"A lot of times these small businesses are given a baseline generic product because it suits their needs generally," Hanley says. "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 the community."

Relationships rule

There's a reason why traditional independent insurance agencies targeted small businesses: They were in plain sight, on the same block, with owners attending the same church, social events and Chamber of Commerce meetings. If insurance is a relationship-driven business, that relationship is even more essential with small-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. I belong to several business associations and network through those. Be of help to them. New businesses need so much information in the start-up. Try to be a resource to them."

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

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

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

And while Business Owners' Policy (BOP), Auto and Workers' Comp are at the core of small business coverage, changing exposures create additional needs, says Steve Tombarelli, vice president of the SIAA agency network, which offers members a Business Insurance Advantage program targeting small commercial lines business. "We work to provide education around increased limits of EPLI, Cyber Liability and other coverages like Business Interruption/Income, Umbrella, and Professional Liability."

And although small businesses need all of these lines, producers shouldn'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 will build off one simple account," he says. "It may be a small initial premium, but don't let it be a small account. It's a great way to build a new book and get your feet wet."

Prosper or perish

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

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

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

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

Drumming up business

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

Association business is ideal for the agency's newer agents, who can work with some of the customers to build up their base and can usually quote the business with the many online small commercial rating programs through their insurers.

"Most of the small accounts range from $1,000 to $10,000 in premium," says Logan. "But we constantly market to get every insurance dollar."

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

The Right (Tech) Tools for the Job

Because it takes more small business accounts for an agency to stay profitable, the right technology is essential for managing the business. Bardonia, N.Y. –based Warwick Resource Group LLC, which considers a "small" account as one with less than $25,000 in premium, makes heavy use of its agency management system to service that business, particularly through efficient submission and marketing processes with real-time tools like Vertafore's TransactNOW and IVANS' Transformation Station, says COO Keith Savino.

Other essentials include commercial lines download with all carriers, commission statement download, alerts where available, e-signature capability, mobile support, and customer portals for document and policy delivery. "Agencies need to start moving away from e-mails in dealing with small business and toward a combination of customer portals and personal touch," he says. "We need to balance high-tech with high-touch."

Beyond the Rotary Club: Not Your Father's Marketing Style

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

But while that need for face-to-face interaction will never go out of style, today's social network and tech tools can be another valuable way to find and cultivate small business relationships.

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

As a young producer at Murray Insurance Group, in Albany, N.Y., he exclusively sold personal lines and small business (50 employees or 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 time spent and amount of business generated," he says.

He became good at attracting business online and asking for referrals. Once he had established a solid stream of referral sources, he began focusing almost all of his prospecting time on digital content generation. This became a game-changer: Once he established an online reputation through digital content, roughly half of his new business came from people contacting him.

This approach has two advantages: first, that person is a "warm lead," and second, "you get to spend more time doing what you actually 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've got an easier sale. You spend more time in your business instead of on your business."

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

After posting a video on "What is New York State short-term disability?" Hanley received a phone call from a lawyer who wanted to purchase the coverage—not very cost-effective at $44 per year for female employees, and $19 per year for males. But Hanley knew every business that needs short-term disability also needs Workers' Comp, Property and Liability. And because the prospect was a lawyer, 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 year later, the firm's health insurance was up for renewal, and Hanley wrote that, too, which swelled to a $6,000 account. "This is the ultimate in small business accounts, but if you looked at it, you wouldn't think it was much," he says. "Once I had the lead I did what every insurance agent has done for 100 years: Ask questions and fill in the answers."

Hanley acknowledges that the Internet-driven marketing method might not work for everyone, which is why he promotes what he calls "a diversity of approaches." When he was with the agency, his brother-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 the community. "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-true methods. "Digital marketing is just a piece of the puzzle," he adds. "You still need to go to marketing events and sponsor the local not-for-profit 5K run. But there's this whole new group of consumers who want to do business this other way. That just needs to be added in the best way your agency can handle it."