and William Schoeffler Jr.

Death and taxes are as inevitable as life itself. Yet most fail to plan for the inevitable. An ounce of early preparation is worth a pound of last-minute maneuvering. Thinking through the eventual exit ahead of time allows you to build the systems and people equation that takes time. Investors look for businesses that run themselves and do not depend on an owner’s brilliance or consistency in order to profitably function. An Oak & Associates survey found that only 20% of agencies had a long-term plan, which was mainly a purchased life insurance policy.

There are two main ways owners perpetuate. The first is internally to members of the owner’s family or to loyal employees. The second is to an outside investor, such as another independent agency or a national broker with private equity monies.

Internal Perpetuation Route

The usual route for internal perpetuation is for the owner or owners to bonus or gift some stock to the key people. For the remaining stock, there is usually a note promising to pay the owner their value over time, which is based on the firm’s fair market valuation and paid over seven to 10 years. This is compared to a third-party sale, which typically pays out over one to two years, or in some cases, today can be paid upfront. Remember the firm needs to be profitable into perpetuity if owners expect to receive their full value as it is paid from these earnings.

A popular option is a Grantor Retained Annuity Trust (GRAT), however, the owner cannot die within the first five years. If that is reasonably certain, this option allows the payments to be tax deductible to the agency. The candidates can be family members or key employees. If the former owner does not survive the payout period, the entire value reverts back to the owner’s estate.

Sale of the Agency

There has been something of a gold rush in selling to private equity firms. Buoyed by low interest rates and salivating at the consistent earnings in insurance, private equity money managers have been rapidly consolidating the insurance agency industry over the last few years. This has made the decision for many clients to sell to a third party easier. Key employees and families benefit from large upfront direct bonuses and monetary gifts. This can reduce the payout period and uncertainty. Gold rushes do end, yet interest rates will continue to remain low for the next few years.

After exhausting internal perpetuation options, it is best to develop a great Agency Profile & Pro forma report to use in search of the right buyer.

The key is to find the best fit for the agency’s culture and book of business. It is also good for the owners to have representation, so word does not get out on the street and to ensure that confidentiality agreements are signed and the process is properly managed. In that way, the owners can still do what they do best, which is manage the firm and sell new business and handle existing key service aspects of their book of business.

What Assistance Should be Received

Good consultants do add a lot to the process and are there to paint the picture of what the agency is. They also properly screen the buyers so that the number of buyers approached is reasonable and the private confidential information of the firm is not placed in the hands of so many people. After the appropriate buyers are brought to the table and the offers are in, the consultant can manage the analysis of the letters of intent, negotiate price and terms and then can be there for the end of the due diligence process. When the final results come in, the consultant then helps manage why the data received may or may not match what was done in the Agency Profile and Pro forma report. These results then need to be negotiated.

The agency owner’s CPA and attorney are always involved. In addition, the consultant also helps with checking that the purchase agreement matches what was promised and some of the terms that are often typical from one deal to the next are checked. This includes the working capital requirement, agency errors and omissions liability tail coverage requirement, the settling of debts and also looking over the new employment agreements for the owners.


The perpetuation process of an agency is often not easy. It can be as simple as just doing a valuation and getting the price and terms in place if the right players are employed. It can also be a great education process for the perpetuation candidates and the owners. With the assistance of a third party, a perfect plan can be developed. If this does not work out, there then may need to be a sale to a third party with the help of a professional.

About Catherine Oak

Oak is the founder of the consulting firm, Oak & Associates, based in Northern California and Central Oregon. Oak & Associates. Phone: 707-936-6565. Email: catoak@gmail.com.More from Catherine Oak

About William Schoeffler Jr.

Schoeffler Jr. is a financial analyst for Oak & Associates who specialize in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, sales and marketing planning as well as perpetuation planning. Phone: 707-935-6565.