Small businesses are a large part of the American tradition, andstill play a vital role in the U.S. economy. Consider: In 2011there were 28.2 million small businesses in the U.S., accountingfor 99.7% of America's employers; comparatively, there are only17,700 firms with 500 employees or more, according to the U.S.Small Business Administration (SBA).

In fact, small-business employers—defined by the Office ofAdvocacy as those independent businesses with fewer than 500employees—are the ones driving the nation's economic recovery.Small firms accounted for 63% of the net new private-sector jobscreated between 1993 and mid-2013, or 14.3 million of the 22.9million net new jobs, the SBA says. Since the end of the GreatRecession (mid-2009 to mid-2013), small firms accounted for 60% ofthe net new jobs, with firms in the 20-499 employee categoryleading U.S. job creation.

With that sort of clout—and because many independent agenciesand brokerages are small businesses themselves­—the insuranceindustry can't afford to ignore this powerful market niche.

"Agents really like to write bigger accounts," says Ryan Hanley,digital marketing lead for TrustedChoice.com, the nationalconsumer-facing web portal for independent agents. "They make themfeel good. They're sexy. There's more money in the account." But hesees "incredible opportunity" in specializing in small business,especially because of the strong relationships and cross-sellingopportunities in what he views as a greatly underserved market.

"A lot of times these small businesses are given a baselinegeneric product because it suits their needs generally," Hanleysays. "But if you give them a bit of time and set them up right,they refer you. They help. These are the people that are in thecommunity."

Relationships rule

There's a reason why traditional independent insurance agenciestargeted small businesses: They were in plain sight, on the sameblock, with owners attending the same church, social events andChamber of Commerce meetings. If insurance is a relationship-drivenbusiness, that relationship is even more essential withsmall-business sales.

"Relationships are huge for this market," says Jim Mansfield,CPIA, principal of Mansfield Insurance Agency Inc. in Bright, Ind."I try to be a consumer first before being their insurance agent. Ibelong to several business associations and network through those.Be of help to them. New businesses need so much information in thestart-up. Try to be a resource to them."

Mansfield estimates that 25% of his agency's business comes fromsmall to midsized businesses—which isn't altogether surprising,given the agency's rural location. Mansfield considers "smallbusiness" to be $2,000 or less in commissions, which heacknowledges could be considered a big account to smalleragencies.

When Mansfield meets with a small-business customer or prospecthe sits down with the owner, who usually needs an education on whathis business is worth and how insurance can safeguard it. "I stressthe protection of their assets, which is more than what theirfinancial statements show," he notes. "Their employees andcustomers are assets, and their protection is significant."

Although the scope and premium basis may be more related toaccount size, small businesses have the same needs as any other:Property, Liability, Auto, Workers' Comp and Cyber, says KeithSavino, COO at Warwick Resource Group LLC in Bardonia, N.Y. Theclassification and niche has more to do with all of the business'other unique needs, such as a restaurant needing liquor liabilityor a tech account needing tech E&O, he adds.

And while Business Owners' Policy (BOP), Auto and Workers' Compare at the core of small business coverage, changing exposurescreate additional needs, says Steve Tombarelli, vice president ofthe SIAA agency network, which offers members a Business InsuranceAdvantage program targeting small commercial lines business. "Wework to provide education around increased limits of EPLI, CyberLiability and other coverages like Business Interruption/Income,Umbrella, and Professional Liability."

And although small businesses need all of these lines, producersshouldn't overlook benefits, life insurance and personal insurance,says Stan Logan Jr., owner of Logan Lavelle Hunt in Louisville, Ky."Many times this leads to referrals because each new agent willbuild off one simple account," he says. "It may be a small initialpremium, but don't let it be a small account. It's a great way tobuild a new book and get your feet wet."

Prosper or perish

Like any niche, there are risks inherent in specializing insmall business—the biggest of which is its high mortality rate.

"Small businesses come and go. Their stability is low. We try togo after the more stable ones," says Mansfield. To undercut therisk, his agency focuses on businesses like dentists,ophthalmologists, pharmacies and contractors.

Producers, Savino acknowledges, can be fickle about selling tothis niche. "Small business is just not for everyone," he says."There are often swings into and out of this market by agents andbrokers, depending on the strength of the economy."

Agencies that succeed at targeting small business work withtheir customers to help them not only survive, but ideally outgrowsmall-business status. Mansfield insured a mom-and-pop caterer thatwent from a weekend-only concern to a premier business specializingin weddings and corporate events. "I felt part of their growth, asmany times I was in conversation with their accountants andlawyers," he says. "If we are to keep customers like this, we needto be recognized as part of their professional network. Once weare, it leads to referrals."

Drumming up business

Along with referrals, agencies targeting small business oftenfind success in working with trade associations for marketing.Logan Lavelle Hunt offers its property & casualty, benefits andwealth-management products through trade associations such as theHome Builders' Association of Kentucky, marketing directly to theirmembers. In turn, the agency offers educational classes and assistswith the association's new member recruitment and retention.

Association business is ideal for the agency's newer agents, whocan work with some of the customers to build up their base and canusually quote the business with the many online small commercialrating programs through their insurers.

"Most of the small accounts range from $1,000 to $10,000 inpremium," says Logan. "But we constantly market to get everyinsurance dollar."

For agencies like his, "there is gold in these accounts," Logansays. "It doesn't always have to be a story of selling a largecommercial or business policy. One of our member agents went on acall and was talking to the insured about a BOP that was a $500minimum premium policy. But while the agent was there, thediscussion turned to personal-lines needs. When the agent left, itwas a $7,500 personal and commercial lines sale, with theopportunity to return to discuss group life and health insurancefor the business."

The Right (Tech) Tools for the Job

Because it takes more small business accounts for an agency tostay profitable, the right technology is essential for managing thebusiness. Bardonia, N.Y. –based Warwick Resource Group LLC, whichconsiders a "small" account as one with less than $25,000 inpremium, makes heavy use of its agency management system to servicethat business, particularly through efficient submission andmarketing processes with real-time tools like Vertafore'sTransactNOW and IVANS' Transformation Station, says COO KeithSavino.

Other essentials include commercial lines download with allcarriers, commission statement download, alerts where available,e-signature capability, mobile support, and customer portals fordocument and policy delivery. "Agencies need to start moving awayfrom e-mails in dealing with small business and toward acombination of customer portals and personal touch," he says. "Weneed to balance high-tech with high-touch."

Beyond the Rotary Club: Not Your Father's MarketingStyle

The symbiotic relationship between independent insurance agentsand America's small businesses goes back generations. Parents,grandparents, and great-grandparents in the business understood thevalue of pressing the flesh and promoting insurance sales at everyopportunity in their communities—in church, at parties, at theRotary Club.

But while that need for face-to-face interaction will never goout of style, today's social network and tech tools can be anothervaluable way to find and cultivate small businessrelationships.

Case in point: Ryan Hanley, who staked his reputation on socialmedia marketing.

As a young producer at Murray Insurance Group, in Albany, N.Y.,he exclusively sold personal lines and small business (50 employeesor fewer), with about 150 small-business clients.

When prospecting, Hanley found two methods to be effective:meeting people in person and working events, or working online."Over time, I found a much higher profit margin online for timespent and amount of business generated," he says.

He became good at attracting business online and asking forreferrals. Once he had established a solid stream of referralsources, he began focusing almost all of his prospecting time ondigital content generation. This became a game-changer: Once heestablished an online reputation through digital content, roughlyhalf of his new business came from people contacting him.

This approach has two advantages: first, that person is a "warmlead," and second, "you get to spend more time doing what youactually enjoy doing, which is the insurance side of it," he says."If I'm not out pounding the streets in my car stopping in places,that's time I get to spend reading a professional liability policy,picking it apart, so that when I go sit down with that client I'vegot an easier sale. You spend more time in your businessinstead of on your business."

Hanley recalls developing a YouTube video series, "100 insurancequestions answered in 100 days," based on questions from hisclients, which he posted in 100 consecutive days.

After posting a video on "What is New York State short-termdisability?" Hanley received a phone call from a lawyer who wantedto purchase the coverage—not very cost-effective at $44 per yearfor female employees, and $19 per year for males. But Hanley knewevery business that needs short-term disability also needs Workers'Comp, Property and Liability. And because the prospect was alawyer, he needed Professional Liability, too.

Hanley ended up writing all of his policies for two locations,along with personal coverage for the lawyer and his partner. A yearlater, the firm's health insurance was up for renewal, and Hanleywrote that, too, which swelled to a $6,000 account. "This is theultimate in small business accounts, but if you looked at it, youwouldn't think it was much," he says. "Once I had the lead I didwhat every insurance agent has done for 100 years: Ask questionsand fill in the answers."

Hanley acknowledges that the Internet-driven marketing methodmight not work for everyone, which is why he promotes what he calls"a diversity of approaches." When he was with the agency, hisbrother-in-law loved cold calling, and is very successful at it.His father-in-law, who has been in the business for 40 years,developed the agency's referral business by getting out into thecommunity. "As a team, we blanketed the market in those three ways,and the agency grew significantly every year," he says.

By no means does Hanley suggest giving up those tried-and-truemethods. "Digital marketing is just a piece of the puzzle," headds. "You still need to go to marketing events and sponsor thelocal not-for-profit 5K run. But there's this whole new group ofconsumers who want to do business this other way. That just needsto be added in the best way your agency can handle it."