Should I Open a New Company?

[AdvisorsIns]

I currently own an independent insurance agency that primarily is aligned for
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I currently own an independent insurance agency that primarily is aligned for

Preferred business. No cash clients, minimum non-standard clients. I have been sending all my non-standard leads to someone else in town in which I get a kick back for. I am thinking maybe I should open a whole separate agency to cater this market. A mentor of mine when I told him I did not desire to work in that market said you may want to diversify and have a market for this clientele in a down market or change in economical status. Has anyone ever done this? I would locate it probably just down the street.
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I have seen this type of strategy work in other types of business. At the grocery store you see the name brand and the store brand. Some will pick the name brand thinking it is superior and some the store brand. Most likely the name brand product is the same as the store brand just packed differently to appeal to different people.

 

[Bertolinoins]

Locate it near a DMV office if possible.

 

[xrac]

Locate it near a DMV office if possible.

Excellent advice!!!!!!

 

[AdvisorsIns]

Has anyone ever done this or tied and failed? I don't really want the non-standard business on the books in my current agency, or should I. And hire someone to do it.

 

[rudy323]

I went from working for a preferred captive agency, then bought a non-standard indy not knowing much of the difference

It's the equivalent of having a sit down restaurant to a fast food place, both serve food but operate fairly differently and cater to different people

BUT
if your state allows you to collect agency fees, you can make money faster than preferred (agency fees, bigger premiums)

 

[AdvisorsIns]

It does allow agency fees, but I have no experience in how that is done.

 

[Bertolinoins]

I went from working for a preferred captive agency, then bought a non-standard indy not knowing much of the difference

It's the equivalent of having a sit down restaurant to a fast food place, both serve food but operate fairly differently and cater to different people

BUT
if your state allows you to collect agency fees, you can make money faster than preferred (agency fees, bigger premiums)

Well said. It is almost like a completely different business. The upfront cash flow on a non standard agency can be pretty darn good but they don't build long term value like a preferred agency does. Nordstrom and Walmart both make a lot of money, they just do it in different ways serving different clients.

 

[nyc2phi]

Seems like a good idea. This market can be a pain which is what I think some of these responses are hinting at. Chasing people around for payment, chargebacks, ect.

Maybe try writting some of the sub-standard business you've been passing on first to see if this is something worth your time?

 

[Arnage150]

Seems like a good idea. This market can be a pain which is what I think some of these responses are hinting at. Chasing people around for payment, chargebacks, ect.

Maybe try writting some of the sub-standard business you've been passing on first to see if this is something worth your time?

My father tried this years ago. The cash flow was great. Unfortunately with all that cash in the office, employee theft was a BIG problem. If you are not on the premises to oversee operations everyday/all day or have someone your trust A LOT beware. Cash is so hard to keep track of. It is a different business model from what you have now. It can work but it is a lot different.
It's not the route I would go. To me it is a step in the opposite direction. Get into benefits, health insurance, life insurance, taxes, mortgages, business insurance...something that caters to the clientele you have now.

 

[AdvisorsIns]

Seems like a good idea. This market can be a pain which is what I think some of these responses are hinting at. Chasing people around for payment, chargebacks, ect.

Maybe try writting some of the sub-standard business you've been passing on first to see if this is something worth your time?

I know it is not the type of business I want in my agency and deal with in an ongoing basis. But I'm wondering if I open a Separate company and pay someone to man it If it would prove to be a long term good idea.