Want to reduce crushing 4th quarter workloads and increase insurance agency profitability? Look at your numbers and start building a better book of business.

Benefits Advisor + 4th Quarter = THIS SUCKS!!

November 13, 2017

And what I keep hearing is that this year’s “suck factor” is especially high.

A big reason it sucks so much is the lack of discipline and strategy in how most books of business have been built. Chances are you have too many accounts that produce too little revenue and demand too much attention.

You may not be able to make 4th quarter easy, but you can definitely make it easier. Start by recognizing that not every account willing to work with you deserves the opportunity.

The times, they are a changin’ (finally!)

It's clear this industry (at least the forward-thinking agencies/brokers/advisors) recognizes the need to be disruptive, innovative, and transformative when it comes to serving client needs. But, it's really difficult to do that when you can't even catch your breath because of the constant demands of the most basic service and renewal activities.

Brokers/advisors, heal thyself

Disruption, innovation, and transformation must start at home. You need to transform the way you build your business in order to have enough energy left over to transform the way you impact the business of your clients.

The first step to transformation is with an honest assessment and understanding of the structure of your current book. List all of your accounts from the largest revenue account down to the smallest. Now, do some dissection and analyze how healthy of a book you have built:

  • What percentage of your total revenue is driven by the bottom half of your book (if you have 100 clients, what percentage of revenue is driven by the smallest 50)?
  • By the bottom 25%?
  • By the TOP 5%?

Chances are your answers will be similar to the following, which reflect the typical book of biz:

  • The bottom half, by case count, generates, on average, a little over 6% of total revenue.
  • The bottom quarter generates, on average, about 2% of total revenue.
  • While the top 5% generates 30% of total revenue.
  • And, most of the time, if you wrote 1.5 new accounts that average the revenue in your top 2%, you could replace the revenue from that bottom half.

Have I got a deal for you!

If you went to most people and asked them, “If you could reduce your work load by half, but still get paid 94% of your current compensation, would you?” I can hear the chorus of “Hell yeahs!!!!” as I type.

Why wouldn’t you do the same thing? Or, go one step further.

Building an enviable book of business

Your top 5%, by case count, likely generates 30% of revenue. What if you systematically started replicating that top 5% ten times over (you wrote them once, why not again?) while eliminating your bottom 95% (or improved their revenue through fees, account rounding, etc. to move some of them into the top 5%)?

Over time, you would have half the number of accounts you do today (5% x 10) and have tripled your revenue (30% x 10).

Example – Assume you have 200 accounts that generate $800,000 in revenue and it held true that the top 5% (10 accounts) were generating 30% of revenue ($240,000). If you replicated this top 5% ten times over, you would have 100 accounts generating $2,400,000.

That may be drastic for many/most of you, but it’s the direction you need to move. As you analyze your book of business, pay close attention to how little revenue you are actually receiving from each account in that bottom half.

We did a survey of a few dozen brokers recently and determined the cost to quote a group (fully insured medical, dental, life and voluntary) is around $1,000. And, that’s before paying commission, servicing the account, or providing other resources to the client. The harsh reality is you are likely unprofitable on a significant portion of your book of business.

Yes, it’s a bold move

I know the thought of firing clients is scary, I get it. But, you need to realize that you keep those unprofitable clients at the expense of your best clients. Those best clients are basically subsidizing a “client welfare” program both financially and in reduced access to you and your team’s attention.

Of course, I’m in no position to tell you what to do with your clients, but I do encourage you to be honest in asking yourself whether or not you are truly better off having them as a client than you would be without them.

Can you see it?

Imagine future 4th quarters where you were handling renewals for a fraction of the number of clients, earning more than you ever did before, and feeling more confident in your client relationships because of the additional attention you had been able to provide as a result of your reduced workload.

That’s a 4th quarter with a SIGNIFICANTLY lower suck factor!

Those of you pushing boundaries, disrupting, innovating, and transforming are doing something incredibly special. It's a privilege to work with you, a privilege that should be reserved for very special opportunities.

Leave those small, non-appreciative opportunities to your less deserving competition.

Photo by Alphaspirit

Q4i Agency Annual Plan 2018 

Kevin Trokey

Written by Kevin Trokey

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.

You might also like

WHAT CAN WE HELP YOU FIND?

SUBSCRIBE TO THE AGENCY BLOG