Most insurance agencies grow through a mixture of organic growth and acquisitions. At first, organic growth often plays the larger role. Then, as the business develops, acquisitions (or mergers) become a way to catapult to the next level. Obviously, each approach offers its own unique challenges and opportunities. Therefore, choosing the right mix for your agency is critical to your success.
Finding the financial resources to fuel insurance agency growth can prove challenging. Agency owners and principals often hesitate to burden their business with debt – especially with persistent rumors of a coming financial downturn. Organic growth typically happens at a steadier pace. Therefore, accumulating capital is often easier.
Acquiring another agency or its book of business usually requires a substantial up-front investment. Leaders of smaller or newer agencies, in particular, may not have the connections to attract venture capital. Additionally, insurance agencies often lack the assets that traditional lenders look for to secure loans. If an agency needs outside funding, finding a source requires an innovative approach.
Another key consideration for determining the ideal growth balance is the robustness of infrastructure and staffing. Although many of us fantasize about our businesses “blowing up” into massive overnight successes, growing so quickly that we outstrip our ability to deliver a quality customer experience is a recipe for failure. Sometimes, acquisitions bring the additional technologies and staff needed to support the new business. Don’t assume that everyone will make the transition, however; have contracts in place, at least for key managers and producers. Remember, also, that existing processes and procedures may not scale easily. Be prepared to re-think how you do what you do, especially during times of rapid growth.
The slow and steady nature of organic growth primes agencies for success. For example, there’s time to experiment with alternative methods. Making time to find the right people for a growing team is easier when phones aren’t ringing off the hook and inboxes aren’t overflowing. Additionally, the organic approach often encourages the development of existing employees to fill new roles. That’s a win-win situation!
Staying Compliant During Growth
Having your dream team doesn’t help if they aren’t properly licensed. Growth often brings new compliance requirements. With organic growth, this may involve obtaining additional lines of authority for new types of products or non-resident licenses. (Don’t forget about registering the agency with foreign Secretary of State Offices, too.)
An acquisition often results in the opposite problem – too many licenses instead of too few. Strategic choices about how many producers need licenses in a given state keep compliance costs reasonable. Just be sure to cancel any unneeded licenses appropriately.
Whether you opt for the organic approach, acquisitions or – most probably – a combination of both, having the right tools and resources makes all the difference. For organic growth, this may mean developing an assertive referrals program, taking advantage of social media marketing (especially if you can produce your own content), and branding your agency. Agency networks also open doors for expansion. With acquisitions, it’s essential to find the right agency to acquire and to negotiate the right terms for the deal.
So here’s wishing you every success!