Preparing for an Agency Business Startup

DT1970

Expert
57
I've been reading these forums with a great deal of interest over the past few weeks. I am extremely impressed with the business acumen of many of you...as well as your creativity in nuturing your respective businesses.

I am contemplating the potential of starting an agency and would like input on preparing myself. I want to make sure I have enough tools to increase the odds of success. My "dream" is a business that my son (he is 12) could be involved in after he finishes college. Assuming he would want to of course. The other condition is that I want to own my own book of business...which rules out something like State Farm for instance.

So...that being said, here is where I'm at in life.

- no bills...house paid for, cars paid for, 50k in the bank, no credit card debt, wife works part-time (earns enough for groceries for the month)
- I am middle-aged with about 20 years of consultative sales background (industrial mfg rep)
- I am almost finished with my undergrad degree (nightschool)
- I am currently unemployed

My thinking is...
- start out of my home office to minimize cash outlay
- obtain the appropriate study materials to obtain the pertinent state licenses
- as my core classes are done in school, I'm thinking I should take electives that may be beneficial (business law, etc)
- I am planning on going for an MBA in finance

My questions are...
- are there any particular classes you would recommend for this field? (my major is business administration...all the core classes are done ie finance, accounting, marketing, etc)
- is there a recommended company to purchase study materials from (cost/value) for my state tests?
- If you had to pick ONE insurance to start with, which one? life, health, p&c, etc? I'm thinking I should choose a single specialty and focus on that until I learn the business
- in conjunction with the above question, is there a particular carrier(s) I should consider?
- ancillary purchases? computer software, certain subscriptions to websites (credit reports, etc?)
- I will need E&O (?) insurance I think?

I've read where many of you advise to work for any independent agent to learn the ropes and/or work for a captive company like NYLife etc...I'm not adverse to doing this, but I'd much prefer to go it alone if at all possible...I really hate the idea of building a book of business then walking away...also with a captive like NYLife or Met etc are there possibilities of working there and then going independent but keeping your book of business and the ability to sell that particular product?

Lastly, my personal views are that I will never solicit business from my family or friends. If they wish to use me, I would help them of course. But I'm a firm believer that money and friends/family don't mix well (at least for me). I've read where some of the companies want you to start off by listing everyone you know and contacting them to buy a policy to start off....I won't do this. Nothing against this model, but it's not for me. So if you recommend a company to me, would you tell me if you feel this would be a requirement?

I understand that I am asking YOU for your valuable time and information and I'm definitely not seeking to be arrogant or restricting in what you provide me...and I am very grateful for any wisdom that any of you would care to impart.

Lastly, I am wondering what the possibilities are for ancillary opportunities with an agency...if I picked up a CPA designation (schooling and training)? CFA? association with someone like Raymond James or Edward Jones?

Thank you in advance :)
 
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This business has a fantastic return on investment. Once experience is gained in excess of 7-1.

The first key is to know how to sell, you seem to have that covered.

As far as whether you go P&C or L&H, I would choose the later. There is less learning curve, higher commissions and lead sources are abundant. Also top street contracts are available without prior production. (If you wish to talk about contracting for health, please contact me as I am a GA for Health Choice One which carried all major national carriers for life and health).

With P&C you will be unable to get top contracts with national companies without prior production which will put you at a competitive disadvantage so go life and health.

You have a substantial cash cushion which should cover your living expenses and invstment in this business.

After licensure start out with a 500.00 a week lead budget that will allow you to purchase about 80 leads a week at the least. assume you close 1/20 to start. That is an average sale cost of 125.00

Assume average sale is 3000 or 12000 per week for 4 sales @20% commission with 50% advance . You will generate 2400.00 commission or 450% ROI and be advanced 1200.00 per week. As your experience increase you should be able to close 1/10 and generate 4800.00 a week and eventually a 175,000.00 plus income after drop off and expenses.

The CFA designation is a three year process and is most useful if you are an analyst on Wall Steet there is 60% fail fate on those 3 tests. The CFP is more valuable and is far easier with over an 80% pass rate. These designations are not that useful unless you go for securities licensure.

The CPA is additional course work and may or may not be worth it. An MBA which i hold is relatively extraneous when you work for yourself esp if its in finance or global business integration. Its more a credential to get hired not if you work for yourself.

The reality is that most will fail but if you work both hard and smart in this business you will be a success. The secret is most agents are part timers who make little money simply becaus ethis business is based solely on marketing (whether that is leads, referrals, or mailings). If you do spend 20% of your income on marketing you will have an enviable pipeline and you will never have a slump. The key is activity and closing. if you become an expert at both you can not fail.
 
Paradigm

Thank you. Your post was enlightening in the extreme. I got your PM and will drop you a note later this week.

Insurance, as an outsider and a general observation, is a very interesting business model. The residual aspect is enticing, clean and attractive.

From an analytical point of view, the cold numbers calculations that you offer (and I've read similair posts from others) is a pretty amazing formula for determined & persistent individuals.

As a side note, alot of the things I've read on this forum are educational over and above your respective industry of insurance itself. This site should be required reading for anyone in a sales and marketing position.

I never knew insurance agents were so entrepenurial and creative.

PS - I am considering an MBA in Finance to help springboard a CPA. I really want the ability to crosssell services and products to clients that make sense for them. Having an MBA degree in my office along with a CPA license would give me some additional credibility. I'm a big believer in education although I do hear what you're saying with respect to the extraneous factor for a self-employed person.
 
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