Are You Among the Best?

In spring, the thoughts of many a great agent turn to love…of the Big “I” Best Practices study. Every three years, a batch of invitations is sent to high-performing agencies around the country, asking them to participate in the study, which determines the top 30 independent agencies in seven revenue categories and provides analysis and benchmarking data.

“You never really know when you’re a privately held company how you compare with your competitors if you don’t have information like this,” says Brad Buie, CFO of The Rutherfoord Companies in Roanoke, Va. With $57 million in revenues, 260 employees and 11 locations, Rutherfoord has few peers—especially those who share the same 15% to 16% average annual growth rate since 1991.

Buie focuses on the people-cost aspects of the study, especially revenue per employee, since insurance is a labor-intensive business with labor easily more than 50% of sales. “We also zero in pretty closely on the travel and entertainment expenses,” he adds, as well as the revenue of large producers. “We produce internal reports condensing the [Best Practices study] information that we distribute to our division managers. We can say: ‘Your revenue per employee is X, and the peer group is Y.’”

David D’Orlando’s engineering background makes him a numbers guy. “We are a corporation, and we run it like one,” says the principal of Baldwin/Welsh & Parker Insurance Agencies in Wayland, Mass., a set of suburban Boston personal lines agencies. After buying the agency from his father in 1992 following a 15-year corporate career, D’Orlando found himself with an analytical mind in a seat-of-the-pants environ¬ment. While the entrepreneurship of agencies can feed growth, he says, working in corporate America led him to expect and want goal setting.

As agency owner, D’Orlando had no one to compare notes with and little analytical data to measure his company. “There are not a lot of other evaluators that are done on a national basis,” he says. “Benchmarking in general is a good technique for improvement. You need to know where you are in order to get where you are going.”

When he was nominated by a carrier in 2000, D’Orlando jumped at the chance to take part in a national evaluation. He’s won top-30 designation twice and is shooting for the triple crown this year. The discipline of gathering data makes him watch his operation more closely, he admits, especially the income statement, employee productivity and receivables.

D’Orlando pours over the analysis he receives in his Best Practices update report each year. “In the insurance business, because we’re own¬ers, we don’t usually have bosses,” he states. But by participating in the Best Practices study, “I have [experts] looking over my work and that’s a good thing.

In the western Kansas city of Liberal (pop. 19,666), the chamber of commerce lists a total of 11 insurance agencies. But when Al Shank of Al Shank Insurance was ready to buy, he turned to the Best Practices study for analysis first. “My oldest and largest rival here in town approached us about the possibility of purchasing them,” he says. Interested but wary, Shank introduced himself to the issues involved in M&A by attending a Best Practices session on the topic at the 2005 Big “I” Convention.

“The information on M&A that the Best Practices provided at that convention was extremely timely in so many different ways,” Shank recalls, noting he completed the buy in 2006. “I had never purchased an agency before, so it gave me some great information and some great things to think about.”

Since the purchase doubled the size of the business, Shank needed to take the next step: planning the operation of a larger firm. He looked at data for his post-merger size category, and studied larger firms’ staffing, company representation, pay and automation data.

At Hupe Insurance Services in Ft. Wayne, Ind., Roger Hupe had his doubts about benchmarking. “It always seemed like everybody and his brother was an expert in telling you how to run your agency,” Hupe says. Then a carrier nominated Hupe for Best Practices. “I didn’t take it seriously until the company nominated me,” Hupe says. “When I heard about all the detail [the research] went into, I was impressed. The carrier thought it was an excellent resource.”

Carriers are a good resource for agents in pointing out what they do well, Hupe contends. “When you make a commitment to being involved in best practices, you have the incentive to stop and analyze your agency from [carriers’] perspective,” Hupe says. “Being a small agency, I’m the guy who does the numbers. The study allowed me time to stop and answer questions that need to be asked on a regular basis.”

Susan Leslie is president of Bragdon Insurance, Inc. in York, Maine, and the chair of the IIABA Council for Best Practices. For more information about participating in Best Practices, go to www.independentagent.com or contact Jennifer Becker at 800-221-7917; jennifer.becker@iiaba.net.