Kick-starting as an independent producer

Feb 21, 2019

  1. BananaCo
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    BananaCo New Member

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    So, I'm particularly, let's say "fresh-faced," in the industry.

    I just did entry-level production of P&C and life at a mid-sized State Farm agency here in Knoxville for 7 months. It was almost entirely phone sales - exclusively multiliners and ice-cold leads from 1-4 years ago - and my production was mediocre. My agent wasn't big on me getting out of the office. I turned a decent number of these cold prospects, set quite a few appointments and have written a little life here lately. But it's time to branch out with an independent agency. Long story short: I quickly picked up on the pyramiddy nature of the captive game, and I'm ready to move on. I'm interviewing and weighing offers at some of the local independent places, but I don't have much frame of reference for expectations.

    I'm strongly considering joining a relatively small group, which currently consists of just the owner and his wife. I'd be the only in-the-field producer in the office. I'm told they do well with referrals, but they'd love for an employee to get out and talk to businesses, realtors, loan officers, etc. He's offering a very strong commission split - as high as 60 to 70% of new business and life.

    As it stands, this place doesn't have much commercial presence, but they have a desire to grow in that area. The owner says he just needs a producer to pound the pavement and drum up some B2B. He's got some good carriers for it - Nationwide, Grange, Safeco, State Auto, Travelers, Donegal, Hartford, and a few others to write commercial through. I'm ready to do the research and find good niches for each company. I'm just inexperienced at this point.

    In your guys' experience, is it realistic to expect decent commercial and/or personal volume at a fairly small place? Or am I better served holding out for one of the bigger, better-known agencies in the area? The positives at this place include a starting base to get me on my feet, tons of professional freedom, and a close-knit atmosphere learning under two principals with 30+ years insurance experience. The downside is obvious: perhaps they're small for good reason. That high commission cut is enticing, but who knows how much volume I'll see?

    I'm not greedy, and I'm excited about building a career the right way. But the last thing I want to do is tether to a back-of-the-pack agency and suffer for years under a non-compete. Not to mention, I've got a family and don't have two or three years to burn at $20,000 a year.

    Any thoughts at all? Input would be greatly appreciated - clearly, this is a community that knows its stuff.
     
    BananaCo, Feb 21, 2019
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  2. Mike007
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    Mike007 Expert

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    What is your mentality? What is your mindset? Are you ambitious? Are an entrepreneur? Or you a follower who is destine to work for someone/someone else's agency all your life?

    What is your P&C renewal commission? I will not touch a P&C contract without renewals. It is the only reason for selling P&C.

    You can get anyone to give you a Life, Annity, or Medicare contract. P&C is much harder. So you'll have to compromise.

    What products do you plan to focus on the P&C: Personal? Commercial? What about Life Insurance? Annuities? Etc?

    Depending on your answer, I can get a better idea of where you can go.
     
    Mike007, Feb 22, 2019
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  3. BananaCo
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    BananaCo New Member

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    Thanks a bunch!

    As for my personality: ready to be aggressive and market myself to prospects. I've learned I'm better in person than a call-center environment, so I'm definitely not afraid to walk into 20 business a day. Ready and willing to work the process, hunting for x-dates and sit-downs.

    My goals: yes, agency ownership is part of my 10-year plan. But I've got to start somewhere, and I still have miles and miles of education and experience before that's an option.

    I'm definitely wanting to focus on commercial lines. My ideal position is one that allows me to visit businesses and build relationships, writing their companies and their personals along the way.

    And no, I'd never touch anything without renewals.

    Essentially I'm down to two offers: the small agency I described above, and a more high-profile one.

    Agency A: Tiny agency; just a principal and his wife. They're older and done walking into businesses, so they want s a you producer to be their arms and legs. Direct appointments with just a few carriers, no real commercial heavy-hitters. Almost all of my credit potential through Nationwide, Travelers, Safeco, State Auto. Very little commercial presence at this agency - 95% personal on their books. But they want a producer to branch them in B2B. Offering 100% new business Year 1, then 75% in all future years, with 75% renewal. 70% life commission, though they don't write much life. Small bonus potential. All in all, I'd have to top $25K in monthly premium right out of the gate to make my nut. Seems tricky with so relatively few options. Feel like I'd be chasing a handful of niches and frequently losing on rate.

    Agency B: serious heavy-hitters for commercial products. Direct with Erie, Grange, Nationwide, Met, Travelers. Very successful commercial producers - including my best friend and industry mentor. Aggressive local underwriters unafraid of allowing 30-50% credit for attractive commercial prospects. HUNGRY underwriters by reputation. Haven't discussed numbers beyond 48% new business, 35% renewals. 60%+ for new life commissions. Some base salary may be included as I start up - principals know I'm pretty green but definitely like my potential. Frankly, much more local prestige and exposure.

    Essentially, I'm deciding between thoroughly unknown potential at a small agency vs. a true volume beast. 75% commission vs. trading some of that % for a known homerun commodity. I can't stress enough how hungry these local Erie folks are for quality business.
     
    Last edited: Feb 22, 2019
    BananaCo, Feb 22, 2019
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  4. Mike007
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    Mike007 Expert

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    Banana,

    Sorry, I've been very busy. Your 10-year plan is way too damn long. You would be giving away way too damn much of yourself already by that time. If I were in your shoe, I would spend no more than 3 years, maybe even just 2 years. Just depends on how fast I can absorb knowledge.

    Look, you are making things more complicated than it really is. It is really not that difficult to run your own agency, especially as a sole owner and producer. Even as a sole owner, at the very least, you are building equity for your own agency, not someone else's agency.

    This is my opinion and others may disagree but here are my 2 cents. Big fish, small fish, I don't give a damn about which company I work with or work for if my income is based on my own bare hands.

    In this industry, I worked for unknown mom and pop agencies and I worked for big fishes and it never made a single impact on my income. What affected my income was ME. My own damn ability. NOTHING ELSE MATTERS. At first, it was nice to have my name on that business card attached to that billion dollar company. That big fish you see on TV everyday running their commercials. Yeah, I felt special but once that glitter wore off, I realize my income is still dependent on just ME. No one else but ME. That fancy name from my company means very little.

    With that said, the only saving grace that the big fancy company did for me was, they taught me their sales system. But these days, you can buy a sales system anywhere for a few hundred bucks. You can learn it from books that cost $20-$30.

    With that said, I would lean in favor of Agency B due to training, especially for commercial business. But beyond that, they really don't have much else to offer. Don't get fool by the glitter. It's a mirage. Remember, this is sales. You earn your own keep. I wouldn't waste more than 2 years with them if I was in your shoe.

    Like I said, starting your own agency is not that hard, especially after 2-3 years once you have enough knowledge about the products you sell. By that time, you may have enough connections to some of the insurance companies that they may give you your own contract especially if you are a heavy hitter. If not, you can find an insurance cluster or an insurance aggregator to give you the necessary contracts and run your own agency.

    For me, both those opportunities aren't even worth touching. I wouldn't even touch a contract if I didn't own the book of business. In my area, there are agencies out there that will allow me to own my own book of business and when I leave, I can take my book of business with me. You may not have this option available but in my neck of the wood, it can be done.

    BTW, how long has your friend been in this industry? And how long has he been working for Company B? What is so enticing that he is still there and not out on his own? I just can't see being an employee is more rewarding than running your very own business?
     
    Last edited: Mar 1, 2019
    Mike007, Mar 1, 2019
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  5. BADTROUT
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    BADTROUT Guru

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    I agree with Mike, but I understand your need for income now, versus starting an agency from scratch now mentality. One false step leads to an E&O claim, so I like the idea of gaining some experience before starting your own... The problem is you will create a conflict of interest if you really do much of any work for yourself while working for either of the other two. So no matter when you jump, it will be tough. Where I would start is by interviewing the older couple and asking THEM what their long term goal was, and see if they would be open to potentially selling their agency to you somewhere down the road. Perhaps you build an equity stake in your book of business, perhaps they look for someone to pass it along to when they get close to retirement.

    Start with that and let them know your long term goals to see if there is some synergy. Other than that possibility, I would go into either of the two ASSUMING you will likely have a non compete of sorts and you will have no "ownership" of those clients for a bit after leaving. Use that as a starting point when making your decisions, look over both employment contracts (and if there isn't one DEFINITELY discuss it with them up front).

    Lastly, some things to consider...

    100% New and 75% thereafter pays better than ownership pays... the only downside is stressing your job security... because you have no ownership. 48% new business, 35% renewals is a bloody joke... at the end of the day if you are creative in finding markets... run with the niches that no one else seems to want to bother with. 48%? Seriously? they cant toss in 2% more just to appease my OCD?

    Long story short if your end game is enough learning of the business to start your own agency... TAKE THE BIG UP FRONT NOW, and go with the smaller of the two and lead with you would like an equity stake in your book... maybe even vesting it over time so they know you won't just take the money and run. Tell the larger more affluent agency to pound sand until they are willing to pay you either a decent salary or a lot better commission than that... I wouldn't even bother to read a contract less than 60/40. Just my opinion, and I wish you all the best in your decision!

    PS to re-iterate a great point Mike makes...

     
  6. shawnmwalker
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    shawnmwalker Guru

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    Holy Crap. Everyone is writing books on this thread.
     
  7. shawnmwalker
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    shawnmwalker Guru

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    I like the mom pop build in equity stake.
     
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