Even if you renew 100 percent of your accounts, you're still down 15 percent in revenues. In 2008 and again in 2009, an overwhelming 60,000 small businesses closed each year. That money comes right off our bottom lines. Another huge percentage of businesses no longer qualified for bank loans and have been stymied. Businesses have reduced exposures, sales are down and payrolls are down; there is simply less business transactions than a couple of years ago.

Carrier multi-variant rating platforms ate your contingencies. Hopefully we are all aware that loss history, credit score and demographics make up many companies' personal lines rates. The new term “multi-variant rating system” means that each policy is priced based on an algorithm of factors, and each carrier has a slightly different formula. What does this mean to you? If you're looking for the contingencies to make up the profit lost from revenue reductions, we have some sad news.

With the multi-variant rating systems introduced in the last couple of years, the products are being priced at a point where the carrier is making a small profit, but not at a pricing level (with the current loss ratio) you need to qualify for contingencies. Policies-in-force count is down, premium volume is down and now rates are being depressed. In other words, they've priced the product right out of your profit sharing formula as an independent agent. We didn't need an aggressive attorney general to take it away, just a good insurance company actuary. And if the company sees it is missing the mark late in the third quarter, what happens to your loss reserves? Why would we ever bet on a wing and a prayer for something that is totally beyond our reach and influence? But not to worry, the reserves will drop again late first quarter of the following year; then the race we can't win is on again.

Traditional hard/soft market cycles of the past are history. If you're hanging on to your agency for the “hard market” so your revenue and equity run up tens of percentage points, you may retire before you see it. The new era will be significantly void of the past insurance cycles. It will require the business acumen necessary to be a professional, not a peddler. If you think you're in pain now, just wait. Welcome to the new normal.

We're working the same old prospect database. Too many producers are working the same list from 2007. There are fewer employees, payroll and equipment, so these same accounts will not put us in the revenue position we need. Have you totally re-evaluated your prospect list and modified your plan and goal to reflect this? If you haven't re-qualified your entire data base, you can have a good sales year and still fall significantly short of your goal. Evaluate your prospect lists again.

The government is now in our business—at least for now. We really don't know what effect the government will have on the healthcare distribution and commission issues, but one thing is certain: if it's government, it can't be good for our wallets. Have you looked at how you'll recover from a loss of benefit revenues? Are you focused on property, casualty, life and disability, long-term care and cross selling those benefit accounts as well as adding optional voluntary benefits?

The average family buys 6 to 7 policies; the average agency insures 2.5 policies per household. One common activity we do almost every time we meet with our sales teams is to have them count the number of policies (lines of coverage) they personally own and then look at the agency's book of business and its average number of lines per account. Why wouldn't we sell every product we have available to every client we have? We have become lazy, conforming vendors willing to take orders, timid to ask for the cross sale or referral. Many agencies and certainly captive and direct writers have actually become irrelevant in the new normal.

Your agencies are worth significantly less today, which means if you're like the overwhelming majority of middle-aged agency owners, you're trapped. So what do we do to recover the loss of income and equity? Why is there such acquisition frenzy on the horizon? It's not because they'll have to pay you more. There are a lot of bargains out there. Regional and national brokers see the breaking of your will, the lack of dedication to do what is necessary to survive. They realize the distribution system is growing old and tired. They smell the vulnerability of the agency marketplace and like a pride of lions, they are poised for the kill. We hear it over and over: “Just take away the pain.”

Here is the deal

The status-quo agency is becoming irrelevant. As you look and modify your sales goals in 2011, you must consider a number of things if you don't want to be irrelevant:

1. Spreading thin layers of business with multiple carriers is irrelevant. Carriers need volume; you need clout. The system needs production growth, so we all need to build volume with a specifically chosen few companies that meet the rating and underwriting requirements of our local area.
2. Simply offering prospects a 1980s “value proposition” sales philosophy makes you irrelevant. Bring specific customized value-added solutions every time. The 27-year-old “beer mug” sales mentality, in which we quote anything that walks through the door, is a thing of the past. We hire extra staff to push the paperwork and scour our carrier websites in this poor-paying public service project called “quoting,” which nationally results in an average 25 percent close ratio in commercial lines and we've seen some 10 percent closers in personal lines. This concept was introduced in late 1983. Are you buying anything the way you did 27 years ago? The Dynamics of Selling program encourages a strategic process specific to each line of business, and with that a 70 percent-plus closing ratio. We need to focus on creating specific value around our buyers' needs and value systems, making our solutions specific and customized for each case.
3. If you don't have an active Web presence, you are irrelevant. People are doing their research online. If you're not on the Web, you're not real. Provide access to information, your expertise, your employees and your value proposition. Most insurance websites are shallow and boring. Give me a reason to want to do business with you.
4. Not having a specific marketing plan and budget makes you irrelevant. With shrinking sales, payrolls, fleet schedules and reduced spending, we all need a plan for replacing the revenues we are losing. There is nothing more important to your future than new clients and accounts.
5. Not following a specific sales process in your agency makes you irrelevant. Have you ever considered that everything in life we buy was manufactured using a specific process? Everything from cars to vacuum cleaners are sold using a process, yet we see only about 3 percent of the agencies across the country following a solid proven sales process every time. No wonder the ones with a sales process are at the top of the food chain.
6. Not having a plan for hiring and training new producers makes you irrelevant. New talent doesn't appear out of nowhere. It takes time to search out quality people, test them for specific traits, explore their makeup and skill sets and create a track for them to grow and develop with the correct habits. You heard us say it before: structure creates revenue. You need an agency perpetuation plan, and you need young producers to help grow the agency in the future.
7. Not focusing 100 percent on new business with your carriers makes you irrelevant. We all need market share and everywhere we go we hear the stories about the “current market condition.” Frankly, we are too involved in what life has dealt us and have forgotten that we each control our own destiny. Our willingness to put our heads down and do what it takes to succeed will help us endure and thrive in this market.
8. Representing tons of carriers is irrelevant. Having a trophy wall with endless carriers that can help you write anything that comes in your front door is dead. Building volume with fewer carriers gives you leverage. Agencies that continue to operate with no lifeline to new clients, no marketing budget and no sales process are miserable and dying. Choose specific partners and go after the businesses that fit their appetite.

Recognizing these market conditions and making necessary changes will assure you a profitable, growing and successful 2011. Good luck and good selling!