Many agencies' small-business departments consist of one or two account managers handling overflow accounts that commercial-lines producers don't want. Our agency, however, built a small-business unit with four producers and two account managers who specialize in this class of business and actively pursue small commercial accounts. We currently write 1,300 of them, generating a total annual premium volume of nearly $6 million. We can do anything our large-lines unit can do; our customers just happen to be smaller.

Typically, we define small-business accounts as those with less than $25,000 in total account premium from all lines and up to 50 employees. Until a few years ago, that meant mostly mom-and-pop operations such as video stores, music stores and florists. Recently, however, we expanded our definition of "small business" to better match our carriers' definition of the risk. It now includes a wide variety of Main Street retail, wholesale, light manufacturing and service operations with up to $15 million in property values and annual sales, and premiums ranging from $500 to $300,000.

Target marketing is the most effective way for us to prospect in the small-business niche. Several times each year, we ask our carriers what type of clients they prefer and what sort of accounts they've written recently. Their input helps us decide on which niches to focus. For example, suppose a couple of our carriers indicate that they like insuring small, independent florists and that they close 80% of such accounts. We then develop a direct-marketing plan to identify and target the prospects. We send them mailers, and our in-house telemarketer follows up with them. Once we talk with a prospect and close the sale, we already know which two carriers are best suited to write that class of business, so we don't waste time sending the app to other markets.