Help W/ SIAA and Smartchoice Calculations

[djs]

Let's assume for simplicity sake its 12.5 NEW business and 12.5 renewal, it costs at least 2.5% to get NB anyways

If you sell $400,000 in premium per year for three years
Your commission $50,000 per year/$150k for the period

SIAA takes $25,000; $15k from commissions $10k from your start up fee

Smart Choice takes $45,000 as its cut; $15k per year which is 30% of your commission

I am in the same predicament, I know the right answer but ponying up the $10k is the tough part

This might be true if you don't calculate renewals. Using the same numbers, but with a 100% renewal rate (not realistic, just didn't want to do the math for an 85% renewal rate).

$400K premium year 1, 12.5% commission = $50K in commission.
Smartchoice: 30% = $15K
SIAA = $5K + 10K = $15K (assuming you pay the fee upfront and it really is 10%)

Second year
$400K new business + $400K renewal = $800K @ 12.5% commision = $100K
Smartchoice: 30%, capped at 15K = $15K
SIAA: 10% * 100K = $10K

Third year
$400K new business + $800K renewal = $1200K @ 12.5% commision = $150K
Smartchoice: 30%, capped at 15K = $15K
SIAA: 10% * 150K = $15K

At the end of year 3, you have:
Smartchoice: $15K + 15K + 15K = $45K
SIAA = 5K + 10K + 15K + 10K (signup) = $45K

Moving forward, if you keep a $1.2M book, its break even either way, using these numbers. With a larger book, Smartchoice is better, with a smaller book SIAA is better.

Problem is, from what I know, these aren't very accurate numbers to be using. I know SIAA has a much more complex payment system than this, which could bump the breakeven higher than the $1.2M illustrated.

Now the challenge.... can you actually write $33K in new business premium, month in and month out, while maintaining your book? Probably pretty easy the first few months (critical) but then it becomes a bit of a challenge once service starts coming in.

Dan

 

[Bertolinoins]

Yes forgot to mention that as well.

Bertolionins are you part of SIAA?

No, I am a member of a CA only cluster with a fixed monthly expense. I did look at SIAA in 2008 when I opened my agency but I was not comfortable with some aspects of the arrangement and the master agency was not very responsive.

 

[Sales71]

No, I am a member of a CA only cluster with a fixed monthly expense. I did look at SIAA in 2008 when I opened my agency but I was not comfortable with some aspects of the arrangement and the master agency was not very responsive.

What part of CA is your agency located?

 

[Bertolinoins]

What part of CA is your agency located?

Sacramento

 

[iiinycboi]

Interesting, I did do a simple calculation on a spread sheet and it does seem djs is right. But I want to try and factor in the buyout clause for smart choice if i break off early it could possibly be better than siaa?

I think for me smart choice would be better since I don't want to pay the 10k upfront. I need the money for marketing and bills to stay afloat. I rather pay a buyout when I'm more established, even though I hear greater things for siaa.

 

[infoe]

i think for me its less about the initial buy in purchase then what the cluster will do for me in the long term and again factoring profit sharing percentages. siaa doesnt ask for the 10k up front i know they take a very small part up front and take the rest from profit sharing. I should do more due diligence on smart choice but im all but decided on SIAA.

 

[Guest]

SIAA will let you do monthly payments for 3 months for the entry fee.

 

[Guest]

Trade secret should not be giving out.

Tired of hearing people talk about **** they dont know.......

 

[iiinycboi]

I'm sure SIAA is the better choice, and I am aware they have the finance plan for the buyin.

But that's for people who has the money to pay for it. For my situation it's better suited that they take a bigger cut off of what I make. Then having to pay for it out of pocket if I don't make enough premium this month or next.

SIAA is the better choice but my situation doesn't allow me to go with them. If I had the money to put up front I would go with SIAA instead of smart choice.

 

[thetruth]

Tired of hearing people talk about **** they dont know.......

Hello Red,
I am looking into SIAA here in AZ (I assume you are in AZ due to your avatar). I tried sending you a message, however it says you are not set up to receive messages from members. would you email or send me a message? I would like to email you or talk to you about SIAA. I have already contacted the master agency and I would like some feeback from an member agency. I have an established IA book in the valley for about 5 years. it looks like you have a lot of good things to say about them and I wanted to call or email you briefly if possible.
thanks,
jim