MOST agency owners agree that now is a great time to be in business. That's not to say that running an agency is easy, but the results have never been better. Agency revenues, including contingencies, are at an all-time high, as are profits. The average $3 million dollar (revenue) agency generated operating earnings of 14.5% in 2005, even after some additional owner return in the form of payroll and other perks. With business going so well, many agencies have placed perpetuation, whether internal or external, on hold.

Meanwhile, projected record insurer surplus levels, an expected underwriting profit in 2006 (which would be only the second since 1978), and a strengthening economy signal a continuing soft market. Analysts are projecting a 3.8% increase in premiums for 2006, hardly enough to support many agencies' top-line growth goals of 10% or more. Additionally, most agencies' new-business production capabilities are not strong enough to make up the difference. The hard market of the early years of this decade enabled many agencies to get by without creating a true sales culture. But many agencies now feel the lack of such a culture.

The most pressing challenge facing insurance distributors in 2006 is spurring new-business production to drive organic growth–or finding a partner that can. This will be a watershed year for many independent agencies, which must determine how much of their earnings they want to reinvest in infrastructure, including production talent, to fuel growth and build organizational viability.