How to Create & Reward Exceptional Agency Leaders

It’s always difficult to admit not being good at something — especially when you are the agency owner and leader of an insurance agency. But knowing a person’s weaknesses is extremely important. Leaders who understand their own weaknesses can find employees to fill that talent void.

Humans are best when they specialize. Look no further than to Henry Ford, who increased factory output dramatically by having workers who were trained to be exceptionally great in one facet of his company. Ford was never seen installing parts on his cars. This isn’t because he wasn’t capable, but because it was not the best use of his time. Besides, he had valuable employees to do tasks he couldn’t or didn’t want to do. Knowing what is going on within a company is part of being a CEO, but you don’t actually have to be good or even capable of doing that task.

Play To and Identify Strengths

Leaders of small companies often get too deep in more mundane parts of their business when a problem arises. While this can be acceptable for larger issues, small ones can easily distract the owner/leader from more important work. When agency owners have issues with this, we tell them to write themselves a personal job description, considering areas of both their strengths and weaknesses. Putting pen to paper and evaluating personal weaknesses can be uncomfortable to look at — weaknesses such as analytical savvy, computer skills, training salespeople, etc. It is an important exercise because those weak traits can usually be found in new hires or in existing employees.

Those working to positively improve workflows and provide new ideas should be given rewards and credit for these improvements.

The best-run company is one where the head owner could disappear for an extended period of time and come back to an agency that is still well-functioning. The first step in this is to hire and train the best employees one can find. New hires need to be viewed as future leadership replacements, not just task completers.

Many owners will balk at the costs of hiring top talent, and instead settle for new, inexperienced or even marginal workers. This becomes a self-fulfilling cycle because then owners will lack trust in those employees.

With lackluster staff, the agency owner will delegate tasks instead of independence, the latter being critical for growth. In businesses where owners continually micromanage with top-down control, efficiency is capped and stagnation can result. Growth only comes from the proper delegation of authority to the firm’s talent.

Steps to Improve Leadership

To foster leadership within, start by getting those recent excellent hires inspired with an optimistic and forward-looking vision. This can be based off of what is unique to the company, such as excellent customer service, special programs or things like valued services.

Then using this vision as a template, and identify potential leaders that exemplify said traits. Be sure to occasionally test them through challenging tasks. Give them independence on these overwhelming tasks and see how they respond to it and problems that steam from those decisions.

Independence is huge when trying to create leaders. How can your work truly be your own if you are constantly being corrected or guided? Let employees have the power to take their own creative route, and be responsible for the results.

If leaders have confidence in staff, this helps them take on new challenges. New employees must be reminded that it’s OK to improve long-standing company processes and procedures. Too often during mergers or acquisitions, Oak & Associates will see two different competing processes that both owners see as the best. A balance of these processes is needed with the best ideas winning.

This same concept can also be applied to hires from other agencies who have been exposed to other ways of doing things. Their experience can be a possible gold mine of insider knowledge that can make a company much more refined and innovative, if new employees are tapped for better ways to do things.

Provide a Variety of Rewards

Sometimes leaders are blind to their own mistakes. What’s important is creating a work culture where new hires believe it’s OK to critique and improve the status quo. Those working to positively improve workflows and provide new ideas should be given rewards and credit for these improvements.

There are lots of ways to reward employees. In addition to monetary rewards, many employees today are also focused on time off, providing increased authority, and offering health club memberships, childcare, working from home to save commuting time, four-day work weeks, insurance company trips, dinners out, etc.

Asking employees what rewards most important to them, such as during performance reviews, can help management provide rewards that individual employees feel are the most valuable or best for them. This can also improve morale.


Using Agency Employees to Improve Leadership

By: Catherine Oak

In today’s business climate innovations in technology and systems have upended communication, payroll and record keeping. Even with these drastic changes one aspect of a business has yet to change, the CEO.

Every company big and small has a CEO and their decision-making ability is key to successful growth. A truly great leader should have strong values and a rock solid mission statement, which all employees understand and look to for leadership. These values, mission statement and written goals rarely change as a company grows.

Leaders must continually question their decisions. Not in a way of self-doubt, but questioning to ensure they are in line with the future vision of the company. Doing so raises the business’ standards to a new level.

A business that grows long term is one that is innovative. When Oak & Associates is asked to assist agency owners with management and growth, we first talk to the owner of the agency, and then go to the employees and ask them what they would change if they were CEO. Their insight and ideas are usually much different and often more simple to implement, from the insight of the agency’s leadership. An Employee Survey is completed by each employee anonymously before going to the firm, so the consultant and owner knows what the employees believe are the problems.

For example, if the agency owner is looking to improve process and profit one must look no further than to those who are in the trenches daily, on the phones and face-to-face with the company’s clients, day in and day out. They have a great sense of knowing what needs to be done.

An owner who isn’t looking to improve those two key aspects is not a leader and instead one just keeping the status quo. The process that a leader puts into place is as important as the growth or goal itself.

The biggest mistake that agency owners make is that they forget about how important their employees are in accomplishing future growth. Including employees when making decisions gives the leader insight as to whether or not the goals set by the leader are possible.

Employees need to be asked and not made afraid to discuss changes needed to improve the operation.

One of the most dangerous things for CEOs is if they surround themselves with employees that have nothing to say or choose not to say anything. When that happens, the owner is at fault because they never encouraged or asked their employees to contribute. The good employees end up leaving. Most of the time this isn’t because the employees are unaware of any answers or ideas. Instead it is because they feel that their opinions are not valued. Also, when new employees from other agencies join, they should be encouraged to tell management what things were done differently and better in the agency they came from so they can be implemented to improve the operation. Often this input is discouraged or put down as “that’s not the way we do it here.”

To be a great leader of any organization, including insurance agencies, the leader needs to surround themselves with employees who ask great questions and continually challenge him or her as to how things are done. Those employees can brainstorm their ideas with each other and deliver their thoughts to management to improve the organization. The manager of that department or agency owner can be

The biggest mistake that agency owners make is that they forget about how important their employees are in accomplishing future growth.

present at this meeting, but only if they get out of the way and listen and encourage, not intimidate or put down those new thoughts and ideas.

Leaders must realize that creating an environment where employees feel encouraged to give feedback on programs, processes and how to improve profit is crucial to sustaining and creating more long term growth.

Leaders/owners need to make everyone in the organization feel a part of the agency’s success and reward those efforts that do contribute. How to reward those efforts will be the content of another article in the future, as well as how to create leaders in the organization.


Producer Compensation – What’s New Today?

By: Catherine Oak

Designing a good and motivating producer compensation does not need to be a mystery. The bottom line is – pay what can you afford to pay, for what you are providing the producers and be in line with the important competition.

Total compensation for any agency is always the largest expense category. For the typical agency, total compensation (producer and employee compensation—plus benefits and taxes) ranges from 50-75% of total revenue. If the compensation is too high, the agency will lose money. If the compensation is too low, then the agency could lose the producers and employees, and service may suffer.

How to Calculate

The way to calculate what you can afford to pay is to take total gross agency commission and fee revenue. Then subtract all necessary on-going expenses except producer compensation and any owner compensation or bonuses. It is not recommended to include contingents, since these should be considered bonus income.

The next step is to take out an expected fair rate of return on the business for the owners. This typically ranges between 10-20% of revenue. This “expense” is the cushion for affordability of producers. If the agency really needs a producer, then the owners might need to dip into their profits to make it happen—at least until they validate.   

Today, an average firm that properly manages expenses can typically afford to pay commercial lines producers 25-35% commission for renewal business. This assumes that the owners want to realize a 10% to 20% pre-tax profit. Keep in mind that if the owner is a producer, their producer compensation is the same 25% to 35% commission and is in addition to the profits of the firm.  Owners should also receive management compensation, if they are performing that role.

The range of 25-35% varies based on whether (and how much) the employer pays for certain expenses, resulting from the producer’s employment and activities. These expenses include employee benefits such as health and related insurances, payroll taxes and retirement plans.

Producer Expense Caps

The producer expenses often include business development expenses such as travel and entertainment, auto and club dues, and cell phones. The best way to properly manage and reward producer business development expenses is to give them about 3-4% of their book of business for these expenses (which are actually perquisites for the producer). This percentage actually becomes an expense cap for the year, with monthly expense reports still being submitted.

Pay More for New to Grow

New business can be paid at a higher rate, since the calculations assume expenses are mostly paid out of renewal income. Of course, there are expenses associated with writing new business related to marketing and staff time putting the new account together.  

Particularly in agencies that want to grow, a higher percentage is often paid to encourage producers to write new business such as 40% to 50%.  This would  assume that the owners are giving up some of their profit the first year!

Some real aggressive agencies are paying an additional incentive to those producers that exceed their new business growth goals. Some firms today will expect experienced producers to write between $50,000 to $100,000 in new commission per year. This depends on the size of their current book, where the agency is located, etc. If the producer exceeds whatever his or her goal is, the agency may provide an additional bonus of maybe 5% commission. This becomes retroactive on all of the new business written for the year!

Who is Doing the Work?

Another key compensation concept is to, “Pay based on who is doing the job!”  Agencies do differ on whose job things should be. For example, who should do policy checking?  In some agencies, who does this role would be that of the producer, in others the role is that of the CSR and in others the marketing department, if one exists.

Today many firms are delegating their “small” accounts to CSRs to sell and service. Thus, many firms pay producers less commission or even zero for “small” commercial accounts. Small is usually defined as those accounts that are Business Owner Package policies or small monoline accounts.

However, the definition of “small” also depends on the firm’s book of business and are usually defined as those accounts generating $500 to $2,500 in commission or less.  Where the agency is located and what is available to write in the area, can often determine what is the dollar amount cut-off.

What about Personal Lines?

The trend today is to not pay commercial lines producers who also refer personal lines accounts to the PL department, because the CSRs are typically doing all the work.  A first year commission for CL producers for at VIP personal lines package policies may be warranted to encourage them to generate the leads on these much larger PL accounts.

Payment Methods

The method of paying producers should not make a difference in determining what is a fair amount for compensation. Salaries or draws against commission should be considered only as a convenience for producers, since the timing of renewals can produce some lean months.  They should be set based on the firm’s renewal commission and use a book that is somewhat smaller, because of possible attrition. Once the draw or salary is met, new commissions should be paid to the producer at least quarterly, to keep them motivated to write new business.

Grandfathering the existing compensation plan for a period of time (or indefinitely) for accounts already on the books, is one way to introduce a new compensation plan and to avoid an immediate impact on producer incomes.


Compensation for owners and producers is never an easy issue to address. There is no single solution. Each agency needs to blend the right ingredients for an effective compensation plan to attract and retain good producers.  Being creative and trying new things (which may include some of the ideas in this article) may be the healthy change the agency needs to be competitive and become more profitable.


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.

Guerilla Actions to Grow the Agency

Several years ago I attended a five day Guerilla Business School in Los Angeles, put on by a training organization called Peak Potentials. The schools are taught by successful businessmen and woman who have made millions or even billions in their businesses.  Their goal in teaching these seminars is to educate others to be able to achieve similar results to improve their lives and their employees and then have money to also donate to help others and other causes in the world!

Following are nine key take-aways that will improve my business and that of our agency consulting clients:

  1. Owners should work “ON” their business, not “IN” their business. Most entrepreneurs come from the trenches and then stay there when they open their own business.  They do not start with management skills initially and have to learn from the school of hard knocks.  People open up their firm when they think they can do it better than their bosses, and then continue to work “in” and not “on” their business. 

Unfortunately, they are not able to grow and manage their firms, as they don’t have the pieces in place to delegate the working “in” their business to others.  Read Michael Gerber’s book the “E Myth” and now a new one that is “E Myth Revised’ for more great information on the subject.

  • Surround Oneself with Successful People and Mentors.  People are who they associate with.  Be a part of a great Mastermind group for your own learning and support.  Thomas Edison and Harry Firestone were part of Henry Ford’s mastermind group. 

Oak & Associates has a group of high-performing larger insurance agencies meeting quarterly, that are strategically placed, so they don’t compete with each other.  If interested, let us know.

  • Invest in the business versus the owners spending the profits.  Owners need to set their firm up for maximum sales price for their retirement, making their firm more valuable. This can be a sale internally to others or a third party sale.  If profits are not invested back in to make the firm bigger and better, the owners are selling the firm to themselves now, and won’t command a higher price tag later.
  • Spend 60% of time on marketing and sales, not administration or operations.  Most people spend less than 20% of their time on new business and sales and 60% of their time on administrative items.  Simply said, if you aren’t growing, you won’t have anything to administrate, correct?
  • Build the Right Team for new Business Growth. 

High-performing firms have owners who work hard on bringing in the best people and essentially replace themselves long before retirement.  That is working smart.  It also shows confidence!

  • Inspire People in the Firm through Communicating the Firm’s Goals/Mission. Employees need to know what the firm’s goals and mission are.  Then they can help the agency get there.  High-performing firms often even share their financial statements monthly and the budget, so managers know how the firm is doing. What a concept!  If bonuses are based on individual’s efforts, there will more likely be more growth and happier people working toward the firm’s goals and mission when they are aware of what they are.
  • Be a good listener, especially to what customers want and need.  Do the firm’s products meet the needs of the customers, their why?  Most firms sell what they have to others versus listening to what the customers need and desire and then finding or creating that product.
  • Outsource what can be versus having to hire and increase fixed payroll.  In this way, if the business revenues go up or down, owners have flexibility and don’t get into financial trouble.  Today there are fewer good people looking for work since Covid, so commissioned sales and outsourcing is working well for many growing firms.
  • Do not be afraid to take risk by taking action.  We learn much more from our mistakes in life and in our business.   Look at how many times many of the greats in business started and failed, Charles Schwab of US Steel, Donald Trump, Richard Branson, Steve Jobs and now ElonMusk.  A great strategy is to consider being ready, firing and then aiming.  Too many people strategize down to the last detail on what they might do with their lives or business and miss the opportunities and learning, because they never take the action.  The perfect plan or strategy does not exist.


These tips when successfully implemented will change the face of the agency and make it and the people employed a formidable force to compete with.

How to Find New Producers

Most of our agency clients tell us they have a hard time finding producers.  They want to know where to look and how to bring them in.  It is not an easy task to find someone especially that is experienced from another agency with a book, that can just come in free and clear with a book of business and easily fit into the agency’s culture.  Every agency is different, has different levels of support staff, different markets, training, computers, perks and contracts.

Following are some of the ways an agency can find good people and be successful in this endeavor from our experience in working with thousand of agencies over the past 35 years:

Promote from Within

We have interviewed so many agency staff over countless agencies, that feel resentful that owners and managers often look outside the agency to bring in managers and new producers.  They may be CSRs or Account Managers that have worked in the agency for a long, long time and know the customers well, the underwriters, the processes and procedures of the firm. 

Often, we are told that they do not have an avenue to move up in the organization nor are they ever asked of their desire to do so even at performance review time.  It is just “assumed” that they are not interested or willing to move up.  They also have a big fear that if they did move into sales, they would have to go on straight commission.

With this concern, even if they have a sales personality and could handle most of the commercial lines or benefits call-ins, they won’t accept the job.

The answer can be a different role that some agencies have created called an Account Executive.  These AEs, they are called can handle existing books as producers do and are not expected to bring in new clients.  They are usually expected to cross sell the existing account with other coverage lines, such as umbrellas, EPLI, fiduciary responsibility coverages, business interruption, Cyber, etc.  Most can do this if they have taken some CSR and CIC courses and have a good manager to lean on. 

The key is how to properly compensate them. Most AEs that have that position compensate them on a percentage of the book they handle as a salary, usually in the 20% to 25% range.  Usually AEs have CSRs to delegate to for clerical tasks and operate more as a producer on the accounts.  If they cross sell or bring in new accounts, they should receive commission for this outside of their salary.

In most agencies the personal lines sales are handled by the CSRs/Account Managers and not specific producers. 

Hire Professionals in the Community

This was an avenue taken by a CA firm we knew and they would hire people in their community that were coaches and teachers.  These professionals knew everyone AND had a desire and drive to win.  They are usually also unable to make a lot more money in their current profession AND are somewhat deadended in their careers. 

The agency we knew that did this hired about forty of these people and they rarely ever left.  They were extremely hardworking and grateful for the opportunity and were quick studies.

Salespeople connected to Agency Niches

Another source is to look at people that sell in the niches that the agency likes to write and already know that specialty well.  An example would be a lumber salesperson or equipment dealer salesperson and the agency has a specialty in contractors or dealers.  The salesperson already knows people to connect with that are contractors and the subs and can talk to them about the program the agency has, that would be perfect for their needs.  Another example would be a car salesman and the agency writes dealerships, or an attorney who can easily write law firms.

College Marketing Projects & Internships

One of our clients has found two great long-term employees through this idea, a producer and a marketing manager.  They started as college business students needing to do a marketing project for a business.  They were invited in and got to know what the agency does, what its marketing efforts were, and concentrated on assisting with their website, mailings, ads, social media, etc. 

After making recommendations for their project to the agency, they both ended up so impressed with the owner, managers and the firm, that they first had internships and then when they graduated were offered jobs and are still there today!

Many people do not really understand the jobs in an insurance agency and how challenging and exciting it can be to work with a wide variety of clients, especially in commercial lines and employee benefits.

When I was in college we had an insurance degree at the University of Wisconsin, Madison, called Risk Management & Insurance.  After you would get the degree and were ready to graduate, the college would have recruiters from insurance firms come to school to interview us.  It helped us get a big picture view of all the roles available in the insurance industry and I took a job with St. Paul Fire & Marine as a Marketing trainee.  I also had a summer internship as well with Employers of Wausau that our Risk Management professor recommended to by sister and I and we did not have anyone in our family that had been in the insurance business. 

Working there really opened up our eyes to all the possibilities there were.  Insurance agencies should go to their local colleges and community colleges to pitch their firms and explain the opportunities they have available.  Often an agency can also post openings on the college website, which can help students find great jobs in insurance.

There are many colleges all over the country now besides Wisconsin that have Risk Management and Insurance degrees, which is a good place to look for agency prospective employees, such as Fullerton & Sacramento in CA, Arizona, Michigan, Mass, Alaska, Mississippi, Colorado, etc.

Project Invest by the Insurance Women

The National Association of Insurance Women for years has tried to get high school students interested in getting into the insurance industry, both carrier and agency roles.  Parents of students in the school that were insurance veterans and other insurance personnel could come in on these career days to explain to students the opportunities that abound in insurance.

Hire a Specialist to Find Producers

There are some good recruiters that specialize in insurance.  Some are specifically dedicated to insurance producers, such as Art Betancourt of Michigan and email him at Arthur.betancourt@aebetancourt.com to see the unique way he and his team work to teach agency owners how to do the recruiting themselves. 

There are also ads an owner can run in insurance magazines, such as the Insurance Journal and the National Underwriter.

Non-Owner Producers Competitors

There are many producers that come up against someone on an insurance sale and lose to them. If the owner or non-owner producer find out they are not the owner, and they were great, the client may be willing to give you their info. Then your agency can reach out to see if they might be interested in a job.

Lastly, recruit those you come across that impress you.  For instance. a waitress in a restaurant you are very impressed with or a clerk in a store.  Are their personalities or knowledge worth exploring for your own firm?

Always remember that it is much easier to teach someone insurance, than how to close.  The key is to make sure they get that insurance training from within the agency or schools that exist from carriers or organizations like the Society of CIC.


This article gives agency owners many ideas on how to find or grow your own producers. Any one of these ideas have been proven from others in the business and may just open up one’s eyes to the possibilities out there.