The annual Best Practices Study, a joint initiative between Reagan Consulting and the Big "I," provides valuable insight into operations, finances and benchmarking information to the independent agency channel and wider insurance industry. With over 3,000 data points, the study contains a trove of valuable information agency owners can apply to their own agencies. But if you don't want to delve too far into the study, the sales velocity metric is one highly impactful area your agency should immediately consider.

Reagan Consulting developed the sales velocity formula and metric to compare an agency's new business against other firms and report it in the Best Practices Study. Expressed as a percentage, sales velocity is calculated by dividing the new business written in the current year by the prior year's commissions and fees.

Sales velocity is among the most important drivers of organic growth and may be one of the most important indications of an agency's ability to succeed and perpetuate over the long term. Organic growth is growth that is not acquired and an area an agency should also monitor carefully.

The Best Practices Study provides the results in six different revenue categories to ensure it is comparing apples to apples. Test out the formula with your agency's numbers and compare your results to Best Practices agencies. In the 2021 Best Practices Study update, the most recent report, agencies between $2.5 million and $5 million in revenue have an average sales velocity of 14.2%, with the top quartile achieving 23.8%. In the $10 million to $25 million revenue range, the average is 12.5% and the top quartile is 20.1%

An agency's organic growth is driven by four primary factors: exposures, rate changes, client retention and new business generation. The first two are mainly outside the agency's control. The last two are items an agency can proactively manage.

Best Practices agencies build cultures of accountability where producers must consistently produce new business at levels consistent with other Best Practices agencies. The keys to excellent sales velocity? Developing a strong sales culture that drives high new business per producer and building the production force that is the right size for your agency. Best Practices agencies never stop looking for the right talent and aggressively invest in recruiting and developing young producers.

Successful agencies also provide the training and tools to develop their staff, so be sure your agency is equipping producers to succeed with accountability, training, support and branding.

The greatest potential for significantly improving your agency's performance starts with one simple metric: Sales velocity. It allows you to isolate your agency's new business contribution to your organic growth results. Focus on what your agency can do to impact the metric and drive results based on new business activity.

Now is the time to take stock of where you stand, then utilize the proper tools for the specific practice or performance gaps to get the process started for your agency. 

Jennifer Becker is Big “I" director of education programs. 

Get your copy of the 2021 Best Practices Study update, a long-standing joint initiative between Reagan Consulting and the Big "I," and start improving your agency today.