Crazy for starting an agency now?

[jtbins]

I have over 15 successful years of P&C experience as a company underwriter and as a licensed broker of standard commercial and e&s products. I've always been an entrepreneur at heart, and starting my own agency is a priority. I do not enjoy working for others. Most of the necessary ground work for my agency is done. I know what I will sell, who I'll sell it to, and how to market to them. I have a good idea of what my income and expenses will be. However, given the less than desirable economy reports, I've been slow to pull the trigger and become self employed. I know there will be many hours required and I'll work solo before I'm able to hire help. That's fine. I put in tons of hours now working for someone else. Does anyone have suggestions about starting up a successful agency in these uncertain times? Is this a crazy move?

Thanks in advance for taking time to respond!

[Phils]

No it's not a crazy idea. Agents are retiring every day and it is increasingly harder to start and build a business like this, so your "competition" from other new agents should be getting less and less all the time. You seem to have the qualifications and don't seem to be just dreaming of any way to stop working for others.

Now.... if you were asking about opening a motorhome dealership my opinion would be different.

Phil

[kevinraz]

I think this is a great time to start an agency. Do the hard work now - get those first few clients, get referrals, get staffing started, etc.

Sometime - and it may be 18 months and it may be several years - the soft market will end and rates will jump. You will be well positioned to reap some serious rewards then. Others who try to start up during a hard market will not be as ready as you are to take advantage of the opportunity.

But now follows a word of caution which I also send to all you agency owners out there: plan ahead for the future. Insurance is cyclical - rates ebb and flow like the tides with little reason. Stockpile money away during hard market times to support the soft market cycles. You need to do more work and keep your staff in place during a soft market to retain your accounts. Cutting staff and asking employees to do more just because revenue is falling though the number of accounts remains steady is stupid and you will lose accounts quickly through poor service.

Don't just go out there and buy all the toys you can during the hard market and then lay people off during the soft markets. Plan on a 20% or so cusion to keep your staff going when the rates drop but work increases to keep those precious clients.

Spoken by an underwriter who has seen good agencies suffer during the soft market when they cut staff because they were not prepared.

[jack of all trades]

You said that you had worked in commercial and E&S business. My advice is to stick to the retail commercial and leave the e&s business to someone else. That field is flooded.
I agree the timing is probably good with decreased competition. Just don't plan any vacations for a few years.

[mccluney]

Given your qualifications, you should have little trouble in starting a commercial agency. In CA my experience that most agents who claim to write business insurance have limited knowledge in identifing or explaining coverage needs. Preferred
markets are easily obtainable through a variety of souces. You might want to talk with your existing contacts to try to get
an appoinment with one or two preferred markets. These normally will want a volume commitment and a want to see a business plan and a plan for perpetuation. I bettting with your existing reputation you may be able to get an appontment. If not, there are are methods to writing business that will let you build up a volume of business to get these direct appointments later. Stay away form writing personal lines business until you have a staff person. Personal auto is labor intensive and will slow down your endeavors to write commercial. You don't need a fancy office as your commerical accounts will never come to your office. A shared office with a common receptionist and available conference room will do nicely. There are low cost agency management systems available. Make sure that they can handle marketing and accounting functions as you will find out that when you begin, you are the staff.

[volstrike3]

Not at all. Chances are with the prolonged soft market and the economy the way it is... you have already lost a significant portion of your income from where you were in 2005 or so. Things are going to be pretty ugly for the next year or so which means you won't be missing out on much while your getting set up. Just get up and running and write everything you can (can be more competitive with lower overhead and no commission split) so your in a good spot when the market turns. If you have adequate funding to get through the first year, go for it. You might even want to start networking with some older guys that own small shops who may be ready to get out. I have purchased two small agencies in the past year on a strictly renewal basis.... there are a lot of little shops that are dying because they have not kept up with the times but control a book of business that will get you off to a good start.

[fenkazlIJ]

No, you should pursue your quest to own your own agency. In every market there will be those that will tell you it's not the right time, but then again when is the right time! There's never enough margin, ROI or profitability. Find good company partners and treat them fairly, write good business and you will be fine. I am not sure where you are located, but there are always good regional carriers, with solid financials that will stick by their products and agents. That can only help you in the long run in a market like this. A word of advice, don't believe what you hear from naysayers --- remember, no one likes competition in our business, even from start ups!

[spmacarthur]

Is this a good time to start your agency? I started my surety bond business in January, 2009, after working for one agency for 12 years. The agency I was with did not write any insurance & my experience is only in surety bonds. Things never happen at the right time & I found myself with 2 choices either find another job or give it a shot & do my own thing. At that point I figured God has given me an opportunity & with the support of my spouse, here I am. Now with that being said, this is the hardest I have ever worked in my life! Everyone is in a different situation financially & my spouse is currently paying the bills. I have not borrowed any money for the business & I have used some of my savings & cut down on spending. I believe somone else posted that you just need those first few customers to get you going & I totally believe the same thing. My advice to you as you struggle, if you are, don't take everything personal, as you will get residence from potential customers & even your colleagues. I live in Texas & if you ever need bonding, look me up as bonds are my specialty & I know some insurance agents do bonds & some do not. Good luck to all of you asking yourself "is it a good time to start an agency".

[Bob Lake]

The best time to start your own agency is when you are ready. You will have to put in a good 3 years of 70 hour weeks with no vacation, etc. Just calculate how much you will need to produce over the course of the next 3 years and work up a business plan. You must have a plan to follow because you will need a map to get you from the first day to the end of year 3.
The ideal situation would have been for you to hook up with an agency that would allow you to own your own business and work for them until you were ready to make your move. That would enable you to keep the stress level at a manageable level while accomplishing your dream at the same time.
Bob Lake

[OAgent2]

Question for Volstrike2:

I am looking to make the move to independent after 7 captive years. My biggest problem seems to be lack of preferred appointments. Buying an agency might partially solve that problem. Seems like financing an agency purchase would be a challenge right now. When you bought your agencies on a strictly renewal basis, exactly how did that work?

[volstrike3]

email me at volstrike3@yahoo.com