Strategic Resources for Your Insurance Agency

Business Planning


So we’re halfway through 2013.  Do you know how you’re doing relative to your 2013 Budget, or your 2012 Strategic Plan, or even whether you’re making headway towards your long-term exit strategy goal?  If the answer to any of these is something other than “YES,” it’s time to start thinking about putting more emphasis on planning for the business, not just running the day to day business.  In the words of that great American philosopher and former baseball player, Yogi Berra: “If you don’t know where you’re going, you will wind up someplace else.” 

Planning isn’t just for the Fortune 500 companies.  In many ways, effective planning can be much more important to the long-term success of smaller privately owned companies because it often addresses some very personal issues of the principals.  The problem is that most small businesses are run by sales-type entrepreneurs, which can be a good thing for growing the business, but often not the best skill set for developing and managing the strategic aspects of the business model.

Studies have shown less than 20-25% of agency owners plan for the perpetuation of their agency.  This often results in the owner(s) having to sell to a third party in order to reap any final rewards from their life-long business pursuit.    Planning for the business doesn’t have to be overly involved or confusing, but it should dig deep enough into the business and the principal’s needs and goals to create some objectively measurable points of reference.  If Budgets are one end of the Planning process, succession planning and retirement considerations are at the opposite end.  As the average age of agency principals continues to increase, for many, retirement is much closer than you think.

Sound business planning includes short-term plans (Annual Budgets), 2-5 year plans (Strategic Plans) and Long-term planning (over 5 years).  These individual plans should all be linked together and continuously monitored and adjusted over time as goals are met, circumstances change and new goals are established.  Many firms establish Budgets for the revenue and expenses anticipated in the upcoming year, but little else.  While this is a good start, it is but one step in the whole Planning process that helps businesses prosper and principals accomplish their long-term goals. 

The short-term planning for Tactical and Budget issues is primarily an operational function, often handled by the controller in conjunction with the sales team in larger agencies, or the agency principal(s) and other key employees in smaller firms.  Questions like the following should be incorporated into the Budgeting process:

·         What are renewals likely to be next year?

·         How much new business can we honestly expect to book?

·         What are our costs going to be to produce and service the business and meet the needs of our clients?

·         Are the revenue and expense projections consistent with the long-term goals of our long-term plans and our stakeholders, or does something need to change?

The opposite end of the spectrum, however, requires a more insightful thought process by the senior management and ownership team very independent of the operational Budget questions above:

·         When I/we are ready to retire, do I/we want to sell externally, or perpetuate internally?

·         When do I/we want to begin and/or end the retirement and business transition process?

·         What should I/we be doing now to facilitate accomplishing these goals?

In between these two time horizons lies the Strategic Planning component, where questions such as the following need to be addressed by both the operational and stakeholder perspectives in conjunction with each other:

·         Do we have the resources needed to continue meeting the needs of our clients and accomplish the long-term goals of the business and its owners, in terms of financial, personnel, operational efficiencies and technology, etc.?

·         What potential changes in the core industry structure do we need to be evaluating to determine the impact on our clients and our operations?

·         Which segments of the business do we need to invest in, and which do we need to consider adjustments to in order to maximize profit returns?


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