Strategic Resources for Your Insurance Agency

Managing for Success of New Producers


There are two ways to organically grow an insurance agency practice:  The existing sales team can sell more, or new people can be hired to add to the sales team.  Depending on the culture and structure of operations of the agency, at some point the existing team may become saturated with accounts and unable to find the time to prospect and underwrite new business.  Hiring new sales people always starts with great expectations, but all too often ends up with something substantially less.  The question is why, and what can be done about it?

Nearly every agency principal has hired a new sales person at one time or another, or at least hoped would be another sales person.  Occasionally you win and get the real deal, but sometimes you end up with an overpaid account manager, and other times, a total flame-out.  But don’t feel bad, virtually no one stands alone in this process batting 100%.  More often than not, it will take two or three hires to find the one you were really looking for. 

Separate from the recruiting process, however, there is a difference in how agencies monitor and manage new producer hires, whether they are inexperienced insurance sales people or seasoned producers.  Many agencies will set up mentoring relationships in the office, set monthly and annual production goals and establish financial rewards based on hitting achieving the goals.  While production is certainly an important part of the success of a producer, it’s not always the best indicator of long-term success.

Generally, the first thing the new sales person will do is contact all the people they know and try to persuade them to move their business, subject to any potential restrictions from previous employment arrangements.  If they have a good Rolodex, no restrictions, and can offer the right solution, they may be able to generate a fair amount of activity and revenue.  The problem is while they’re picking all the low hanging fruit, they may not be planting the seeds for their next wave of sales activity.  They may be successful at hitting their short-term production goals, but little is building up in their pipeline.

Perhaps equally important to actual revenue production, especially in the early days, is the process and activities taking place somewhat behind the scenes.  New producers, seasoned or otherwise, need to be active in identifying, contacting and qualifying unknown suspects and prospects in order to create the necessary pool of potential future sales.  Further, management needs to establish specific goals for these activities and monitor them just as closely as the revenue results.

The prospecting activities of an individual new to the insurance and sales role will be drastically different than one who has been in the business for a numbers of years, but each should have tangible and objectively measurable targets that must be met in order to remain employed by the agency.  Some of the specific measurable goals may include the following:

  • Production Measures
  • Build a book of business equal to “x” times your salary within 36 months
  • Cover “x”% of your salary with annualized production during the first 12 months
  • Generate quarterly production revenue of “$x”
  • Average account size should approximate “$x”

In addition to pure production related goals, there needs to be activity measures as well, such as:

  • Activity Measures, monitored through the use some kind of manual or automated tracking system to facilitate oversight and future follow-up
  • Make “x” calls per day/week/month to prospective clients
  • Get “x” meetings per week/month with suspect clients
  • Obtain quotes for “x” prospects per month/quarter
  • Bind coverage on “x” clients per month/quarter

The unknown factors will be different for every agency and each individual, but there are some norms that can be used as a starting point if needed.  For example, it’s not uncommon to expect a new producer to build a book of business equal to three-times their base salary within 3 years.  Keep in mind this doesn’t necessarily mean their billed revenue during the third year will equal 3x their salary, but rather their annualized book of business as of the end of the 36th month should approximate 3x their salary. 

Similarly, especially for relatively new producers, it’s not uncommon to see suggested ratios of Calls per Sale to be 100 or more, and Calls per Meeting to be 10 or more.  Depending on the agency and any special niche products offered or focused sales prospecting activities, these numbers could be much higher or lower.  As the producer becomes more experienced in qualifying suspects in advance and working the process better, the ratios should come down as the efficiency improves.

As an example, see the illustration below for some of the critical measurements to be considered when bringing a new producer on board and needing to establish management’s performance expectations, as well as setting various expense assumptions in order to project the costs associated with the new hire:

Once the above facts and activity estimates have been set forth, a set of goals can be calculated based on assumptions of how the producer will generate their new business, assuming there is little “low hanging fruit” to pull from. 

These are the key activity goals the new producer and management need to agree on as the basis for continued employment, often with a forgiveness waiver as long as the goals are met two months out of each quarter, or not missed two quarters in a row, etc. 

From a production perspective, while no model is perfect, the following provides for the anticipated slow start of a new producer, but building over time such that at the end of the expected validation point (36 months as noted above), the annualized revenue is equal to the target book of business:

The quarterly production goals are not significant, especially in the early quarters, but based on the assumptions noted above, this is all that’s needed in order to accomplish the 3-year production goal. 

This information can also be used to project the maximum cash investment required to support the new producer, and when the agency is made whole on their investment.  If the agency doesn’t have the working capital to support this kind of investment, they may need to re-evaluate their decision about hiring a producer.  Alternatively, if there are valid reasons why these projections should be adjusted to accelerate the revenue and reduce the projected investment required, they should be reflected within the model.

Finally, taking these assumptions one step further, and preparing a projected P&L for the direct revenue and expenses associated with the new producer over the first couple years, the illustration would look something like this:

Assuming the producer is successful at hitting the revenue targets throughout the 5-year forecast, management will have made a great decision regarding how to reinvest into the agency.  Unfortunately, things seldom work out as we would expect, so these illustrations may represent the one in three new hires that actually develops into a viable producer.  The other situation far too many agencies get themselves into is not holding to the above goals and allowing the producer to extend their validation period well beyond the initial target period.  This will obviously have a significant adverse impact on the cash flow requirements, the investment yield and the return on the new producer.


New producers are one of several options agency principals have to grow and expand their businesses, though it is certainly not a guarantee with each individual.  Management needs to be prepared for the financial implications of hiring the producer, even one that meets all the goals and objectives.  In addition, it’s in management’s and the new producer’s best interests to establish agreed upon production and activity goals that must be met in order to remain with the agency, and to follow through with changes if the results are not exceeding target levels.

Dan Menzer is a principals with OPTIS Partners, LLC (, a Chicago and Minneapolis based investment banking and consulting firm providing M&A, valuation and strategic consulting services to firms in the insurance distribution sector. The author can be reached at 630-520-0490, [email protected].

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