On the surface level, some fairly simple principles guide your agency’s success. You offer insurance services that fit your client’s needs and in turn receive a commission for your work. And at the end of the year, you hope to see that your commissions are higher than your costs. Rinse. Wash. Repeat.
Underneath the surface, however, it gets a little more complicated. Beneath the surfaces are systems and processes you’ve built to keep your agency profitable. Those strategies are what got you here today. One of the first ideas to embrace as a leader is the fact that somewhere in your agency, there are tens of thousands, maybe even millions of dollars of profitability locked up needlessly in those same processes and systems. A critical part of your job is to constantly be on the lookout for these untapped pockets of opportunity and find ways to unleash them.
This article is meant not only to help you identify the goldmine of opportunity at your agency but to share 3 key strategies we use to help our agencies uncover hidden profits.
Increasing Your Agency’s Profits
We all know that profit is simply revenue times gross margin minus costs. Therefore, mathematically speaking, if we want to increase profits we only have three inputs to manipulate.
Ultimately, increasing profits is increasing the efficiency at which you acquire and serve clients and often, that means streamlining your practices so they’re easy to understand and control. In other words, if we want to increase profits, we got to manipulate our revenue figures, margins, or costs.
Here are three areas where almost any insurance agency can find immediate improvement — meaning real money.
Increasing The Number of Opportunities
Simply stated, if your model is already highly profitable, the best way to increase profits is to double down and increase the number of opportunities in your pipeline. If your agency has been around for some time and has a large book, the absolute first place to look is at the opportunities you’ve already created with current and prospective clients.
Here are three tactics we use with our agencies that you can use today to increase the number of opportunities in your pipeline:
Go after the people you’ve lost relationships with or haven’t heard from in a while. Run a reactivation campaign with a direct offer that you target towards all lost and stale relationships.
Right now, your team is dealing with people who are on the fence. Whether it’s due to bad timing, lack of budget or simply procrastination, the fact of the matter is some of your prospects need coaxing. Deploy a campaign with a direct offer to push some prospects across the finish line.
Branding & Awareness
Did you know that you can use your current book to grow your agency? You provided the great service that keeps them with you, leverage their loyalty through online reviews, referrals, and social media engagement. Branding and awareness campaigns, such as ones that ask for referrals or reviews can help you extract more value from your current book of business.
Decreasing Client Acquisition Costs (CAC)
Reducing the marginal cost to acquire a new customer is an ongoing mission for every agency. The first step in decreasing this cost is knowing the exact price it costs for your agency to acquire a customer. Most business owners have no clue. A simple formula is to divide your marketing expenses by the number of customers acquired in the period the money was spent. There are caveats using this method, but what’s most important is now you have a benchmark.
Once you’ve identified the CAC figure to measure against, employ any of these strategies to acquire new business for less:
Boost Conversion Rates
One of your largest costs in business is the opportunity costs of the deals you didn’t close. Think about it, your team worked the opportunity, invested the time and the resources, but ended up with no sale, by boosting conversions, your team wastes
Automate Your Marketing
Most owners will choose to hire sales and support staff, forgetting that salaries are going to be their biggest direct expense. It is 2019, tech-forward and lean organizations acquire and service for pennies on the dollar by leveraging process automation software.
Invest in Client Experience
In insurance, acquiring new clients is expensive. Keeping said clients, on the other hand, is extremely profitable. Small investments in keeping your clients can go long! Focusing on the long haul will directly improve profits.
Targeting The Most Profitable Prospects
When is the last time you asked your target market what they want? Hell, when’s the last time you defined your target market? Doing this regularly and making decisions accordingly keeps you from falling into the trap of selling what you want vs. what your audience wants. Your agency provides the best service to a certain type of clientele. Your agency makes more money from a certain type of clientele. Doesn’t it make sense to focus more on these prospects?
Targeting the best-fit clients at your agency isn’t difficult. Follow this 3 step process to improve profits through client qualification:
Define your target audiences
Create client avatars that define prospects by factors such as zip code, line of business, age-group, etc.
Develop a strategy to reach your target audience
Identify the channels where your audience spends the most time, learns from, and is influenced by
Identify and remove unprofitable audiences
Sometimes a good offense is playing great defense, identify and remove the unprofitable client segments. Remember, time spent on bad opportunities is that could have been spent on profitable ones.
Wrapping It Up
Chances are if you’re reading this, your agency IS, in fact, sitting on a goldmine. You have a book of business and systems to attract new clients that you’ve developed over the years. You have happy clients who are willing to go to bat for you. The gold is already there, it’s just waiting for you to mine it. Try any one of these tactics to help you drive more business without spending a dime on marketing.
Did any of these tactics work for you? Let me know in the comment section.