Should An Agency Specialize or Have a Niche?

[AgencyEquity]

Agencies that specialize tend to have an edge in specific markets. While most agencies do not specialize, I recommend giving specialization some thought, as it can bring in higher profit margins due to economies of scale. Specialization also means, however, that you will turn away accounts that are not among the types of business you target.

I like specialization from a marketing standpoint, as there are many opportunities to get involved in trade associations, target online searches, or advertise in trade industry publications. You can gain a solid reputation in the class of business you target, as industry insiders would rather deal with people who are familiar and understand their specific situation. It also facilitates referrals, as people in the same niche industry tend to know and network with each other.

Even if you don’t specialize, have you thought about narrowing your focus? Examples include high-networth clients, member of a local chamber of commerce or any group that shares specific characteristics. Just as with specializations, it will help in operations, marketing, and your bottom line. Lastly, remember that direct writers mostly do the same thing, providing auto, home and life insurance to middle-class clients. These services are a dime a dozen, so standing out and being a little different eliminates a lot of the competition.

 

[bobwise23]

With Specializing you can become the best in the business.

Steve Jobs was as proud of what Apple chose not to do as he was of what Apple did. When he returned in Apple in 1997, he took a company with 350 products and reduced them to 10 products in a two-year period. Why? So he could put the "A-Team" on each product. What are you saying "no" to?
Steve Jobs and the Seven Rules of Success | Entrepreneur.com

 

[isgutah]

I have heard some good advise that has worked well for me-Genralize first, specialize later. In my case a specialty came naturally by doing what I was good at.

 

[AgencyEquity]

With Specializing you can become the best in the business.

You nailed it, when I do business with someone, this if the first thing I look for, how good are they at doing what I want done. People are much more likely to do business with those who knows their business. Also as previously mentioned, from a productivity and marketing standpoint, it's a huge winner. Many don't specialize because it takes time to develop a specialty agency and most want to sell to everyone and sell them everything right away. However the agencies that choose a niche will do extremely well over the long run and make more $$ per hour of productivity than the agencies that don't. When I had my agency, I had a few different niches and if it didn't fit, I told the prospect that I am not on the best agent for their risk. A single line auto account with no hope of writing a HO type policy never made it past the front door. Things like that will drain your agency, be smart about agency planning, also it's not a bad idea to get rid of your bottom 5% or 10% clients every year, the ones who bring very little revenue and take up the time of a 100k account!

 

[Bertolinoins]

I target 4 niches In commercial lines and two niches in personal lines. I feel like that spreads my risk out enough but allows me to keep on top of each industry and fully participate in the trade associations, etc. I have seen too many producers at large agencies get creamed when their niche goes south that I would never lock into just one or two industries. Ask all of the large "construction experts" how things have been over the past few years. Ask the "hospitality practice leader" how things go when a direct writer drops their hotel rates by 40% and even your closest clients can't turn down their deal. Niche's are great, but you need to have 4-5 irons in the fire in my opinion.

 

[kuri3460]

Agencies that specialize tend to have an edge in specific markets. While most agencies do not specialize, I recommend giving specialization some thought, as it can bring in higher profit margins due to economies of scale. Specialization also means, however, that you will turn away accounts that are not among the types of business you target.

I like specialization from a marketing standpoint, as there are many opportunities to get involved in trade associations, target online searches, or advertise in trade industry publications. You can gain a solid reputation in the class of business you target, as industry insiders would rather deal with people who are familiar and understand their specific situation. It also facilitates referrals, as people in the same niche industry tend to know and network with each other.

Even if you don’t specialize, have you thought about narrowing your focus? Examples include high-networth clients, member of a local chamber of commerce or any group that shares specific characteristics. Just as with specializations, it will help in operations, marketing, and your bottom line. Lastly, remember that direct writers mostly do the same thing, providing auto, home and life insurance to middle-class clients. These services are a dime a dozen, so standing out and being a little different eliminates a lot of the competition.

You hit two good points. First, although I would hesitate to box yourself too far into a niche, I do think a lot of agencies do a poor job of recognizing when to say no. Speaking from personal (ongoing, unfortunately) experience, whether it's a risk the agency doesn't understand, a risk that's a poor fit for the carriers you have access to, or a client that figures to a be a lot of work and a lot of hassle for a minimal return, most agencies can't fathom turning away a potential sale and wind up spending/wasting huge amounts of time that could be much better spent elsewhere.

You also hit a good point in your last paragraph. What separates you from the competition? There are plenty of friendly, competent agents with decent rates, what makes you different? If you can't answer that, you're probably going to have your struggles.

 

[AgencyEquity]

You also hit a good point in your last paragraph. What separates you from the competition? There are plenty of friendly, competent agents with decent rates, what makes you different? If you can't answer that, you're probably going to have your struggles.

I had a great Entrepenuership Instructor in college, he said if you want to do really well, be different, create something different and always be one step ahead of the competition. This one thing still has stuck with me 20 years later. Always use your mind to figure a way to stand out and out do the competition. It does wonders for whoever tries it!

 

[infoe]

It's how Steve Job's made Apple so successful.

 

[bobwise23]

Steve Jobs reduced 350 products to 10 products. I believe if he tryed focusing on all 350 products then the Iphone or Ipad wouldn't be here until 2020. Specialization speeds things up and is simply better for the customer. Remember we are doing business for the customer and not just for ourselves.

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