Scratch Agents- When Does It Get Better...?

[Italianik]

Hi All,
I am a scratch agent 18 months in. Things are going well. Year 2 is definitely better than year 1. I am just curious when it gets to the point where I am paying myself something reasonable and akin to what I made as an 'employee'. Everything goes in one hand and out the other it seems.
So is the magic at:
$1M in DPW?
Year 3?
Or.... year 5?

In case you are wondering- I am an independent, writing for Big Blue

 

[djs]

Well, I could be cynical and say things get better when you go back to being an employee...... but I won't do that

There is no direct answer to your question, to many variables such as average commission/premium per policy, retention ratios, etc, etc., but in general....

You need to get to 1.5M in premium on the books. Assuming you get 10-12% on average, this will give you a bit over 150K to pay your office expenses, have some office help and put food on your table. You won't get rich, but it will become a lot more enjoyable.

Problem is, when you get a little bit bigger, you'll suddenly find you need a second office worker (at least part time) which means you really need to get to about 2.5M in premium to get to the point your not hustling for new business all the time.

You can actually work it out for yourself easier than asking others though. You know what you need to make / want to make. Assume you need to hire a CSR for every 750-1000 policies (items) (or 1 for every 450-500 households?) insured and run some assumptions.

Don't forget to include a marketer, at least part time, in your calculations. You won't grow without one. CSR's can do some, but they need to focus on keeping current business (and cross-selling).

Dan

 

[Italianik]

Ha, funny! I know this is no get rich quick scheme. I have a direct appointment so my commissions are between 10-20%. My target is to grow towards a book that is 50/50 commercial and personal lines.

Someone told me at 500 PIF my life would change, but he was a L,A & H guy. I think P&C is a different animal. Retention and profitability are the name of the game.... IMHO there is no money in marginal business and writing people that don't stick with you.

I'll remain calm and keep prospecting..... and eat rice and beans in the mean time!

 

[djs]

500 pif (assuming $1000 premium per pif) and yes, it starts to get better.

Reason is simple and to illustrate, I'll assume 10% renewal commission, realizing that in many cases, its a bit higher.

500 * 1000 * 10% / 12 = 4166 a month avg renewal commission.

This is nothing to write home about, but it marks the point where the business is covering itself on the renewal commissions, so now you can use new business as marketing dollars to grow your business and probably stop dumping your own money into the business.

Don't get me wrong, it isn't easy at that point for a couple of reasons, but you start to be on solid footing.

Problem is....
At 500 pif, the service work starts to become very consuming. Its the point where you need a staff person to deal with the service work so you can continue to market / network / sell.

If you try to be a one man shop at this point, you will stagnate and not grow. I see it happen all the time.

So, that renewal premium is going to office, E&O coverage, utilities, staff, taxes, electric bills, raters, management systems, etc, but at least, in general, all of that is covered on renewals, rather than eating up your new business commissions.

Now you can grow and actually earn money!!!!!!

Dan

 

[Soaringagent]

If it was easy, then everyone would be an insurance agent.

I'd say after a few years

 

[nyc2phi]

Whose big blue?

I'm also in my second year as well and wondering the same thing. I've learned just keep writing business. I've noticed the more my book grows the less I'm spending on marketing. Referrals come in easier from the existing book and center of influences are sending in more business then before.

Hang on it will def get better, keep stretching your dollar, and writing business.

What state are you in?

 

[insurance1822]

When you sit down on Excel & create a spreadsheet w/ how much you write, your retention, your year-over-year increase in new business written premium, potential bonus money etc....we all know what it looks like. You make ALOT of money in this business.

What's sometimes easy to forget is 3,4,5 years (when the income starts piling up..) is still a LONG TIME practically speaking when you're working every single day writing 1 policy at a time. Focus on the end goal..Just keep your head down & write business and it WILL payoff.

I felt the same way after 2 years thinking "hmmm OK this kind of sucks despite the fact I'm making solid money." but then year 3 starts and BOOM you're getting the 3rd layer of renewals & you're like "niceeeeee." and after year 4 you realize you make more money then 95% of people in the USA.

Years 5+ are all about greed.

 

[shawnmwalker]

think DJS got this one correct. Ins1822 is not off, but DJS spelled it out.

 

[Italianik]

Thanks all! $1.5M seems to makes sense. It's doable, just not over night.
I will put my head down and keep writing.....

Yeah when I hit year 2 I was like- wow I am still having growing pains. Haha

 

[Sales71]

Whose big blue?

I'm also in my second year as well and wondering the same thing. I've learned just keep writing business. I've noticed the more my book grows the less I'm spending on marketing. Referrals come in easier from the existing book and center of influences are sending in more business then before.

Hang on it will def get better, keep stretching your dollar, and writing business.

What state are you in?

NyC I think Big Blue is Allstate