Look for Advice on a Fair Deal with a Potential Mentor

[Bob Klee]

I call BS on the auto retention.

I'd be surprised if above 80% for first year. [typical for me: 72-80% first year over 11+ years depending on many variables] Expect over 90% after 5 years.

But, that was with Allstate, not an IA.

What do others have for their numbers?

 

[b61mack]

i think you are getting, way to far ahead of yourself. if it were me i would say thank you, but no thanks, as i tried not to laugh in your face, you have nothing to offer but maybe's. get your license, first. on your dime. what did the big company say, need i ask.

 

[Bertolinoins]

I call BS on the auto retention.

I'd be surprised if above 80% for first year. [typical for me: 72-80% first year over 11+ years depending on many variables] Expect over 90% after 5 years.

But, that was with Allstate, not an IA.

What do others have for their numbers?

For an IA, PL rentention rates in the high 80's/low 90's are possible for agencies that deal with higher end clients.

 

[b61mack]

your post is full of i want, i want, i did not hear, what you bring to the table, p&c is the hardest part of the business to break into. find a captive company and join them. you are to green, call state farm, allstate, farmers, nationwide.

 

[jbm386]

i think you are getting, way to far ahead of yourself. if it were me i would say thank you, but no thanks, as i tried not to laugh in your face, you have nothing to offer but maybe's. get your license, first. on your dime. what did the big company say, need i ask.

well im glad you are the not the person I am dealing with, you haven't given one piece of solid advice although you have posted 3 times in my thread. If you chose to read my original post more carefully you would realize that both of the individuals I approached are people I have known for over 10 years and have dealt with my family for 15-20 years. They both know me as in individual (personality and professional accomplishments) and not as someone who is just randomly approached them and started making demands. They also both approached me about setting up potential partnerships and employment when I was simply asking them for advice on joining the industry.

Not that it matters to you but the big company said he would be willing to work with me if I was willing to move back and when I said I would prefer not for now he said he would set me up with someone he knew that was a top independent in my area and I could start there and when I was ready to move back to my hometown he would have a place for me.

Getting my license on my dime is fine with me, I do not need to be paid before I start working there I just want my deal to be set up with terms that are good for me once I do get licensed. So if you have any advice on what I should be looking for as part of my deal or if my calculations on first year earnings are correct or are missing something then I would appreciate it but if your just going to state that you would laugh in my face and not take any deals I am proposing (when it was him that made the offer) then don't waste your time typing.

Lastly why on earth would I want to work with a captive agency over taking this partnership as is? My commission percentage would be less and I would only be able to sell one company's products which would mean I would lose out on deals. Yes they would have benefits and training but the people I would be learning from would not be people I have previously built trust with.
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I call BS on the auto retention.

I'd be surprised if above 80% for first year. [typical for me: 72-80% first year over 11+ years depending on many variables] Expect over 90% after 5 years.

But, that was with Allstate, not an IA.

What do others have for their numbers?

Like I said it my assumption that he does mostly personal auto policies but I have not seen a breakdown from him so I am not certain. He may have a much higher percentage of commercial policies then I originally thought as part of the company's book of business but I am not sure.
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I saw betolinoins make this suggestion in the thread about adding a producer to a guys independent agency. Is this something I should be considering?

An example would be that the new producer/future partner be vested at 20% of his book value per year over a period of 5 years. At which point he would have ownership rights over his book of business or the right to buy his book of business at a fixed amount.

 

[Bob Klee]

I don't know jbm386,

While I agree that "high net worth" folks don't change their insurance as often, how many is a first year newbie agent with no experience going to have in his "BoB?" Also, commercial is typically shopped every year with different markets, depending on the risk type..plus I have never had a large enough commercial BoB to give you any guidance here. 90% just does not seem normal/typical to me.

Personally, I've never known any newbie agent that has had a 90% retention for first year any product in P&C except for their own personal policies I'm NOT trying to be "Debbie Downer' here, but that is just a FACT for a new agent.

I'd forecast at 70-75% so you won't have any surprises in your Pro Forma cash flow. That way if it IS better, which you have a good chance at with the close mentoring it appears you'll be getting, then it will be Cake vs. stressing you & your loved ones out a year from now.[if you have a family].

That's my 2 cents anyway. Worth what you paid for it!

 

[NCAgent]

The type of clients really depends and also how you retain them. One of my carriers is huge for my market and so far we don't see many people leaving it to go with someone else, thus locking in their low rate with us and increasing retention. Being able to offer all forms of insurance helps as well (health maybe not but disability and etc. might) like life, toys, landlords, etc.

And yes, depending on the premium that you write 16-20k the first year might work. The beauty of P&C is that you struggle for a couple of years but that 16-20k will follow you every year. So at 70% retention, if you write 16k commission per year consistently then at the end of year 3 you would be making almost 40k per year. Now that might not seem like a lot to you but many people don't gain that much in a salary over 3 years. Writing some life on top of that (mortgage protection for the home???) will supplement the income in the meantime. If you get 1 life per month at 20-40/month for the client, then you just brought in 240-480 for the agency, meaning an extra 3-6k per year, just at one cheap policy. It's up to you guys on how to split that.

Since you are making 25-30% on renewals you need to build a little faster. Get some other referrals out there for more business. I would also see if at the end of 1-2 years of possibly increasing the renewals if you exceed expectations and you are approaching the end of the learning curve. It also benefits you more for leverage if you can specialize in something that the agency needs that the owner doesn't want to handle as much himself, like commercial, workman's comp, things like that. He might have the basics but you could become the expert.

Everyone will tell you that P&C has the potential for exponential growth. The problem with exponents is that when you start off small then it takes a while to get bigger, but when you start to take off then you'll take off!

 

[Bob Klee]

The type of clients really depends and also how you retain them. One of my carriers is huge for my market and so far we don't see many people leaving it to go with someone else, thus locking in their low rate with us and increasing retention. Being able to offer all forms of insurance helps as well (health maybe not but disability and etc. might) like life, toys, landlords, etc.

And yes, depending on the premium that you write 16-20k the first year might work. The beauty of P&C is that you struggle for a couple of years but that 16-20k will follow you every year. So at 70% retention, if you write 16k commission per year consistently then at the end of year 3 you would be making almost 40k per year. Now that might not seem like a lot to you but many people don't gain that much in a salary over 3 years. Writing some life on top of that (mortgage protection for the home???) will supplement the income in the meantime. If you get 1 life per month at 20-40/month for the client, then you just brought in 240-480 for the agency, meaning an extra 3-6k per year, just at one cheap policy. It's up to you guys on how to split that.

Since you are making 25-30% on renewals you need to build a little faster. Get some other referrals out there for more business. I would also see if at the end of 1-2 years of possibly increasing the renewals if you exceed expectations and you are approaching the end of the learning curve. It also benefits you more for leverage if you can specialize in something that the agency needs that the owner doesn't want to handle as much himself, like commercial, workman's comp, things like that. He might have the basics but you could become the expert.

Everyone will tell you that P&C has the potential for exponential growth. The problem with exponents is that when you start off small then it takes a while to get bigger, but when you start to take off then you'll take off!

I agree 100% !!

The Renewal Snowball really starts to look Nice at the beginning of the 4th year. Get through 36 months, keep your head down & produce, you will LOVE year 4.