The 5 ways high-performing firms achieve above-average organic growth
Here are five factors top-performing firms focus on that allow them to perform as best-in-class agencies.
Do you want to achieve higher organic growth? For most firms, that’s not even a question. Of course, growth is necessary to increase revenues and provide opportunities for team members. Growth is essential for thriving and perpetuating your business.
Technically, organic growth is a firm’s overall revenue increase from new and existing business minus its leakage. And, there’s a stark difference between the organic growth rates of high-performing firms and those considered average.
MarshBerry’s proprietary financial management system, Perspectives for High Performance (PHP), compiles 35 years of historical broker data, approximately 1,000 firms, 480+ key ratios and $5 billion in aggregate revenue to analyze a firm’s overall performance. Based on this data, the average PHP firm is experiencing a 6.5% organic growth year-to-date in 2019. The top performing 25% of firms are growing organically by 16.1% in 2019.
What do high-performing firms do to achieve double-digit organic growth that is nearly three times what average firms accomplish? Based on our research and benchmarking studies, here are five of the top metrics top-performing firms focus on that allow them to grow organically and perform as best-in-class agencies.
1. New business growth
New business growth for high-performing firms is 24.6% vs. 14.5% for average firms. High-performing firms are simply writing more new business every year, and this activity is fueled by a well-trained, effective producer staff that is supported by operational systems that allow them to focus on hunting.
2. Acquisitions
The top PHP firms supplement organic growth with strategic acquisitions — and this is especially true in property & casualty business. In fact, the top 25% of firms acquire 81.4% more net revenue than average performing firms, according to MarshBerry data.
3. Productive service staff
When we measured commissions per person among service staff and producers, we found that high-performing firms get more productivity from this staff. According to PHP data, high- performing companies have revenue per service person that is 24.6% higher than average-performing firms.
4. Debt for investments
The old saying, “You’ve got to spend money to make money,” is actually true. While paying off debt vs. acquiring more is a wise way to operate a business, it’s not necessarily how you grow a business. Firms that take smart risks and borrow money to fund growth realize greater revenues.
High-performing firms have a 38.5% higher average current portion of long-term debt that average-performing firms.
5. Efficient collections
High-performing firms collect premiums due faster and have fewer accounts receivables exceeding 90 days. They are 26% more efficient with collecting accounts within 30 days and have zero debts due past 90 days.
There’s no secret to achieving organic growth. There are no shortcuts, either. High-performing firms invest in their people and their organizations, and they focus on generating new business and supplementing that with strategic acquisitions. They stay on top of accounts receivables so they can maintain a healthy cash flow.
Where is your agency falling short? Take the time to assess how your firm manages these five categories and consider how you can improve those areas of your business. The payoff will be greater organic growth.
Curt Vondrasek is a senior vice president at Marshberry. He can be reached at 630.315.9031 or Curt.Vondrasek@MarshBerry.com. Opinions expressed here are the author’s own.
This article is part of a monthly series from Marshberry on achieving organic growth. Read more here: