Formulas For Success With Small Business Owners

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Considering how big the small business owner market is in this country, most agents want to know the best way of tapping into it. The way this plays out in the field shows that its a question with a number of answers.

Some experts feel that in order to effectively serve these entrepreneurs, agents must dive into the specific industry they are targeting. Better serving these small business owners means developing a good understanding of their industry and really getting a handle on the issues–meaning non-insurance-sales-related issues–these business owners face.

But others feel that this can be too risky an approach to take. By putting too much emphasis on any one industry over another, agents could be in danger of limiting themselves and could be subject to the market forces that drive the targeted industry.

Brad Sorensen favors the getting-to-know-the-business approach. The associate vice president and small business market manager for Nationwide Financial Services, Columbus, Ohio, says, “When you look at producers who are selling to specific niches, theyve got a knowledge or appreciation that helps them better understand what the market is like, and the needs that market specifically has.”

Taking this niche marketing approach is one with which John Ferguson has been successful.

Ferguson, who is managing partner for New England Financials Colorado Springs agency, has integrated an industry-specific target marketing approach for his entire agency.

“You really get to know that industry and you can serve them in a way that other agents are just not able to,” he says, explaining that agents who dont have the inside knowledge of their clients industries arent able to match their needs exactly.

John Oliver takes a different perspective. While he says he doesnt “disagree” with the approach stated above, “in certain markets, that just isnt realistic.” Oliver, vice president strategic marketing services for Transamerica, Los Angeles, Calif., says, “I just think its more of an evolution of someones practice.”

While Oliver agrees that many agents have become successful specializing in a certain market, he feels that producers who “become experts in understanding some broader principles about small business issues, such as business survival, succession planning, and disability planning,” will be better positioned for success.

For example, Oliver explains that when a planner is working with a family business that should trigger certain issues that need to be addressed immediately–regardless of the industry. “Are the kids going to take over? Are they trained enough to do that? Do they currently work in the business? Are they pursuing their own careers?

“So whether thats a small restaurant, or a construction company, or a retail firm, a lot of those issues transfer to each other,” Oliver says.

He feels that it takes time for an agent to develop a niche market or specialty industry. “Some people will certainly fall into a niche,” he explains. “All of a sudden the restaurant owner is referring his planner to another one, and another one, and thats one way agents end up becoming specialists in that business.”

Oliver adds that this happens many times by accident, rather than consciously saying, “Thats the business Im going to go after.”

One drawback Oliver cites in focusing efforts on only one industry is that an agent serving that industry is subject to its cyclical declines. “Its much more difficult if someone picks an industry, say construction, and all of a sudden we enter a recession in the building industry,” he says. In these instances, the funds needed for planning may be used to keep the business afloat.

New Englands Ferguson, who has built an agency of almost 60 agents around his strategy of market specialization, says he overcomes this hurdle by specializing in six different industries and understanding the issues these business owners struggle with during recessionary times.

“When we say that we specialize in an industry, it just adds credibility. We can call them at the times they want to be called; we understand the cyclical situations in their business–it just makes us look more professional,” he says.

Ferguson stays on top of these industry concerns through the development of what he refers to as a “board of advisors” specific to each targeted industry. Putting together his advisory board involved extensive research into each market. “We ask a lot of questions to determine who is key in these markets, who is influential and respected in the industry,” he says.

Then, upon surveying these key individuals, Ferguson invites a select group to serve on his industry advisory board, with meetings scheduled a few times a year. “We find out if theyre supportive of us and the approach were taking to the business. If they are, we invite them to be on our board of advisors,” he says.

When Ferguson hosts such a board meeting, he usually brings in a guest speaker to discuss current issues that are germane to his prospects area of business.

For example, one market that Fergusons agency targets is the construction industry. “Its very important to understand certain pieces of legislation that might adversely affect that industry,” he says.

Ferguson explains that in Colorado there are many proponents of what he refers to as “no growth” legislation, which has an adverse effect on the construction industry. “Theres also construction defect litigation that is very important to that industry, and now the cost of liability insurance is very high,” he says.

“When youre able to talk intelligently about all those issues–that a normal agent whos working in all markets wouldnt be privileged to know–then youre able to talk at a level thats just a lot different than the competition,” he continues.

“When they [business owners] see that were really focused on their industry to the point that we understand what keeps them awake at night, they begin to understand that anybody can sell a product but we really understand what theyre going through on a day-to-day basis,” says Ferguson. “We really know what theyre concerned about in the livelihood theyre involved in.”

Understanding the business, and becoming familiar with the issues that concern business owners in that market also helps to raise the level of trust between the advisor and the business owner, notes Ferguson.

All industries are a little bit different, but Ferguson feels that if agents understand the decision-making process and how its unique to each industry, they will be much more successful.

Even though Oliver “doesnt disagree” with that approach, he feels that a better strategy for agents looking to serve small business owners is to become more of a specialist in a certain type of business planning strategy, or address a specific need of business owners. This is a strategy that has worked for the 20 years John Schneider has been working with small business owners.

Schneider, who is a general agent for Colonial Supplemental Insurance, Nashville, Tenn., has taken the approach of specializing in educating employees of small businesses on their benefit plans.

Many times a business owners problems tie into employee turnover, morale problems, and the employees lack of understanding how their benefit program works, he explains.

Schneider solves this problem by educating his clients employees. “Improve their level of understanding and theyre less likely to leave for a small incremental wage increase to go to a competitor,” he says. “The fact that theyve got a quality benefit program goes unnoticed unless employees are aware of what theyve got.”

By coming in as a benefit specialist and looking at their benefit plan, Schneider shows business owners how they can improve employee retention and employee relations. The trust Schneider earns through this process often leads to both business planning and personal financial planning for the business owner.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 23, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.