So many things can impact the value of your insurance agency: growth and profitability of the agency, maximizing the use of the latest technology, and an effective strategic plan. Working with a network should also have a positive impact on your agency’s ability to drive revenue growth and increase its ultimate value. Some agencies are hesitant to join a network, thinking it may take away their independence. They may not understand how a network can help them not only grow revenue but ultimately enhance agency value.
How a network adds value
Whether currently working with a network, or considering joining one, ask yourself this question: Do they help you strategically think through the day-to-day operational aspects of your business, as well as the long-term goals relative to driving revenue and adding value? Consider these points as you evaluate an agency network:
- Strategic planning: Make sure the network you are considering can help you build or refine your strategic plan. It starts with building an effective strategic plan, committing that plan to writing, and creating internal processes to hold the agency accountable.
- Access to the insurance carriers: Networks provide access to a wide range of insurance carriers and products but are they the right carriers for your agency? Who you choose to represent long term is of critical importance. Appointments should be considered strategically based on market, need, and long-term objectives.
- Revenue building: Representing the right carrier line-up can dramatically affect day-to-day client relationships as well as long-term revenue and agency value. Is the network you are considering profitable with their carrier partners? Are they growing?
- Technology utilization: Technology in the insurance space is constantly evolving relative to market advancements and the streamlining of agency processes. Having a network partner evaluate and recommend new technologies for their member base is a tremendous value add. Technology councils and peer advisory groups can be extremely helpful to member agencies.
Each business varies in their specific needs, but these are the prominent examples of value that the right agency network can bring to an independent insurance agency.
How a network can potentially reduce value
Consider this scenario – an investor wants to buy an agency and offers a competitive price. But during the exploratory phase the buyer discovers that the network the business is working with has a reduced commission structure and a two-year non-compete: two things guaranteed to turn off a potential buyer. It’s a valuable lesson to examine all features of a network and seek out potential pitfalls that may impact long-term goals or opportunities.
Another potential risk is when the network doesn’t allow an agency to own its book of business. Often, a network will control the agency’s client base and the policies written, to ensure compliance with the network policies. This poses a tremendous risk if a buyer looks to buy your business, as they may not be getting your book because it’s tied to the network.
Other ways a network can potentially reduce value include reduced or split commissions, large exit provisions and reduced profit sharing for the group.
What to look for in a beneficial network
Joining the right agency network, or reevaluating your current network, should start with an evaluation of the organization and their offerings. Is the organization profitable? Do they represent top insurance carriers who are willing to work with their member agencies? Are there dedicated resources and consulting available for strategic planning and technological advancements? Can they help you not only grow revenue day-to-day but overall agency value? Can you exit the contract without having your book held hostage?
FirstChoice, a MarshBerry company, does not impose a non-compete clause on member agencies. Nor does it require a firm to aggregate their entire book. Members receive 100% of carrier-based commissions as well as growth bonus opportunities and profit-sharing incentives. The organization is partnered with over 70 insurance carriers on a national level. FirstChoice is a strong advocate of strategic planning, education, and the use of technology to grow and maximize agency value. Data and benchmarking tools enable members to effectively track their KPI’s against industry peers to help enhance their overall performance.
The use of an agency network should not only allow your agency greater carrier access, it should provide opportunities to significantly grow your revenue more than you could on your own.
Is FirstChoice, a MarshBerry Company, right for you?
FirstChoice, a MarshBerry Company, caters to insurance agency owners who prioritize talent investment, embrace challenging decision-making, want to develop and work toward a strategic plan, and are open to agility and empowerment. FirstChoice offers growth solutions tailored for agencies of all sizes. If you are not a FirstChoice member and are interested in learning more about the nation’s number one agency partner, visit FirstChoice.
