Don’t let bad news about the economy cloud your vision about the future of your agency. Sure, times are tough, but you can take practical steps that will allow you to achieve goals such as organic growth, expansion, or acquisition. By thinking ahead, looking for stable carriers and agencies with which to align yourself, and focusing on long-term solutions rather than short-term problems, you can maintain success in this economy while coming out on top at the end.
Clarify your vision of what your company should look like in the next few years. This could mean growing organically, acquiring another agency, or planning for the next generation to take over the business. Be sure this vision matches your core competencies and the talents of your staff.
You can help prepare for an uncertain future by developing a contingency plan that calls for adequate cash reserves for at least three to six months. These additional funds may be needed to keep your agency operating at a high level after suddenly losing a major client or experiencing some other unanticipated occurrence.
Don’t spend too much energy targeting prospects with unstable business structures or questionable practices, because some of them may not be around in a few years. Instead, go after companies and organizations that will be more likely to stay on your books and continue to generate revenue for years to come. Build long-term relationships with clients who can withstand change and adversity, and avoid relaying on only a few clients who bring in a large percentage of revenues – if one shuts down, you could lose a big chunk of commission dollars.
What Your Peers Are Reading
Make sure you do business with carriers and general agencies that are highly rated and financially solvent to help ensure that your clients’ premiums will remain relatively stable.
While some lower-rated carriers may offer high commissions that boost short-term profits, they may wind up sharply raising premiums, suspending operations, or even closing down – all of which are more likely today than ever before. Ideally, you should negotiate contracts with several reputable carriers and general agencies, diversifying your revenue sources and giving you plenty of alternatives in the future.
Look toward the long term
Whenever possible, negotiate contracts with carriers and general agents that spread commission payments over several years as opposed to large upfront commissions with little or no payouts in the future. This will give you security and peace of mind, knowing that additional revenues will still be coming in the next few years, when you may need additional cash flow.