In the most recent closing quote in Insurance Journal, I wrote why I think this is the best time in history for entrepreneurial agents to start a new independent insurance agency. My reasons include lower costs, the increased need for insurance companies to appoint new agencies, newly adopted technologies such as Zoom that are pushing the agency's geographic boundaries, and the current economic situation, putting unprecedented amounts of business on the street.
Over the past decade, more new independent insurance agencies have been created than ever before, and those start-ups will continue to grow. Some estimate that newly created agencies represent as much as 20% to 25% of all independent insurance agencies now operating.
In this article, I want to explore some of the questions agents should ask themselves when considering whether or not they should become an agency founder.
For starters, I think the most useful question is why you would want to take the risk and commit to the hard work of starting an agency from scratch when you already have a good income, maybe have equity and possibly have the opportunity to buy the agency you already work for?
Accept the risks
It is important to recognize that starting a business comes with risks. You could fail. And even if you don't, it is possible that the investment required will be greater than you can imagine or the return on ownership may be lower. When I started in the agency seven years before my partners, I took some profit from the business. In those years I paid taxes on the profit we made from commissions.
Your experience will likely be better than mine, but recognizing and accepting the risks based on a sharp-eyed analysis is more helpful than wishful thinking.
The risks include whether you will be able to attract the insurance companies you need, whether your marketing and sales plans will work well enough to generate the income you need, and whether your savings will last long. enough will last to make you successful. In addition to these risks, you need to ask yourself other questions such as whether you can become a skilled manager of people to grow the business and whether you can manage the company books effectively.
Founders must recognize that while they may have many strengths to contribute to their new venture, they still have a lot to learn. If you've never run a business, not only do you need to learn in real time, you'll likely end up paying for that education with some costly mistakes. This is in no way insurmountable, but it is a risk that must be recognized and your business plan prepared to mitigate it.
Many of the risks that successful entrepreneurs face go beyond the normal risks of just doing business. You don't have all the capabilities you need to be successful in the beginning. You will miss many things. The challenge is daunting and requires courage to overcome it.
Courage and dedication
Many people dream of having their own business, but have not been able to muster the courage to start. The premise of courage is dedication. Many people are either light-hearted or don't really understand what it means. Commitment means "to decide" on a course of action, and the word "to decide" comes from the same Latin root as murder, fratricide, and so on. Deciding is literally to kill the options. It means "burn the boats".
In 1519, Fernando Cortez, determined to conquer the Aztecs, literally burned the 11 ships he and his men had arrived in, leaving them with no choice but to succeed in their quest. This rather dramatic example is the kind of commitment that leads to success as a company founder. So the next question to ask yourself is, do you have that kind of commitment?
Commitment is scary and takes courage, but it is reinforced by having a clear idea of why you want (or should) start your own agency. What are you trying to achieve? Is it personal or business freedom? Or is creating a new and better way to build an office boost your desire? Maybe you want to improve the quality of the people you work with every day, or you just want to create unlimited financial opportunities for yourself and your family.
Whatever your reasons for starting your own agency, they need to be researched, recognized, and factored into your decision-making or you're taking the greatest business risk of all – no Cortez-esque commitment.
Support and strengths
Another question founders should ask themselves is whether they have an adequate support system to make the effort. As a founder, you work more hours to become successful than ever before. You may miss family events. Maybe vacations for a few years will become a distant memory. It's possible that the stress of developing a new business can affect personal relationships. So ask: Are the people in your life, including friends, family, and co-workers, committed to helping you not only get started, but keep going?
Do you have enough capital to help you and the business to the point of having enough cash flow to support the business and you? Having worked with hundreds of agency founders, my experience is that most do not consider this question as carefully and clearly as they should. This is not necessarily fatal, but it can lead to failed plans, slower growth, limited opportunities and certainly unnecessary stress. Independent agencies are generally low-capital companies, but they need money to get started.
Finally, ask, What are your unique strengths on which to base your business? Having a very clear idea about this will be of tremendous value if you stay focused here. For example, I've seen hugely successful agencies started by talented salespeople who never hired another producer, but supplemented their agency with a strong support team. I have also seen gifted salespeople fail because they were hopelessly distracted by service and administrative tasks, while wasting time and resources hiring 'producers'. that could not produce.
Whatever your strengths, putting them at the heart of your business with plans that you can complement in other areas will help ensure your success.
In my book, UnCaptive Agent, I describe all of these questions as a & # 39; gut check for founders & # 39 ;. My experience is that entrepreneurs are passionate and start their own agency. They cannot be stopped. They will find their way over, around or through any obstacle in their path. But well-considered answers to these questions will help you tackle the obstacles cheaper, faster, better and more successfully.