At the recent MarshBerry Connect Summit, the industry’s premier peer exchange event, insurance executives discussed proven, tested strategies on everything from talent issues to employee efficiencies to technology. In the final in our series capturing these peer insights, MarshBerry shares the latest trends in methods for achieving predictable and sustainable growth.
Consider acquisition opportunities to accelerate growth
Once upon a time, conversations about acquisitions strategies were present in mostly the top 50 insurance firms or firms with private equity backing. However, there has been a recent shift for firms without private equity toward pursuing acquisition strategies in addition to growing organically. Many firms have taken advantage of consolidation opportunities by buying smaller firms – under $5 million in revenue – because private equity investors are less interested in deals of that size. These acquisitions have led to faster market entry, enhanced customer base, broader expertise, and increased revenue streams. It’s important to note that insurance brokers looking to acquire another firm have encountered challenges similar to competing in the sales process. Connect member executives spent increased time helping one another work out a dedicated strategy to seek out and solicit the right purchase opportunities and compete against other interested parties.
Focus on sales velocity to determine true value
Those who prefer to grow organically shared that they’re hiring producers with niche experience, to drive new business and increase sales velocity. Sales velocity differs from organic growth in that it doesn’t include revenue driven by increases in premiums and capacity. Sales velocity is simply the amount of new business written year over year. The sales velocity metric helps firms see how much revenue is coming from lift vs. new sales. Sales velocity becomes a particularly important metric as rate increases slow down. It’s imperative that brokerage firms manage pipelines and keep filling the funnel with true new business and not simply ride rate increases.
To further achieve goals related to growth, firms must focus on holding non-producing producers accountable for lackluster business development. For those producers who are writing less than $100,000 in firm commissions a year, firms have had success in using clear compensation changes to provide higher rewards for those producing. For those producers who have no intention of writing new business, many firms are reclassifying them as account executives and compensating as such.
Implement small business units to increase efficiency
Small Business Units (SBUs) are an increasingly popular strategy designed to enable new business, create servicing efficiencies, maximize producer performance, and enhance client retention. SBUs help firms handle small referrals that come from the best clients. Most firms don’t want to write something not in their wheelhouse, but they also want to keep those referring clients happy. MarshBerry research indicates that around 80% of a firm’s revenue comes only from the top 20% of its book of business. The problem is that the bottom 80% of the book (the part that only produces 20% of the revenue) tends to be the highest touch, highest volume (from a workload perspective), and highest maintenance types of insurance. An SBU can be the solution. These specialized teams handle the insurance needs of small businesses, such as clients that have a relatively low number of employees, minimal annual revenue, and limited assets compared to larger enterprises. Setting up an SBU allows service staff and top producers to focus on driving more aggressive organic growth.
Plan or not to plan?
Talking about growth best practices is one thing, but following through and creating accountability is the key. Strategic planning is a great place to start the process, in addition to establishing key performance indicators at all levels of the firm. Consider the planning methods of top firm vs. average firms. How does your firm compare?
Tracking progress related to growth goals and holding teams accountable will ensure a strong, profitable future for insurance brokerage businesses. What are you doing to make your business better tomorrow than it is today?
