Anyone Started an Agency Cluster?

[nickfernando]

I know that's a loaded question, but my agency may be interested in starting a cluster or developing more deeper partnerships with other agencies. Has anyone done this or know of any resources where to get more information? Thank you.

 

[Arnage150]

What state are you in?

 

[nickfernando]

What state are you in?

Ohio & Kentucky

 

[Arnage150]

I've tried it before with mixed success. From my experience production is never equal and things get complicated.
A couple of things to think about:
Are you giving each member full commission or will there me a managerial charge or levels?

Expenses - E&O, accounting, administrative/commissions, banking...etc. Are they split evenly among all members or is it a % of the book? ie, there are 3 members and 1 member write 90% of the business. Does everyone still pay equal for them?

What if one member continually has claim issues and it prevents other members from receiving bonuses. Do you have a written plan to evict them? What if that member ha the largest % of the book?

Is the bonus split evenly among members or % of book? What if one member has 10k in business and the other has 500k. Does the guy with 10k still get a % of the bonus?

What if you win a trip? Who gets it?

Is your goal to obtain an appointment from a company you wouldn't be able to because you couldn't reach their production minimum or are you trying to make the next Superior Access or Iroquois?

Just like getting a normal appointment companies will scrutinize your (every members) loss history. They will also have to be on board with your idea. Many times they are not. They will just tell you to go to an MGA. What do you have that they want? They will also want one main person in charge. Who will that be?

It can work. I guess the two main things I can say it make sure you have a rock solid contract in place and 2) don't even bother unless you have a specific company (that you can build an agency around) on board that is willing to play ball.

 

[TFMSINC]

It's worse than an IMO

 

[shawnmwalker]

Clearly I am going to be a bit Biased on this one, but please understand this is coming from 15 years of meeting 1000's of agencies, groups, clusters, and upset and happy agents who belong to groups, all over the USA.

A great agent who is a great agency owner, is a great thing. But that is 100% different than what you are talking about.

I have often met/meet great agency owners who have said to themselves, "Dang I got to 5m in WP in good time, I make a killing, I have a few producers, and a small staff, I should start a group, its the next natural step....I think"

This is where the thought gets flawed. The Business model of owning and operating an agency is 100% different than that of Agency aggregation or management. 100%!

This is why so many groups provide decent service/returns at best, not only to their agents but to their carriers.... and thus have upset clients (Agents) and Stakeholders (Carriers)

I would argue that PGI is different all day long everyday for so many reasons from the average group because well, too much to talk about here.... but one reason is that the group is owned by a guy who said, "I am a great agent and agency owner. But to create what I envision (a national Group with 1B in WP), I need the right guys with the right pedigree and background to take this group to new levels." - Senior Carrier guys who have met 1000's of agencies cross America who have been trained by fortune 100 companies to create the right deliverables a group should provide. Guys who understand the agency life cycle, the bumps in the road throughout that life cycle, the ways to grow indefinitely, AND guys who understand the carriers intimately.

 

[PhilL]

I've tried it before with mixed success. From my experience production is never equal and things get complicated.
A couple of things to think about:
Are you giving each member full commission or will there me a managerial charge or levels?

Expenses - E&O, accounting, administrative/commissions, banking...etc. Are they split evenly among all members or is it a % of the book? ie, there are 3 members and 1 member write 90% of the business. Does everyone still pay equal for them?

What if one member continually has claim issues and it prevents other members from receiving bonuses. Do you have a written plan to evict them? What if that member ha the largest % of the book?

Is the bonus split evenly among members or % of book? What if one member has 10k in business and the other has 500k. Does the guy with 10k still get a % of the bonus?

What if you win a trip? Who gets it?

Is your goal to obtain an appointment from a company you wouldn't be able to because you couldn't reach their production minimum or are you trying to make the next Superior Access or Iroquois?

Just like getting a normal appointment companies will scrutinize your (every members) loss history. They will also have to be on board with your idea. Many times they are not. They will just tell you to go to an MGA. What do you have that they want? They will also want one main person in charge. Who will that be?

It can work. I guess the two main things I can say it make sure you have a rock solid contract in place and 2) don't even bother unless you have a specific company (that you can build an agency around) on board that is willing to play ball.

This is very useful input from Arnage150. I can only add to this that one simple question to ask and totally resolve is: "Who will be in charge?" This applies to so many of the possible circumstances that Arnage has so well explained here.

 

[agentinsouth]

I know that's a loaded question, but my agency may be interested in starting a cluster or developing more deeper partnerships with other agencies. Has anyone done this or know of any resources where to get more information? Thank you.

Hell must have frozen over, I am agreeing w/ the cluster guy. Shawn is correct.

Also, as mentioned, The backend operation cost is going to kill you for several years.
E&O, accounting, legal, carrier maintenance, and a lot more for only a 15%-20% cut! I think there are more profitable way to grow.

 

[insurance1822]

I believe Shawn is right. He doesn't know much of anything about selling insurance, but he's got the Carrier group side down.

Once a carrier rep always a carrier rep.

He's the butter bar & we're the Sr enlisted gunnys. He sits in planning rooms and we kick in doors.

 

[nickfernando]

Thanks for the replies everyone!