Drivers of Success

I’ve watched principals of large, independent agencies methodically build cultures that drive customer and employee happiness, value and continued independence.

What do these smart agencies have in common? From my perspective, there are several key attributes.

First, these firms have a strong value system that comes from the heart of the ownership. In turn, they seek clients with cultures that match up nicely, resulting in synergy and deeper relationships that last a lifetime. Other agencies seek a certain account size or type—these agencies also choose a certain culture of mutual respect and independent ownership.

Second, soft and hard cycles are less relevant for winning independent owners. Why? These firms are providing long-term value—not simply quotes on policies—and a variety of services to position themselves as trusted advisors.

Third, these agency owners are never satisfied. They always strive to improve. In today’s soft cycle, with rates off by 20 or 30%, most agencies would be happy to see revenue stay even. Not these agencies. They want eight to 10% growth—at least. I see some firms at $40 or$50 million in revenue and I know some of them will be $100-million firms in a few years. It is simply incredible to watch.

Next, these agency owners continue to plow money back into their businesses—as opposed to continuing to take it out. They are obsessed with employee training to bring their stars along more quickly. They invest in technology and branding. As visionary independent firms, they can take on new initiatives without the corporate bureaucracy in larger agencies owned by a bank, Wall Street or a venture capital firm.

Fifth, they get out the checkbook for professional hires. For example, they bring on board genuine chief financial officers as opposed to simply controllers. They hire chief technology officers, not only systems people. Those strategic folks are not cheap hires. Many agency owners would view them—shortsightedly—as overhead because they are not generating revenue per se. However, these agencies recognize their strategic value.

In many cases, these professional hires come from outside the insurance industry, which is an excellent way for agency owners to capture new ideas. Many independent agencies have a couple of family generations on board. However, today, many successful agency owners are allowing professional managers from outside the family to manage areas where they bring expertise that might not be easily created in a family-type organization. For example, they might hire a professional who used to run sales for a high-tech company and position the individual as vice president of sales for the agency. That will bring a professional sales management approach to the firm—and good sales organizations understand that managing producers and the sales process is a completely different role than selling per se.

Finally, these winning agency owners are very humble about what they have built. Arrogance is not part of their DNA. Sure, they’ve built wealth for themselves, but they are not driven solely by money. They feed off of their success in nurturing employees, giving back in a huge way to their communities, maintaining a strong value system in their agencies and bringing along the next generation of leadership. In turn, that attracts quality people who want to perpetuate the strong culture.

Despite their success, in some cases high-performing agencies can make the mistake of believing that selling the firm is always the ultimate next step. Many owners later say they regret selling to Wall Street; the loss of that treasured culture they built over the years seems to sting the most. Big money simply cannot deliver the levels of independent advice and service clients want—and deserve. As owners of large, successful, independent agencies have shown, there is a steady path to wealth and happiness for clients, employees and ownership.

Jim Hackbarth (jhackbarth@assurexglobal.com) is president & CEO of Assurex Global.