Running Your Practice Like A Business Requires A Mindset Change

Agents first should open a separate business checking account where all their commissions are deposited, he says. Expenses should be paid out of that same account. “Now you can have a financial statement every monthan income statement and a balance sheet of your business,” he says.

Once an agent has a chance to review his financial statements, he or she should be able to get a good idea of how much business needs to be done every month, says Gleason. Agents should break down their commissions by first year and renewals, then view these commissions as revenue generated for the firm, he says. “Then sit down at the end of the year and you can set up a projection of where youre going.”

After reviewing the financial statements, the next step is to determine what your daily or hourly rate is, Gleason explains. After figuring out how much money you make, “go to your appointment book and figure out how many days a year you actually spent trying to sell something,” says Gleason. By taking your annual revenue and dividing it by the number of days actually spent selling, a daily rate can be determined. This then can be converted into an hourly rate. “This is the whole key to learning how to delegate,” he says.

Daniel Hoyt agrees with this approach. Hoyt, a financial planner from Indianapolis, Ind., had an eye-opening experience that forced him to start running his practice like a business.

“My second year was a disaster,” he says. Coming from a Merrill Lynch brokerage office, Hoyt had the advantage of knowing a lot of people with money. In his first year, he worked with his general agent and called on these people to sell them life insurance. As a result, he had a tremendous first year, “but it went to my head and I thought it would be easy to sell life insurance.”

In his second year, and after having his eighth child, Hoyt realized that selling insurance wasnt as easy as he had thought. His adjusted gross income for that year totaled $3,860. “I was bankrupt.”

After doing some soul searching, Hoyt decided that this was indeed the business he wanted to be init was at that time his father-in-law stepped in and provided him with some financial backing.

Hoyt received $1,000 a month to get him on his feet in the life insurance business, but a condition was placed on himhe must provide his father-in-law with a financial business report on the 15^th of every month. Failure to do so would stop the funding he was receiving.

“My father-in-law said he never met a good businessman who didnt keep a good set of books,” says Hoyt. “I kept a good set of booksI had to. I knew where every dollar went.”

After 3 years, Hoyt was up and running on his own, without any more support from his father-in-law. Now that Hoyt had developed the habit of evaluating his financial statements every month, he continued to do so going forward. “Once you get the system going and you finally have it working, its pretty easy to keep it up.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 23, 2004. Copyright 2004 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.