You’ve hit a plateau in agency growth. You know you need to change things up to get past this slump and take your agency to the next level – you just don’t know what that next move should be. Learn about the options available to you and weigh their pros and cons to decide on your next move.
Why Agency Growth Stalls
As a brand-new agency, you win your first clients, and then grow organically based on good reviews, referrals and marketing. Everything is great … until it isn’t.
This problem often occurs when you reach a certain level of market saturation. You’ve already sold policies to most individuals and businesses who are shopping for coverage in your market. The others have the coverage they need and they aren’t interested in switching agencies. Occasionally, you’ll win new businesses, but you’ll also lose some accounts, causing growth to plateau.
To overcome this inertia, you need to make a major change that will help you expand into new markets, optimize your operations and increase your revenue. A few different strategies could help you achieve these goals.
1. Clusters
A cluster is a group of insurance agents who pool their individual books of business to create a larger book.
- Pros: There’s strength in numbers. By collaborating with other agents, you can increase your negotiation power with carriers. As a result, you may achieve better profit-sharing, which is a great way to increase your revenue. Some clusters may provide additional benefits as well.
- Cons: Clusters are often limited in scope. They may help if you’re trying to grow in one market or region, but they may not help if you’re thinking bigger.
2. Networks
An insurance network typically offers access to carriers and may also provide better profit sharing and commissions as well as other types of support.
- Pros: Some networks may provide carrier access for a range of lines on a national level. If you’re trying to diversify your book to attract and retain more clients, this could be good option. A network may also provide access to other resources that you can leverage to grow your agency, such as marketing support and access to technology solutions.
- Cons: Some networks charge fees, so you need to be sure you’ll be able to increase your revenue enough to make up for the extra cost.
3. Acquisitions
In an acquisition, one company buys another.
- Pros: This is a fast way to grow your agency. In addition to expanding your book and gaining new resources, you can leverage acquisitions to move into new markets and regions.
- Cons: You’ll need capital to acquire another agency. Since financing options are available, though, this may not be the roadblock you think it is. You also need to make sure the agency provides a good value. There’s a lot to consider – from the loss ratio to the expected level of customer attrition.
4. Mergers
In a merger, two companies combine to form a single, new company. This is similar to an acquisition in the sense that you’re turning two separate companies into one company, but the two companies are on more even footing.
- Pros: Both companies may benefit from increased resources and a larger book of business for increased leverage with carriers. If the two companies have different specialties, they may complement each other well. If they have similar specialties, they reduce competition.
- Cons: True mergers are tricky because the respective owners will need to agree on the terms. According to Investopedia, companies often use the term “merger” when it’s actually an acquisition due to the negative connotations of the latter. Finding a workable deal may be tricky.
Questions to Ask Before You Settle on a Strategy
To push past a plateau, you need to be willing to make bold moves, but it’s also important to make sure these are the right moves for your agency. Ask yourself:
- What are your long-term goals? Think about where you picture yourself one year, five years, and 10 years down the road. Pick a strategy that aligns with those goals.
- What are your biggest challenges? Maybe you need better carrier access, better technology solutions, or a way to break into a new market. Focus on a strategy that helps you overcome these challenges.
- What are your greatest strengths? You’re more likely to achieve success if you choose a strategy that leans into your strengths.
Heffernan Network is dedicated to helping independent agencies grow. We offer access to top-tier personal and commercial line carriers and increased revenue options. Member agencies also have access to vetted technology solutions and back office support. Learn more.
