The hard reality is the insurance agency business model isfairly simple. You sell and service with a modest back officeinfrastructure. The business does not require a great deal ofcapital and you have the benefit of a relatively robust renewalcommission stream although it requires a good service platform. Youare subject to external forces beyond your control—your need topersevere through the economic collapse in the midst of a softproperty-casualty insurance presented a major challenge. Despitethe simple business model, executing the model is your biggestchallenge.

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What can you do to affect the execution portion of theequation?

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Although it may seem unusual, focus initially on thesubjective—the motivators and attitudes that frame your activity,the “why you do” rather than the “what you do.”

  • Run your agency like a business, with afundamental focus on the critical measures of business success:growth and profitability. And never let the firm act as anextension of your lifestyle.
  • Get tough or perish. Focus on excellence andnever tolerate mediocrity. Continually improve processcontinuously. Aspire to be more than good—be great.
  • Build an organization, with clear lines ofresponsibility and authority, and a staff that understands yourmission and vision. Communicate. Not everyone wants to drive thebus, but they certainly want to know where it is going.

With the business drivers in place, focus on two keyareas:

  1. Build a solid business plan and budget to manage growth anddirection of the firm. Understand the adage that if you don't knowwhere you are going, you'll be lost when you get there. Yougenerally should have a limited number of initiatives that are bothachievable and challenging. Many firms make the mistake ofattempting too much and accomplishing too little. The budget ispart road map and part scorecard. Understand the additional adage:If you can't measure it, you can't manage it.
  2. Build and maintain a capital base. This is not negotiable. Ifyou don't have a capital base, you will not survive. Workingcapital equal to 30 days' cash expenses is the bare minimum, with60 to 90 days preferred. This will provide the cushion to allow youto weather future storms. Equally if not more important, a capitalbase provides the foundation to take advantage of growthopportunities, whether it's a producer or anacquisition.

Although the above concepts are not the magical elixir to besuccessful, embracing these ideas will be helpful on the executionside.

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