‘Self-franchise’ your own agency

Virtually every agency entertains visions of expansion. Multiple offices mean a greater geographical reach, more market share, and higher revenues. But on the flip side, they can translate into a duplication of services, extra overhead, and a selection of stressful managerial headaches. This column describes how to achieve the benefits of an extra office, while minimizing its problems.

In the agency business, as elsewhere, growth means survival. But the actual expense of seeking that survival can sometimes drive you out of business. That makes it essential to pick the right path. Your primary options are cross-selling, aggressive external marketing, hiring additional producers, and buying or opening another agency office. Self-franchising lets you do much of the above simultaneously.

Traditional services

The conventional branch offers full functionality, providing clients and prospects with precisely the same services as the main office. It may have been established as the end result of an agency acquisition or merger. Policy changes, claim reports, and premium payments are all handled on-the-spot. At least one CSR and producer staff it. The office may even maintain its own computer system and bookkeeper. In other words, the traditional branch office is a smaller duplicate of the main agency; sort of like the Mini-Me character in those “Austin Powers” movies.

But these offices have a downside. Too often they focus more on service than on sales. The resulting costs can erase most or all of the revenues generated. The only real benefit of a barely profitable branch is additional volume, which can potentially pump up production and keep your leading carrier happy. However, you can accomplish the same and more by expanding through self-franchising.

Brand expansion

“Self-franchising” is so named because it gives a geographically distant office the “right” to market insurance and related services under the main agency’s brand. The branch is owned by the agency and staffed by new or transferred employees.

It’s not a franchise in the legal sense. It simply borrows a few of its characteristics to illustrate the practical advantages of cost-effective agency expansion. These benefits include a clean room environment to build an office from scratch, at modest cost, in a carefully selected location. And as with an actual franchise, each branch you open should follow the same format. Minimal client service is provided. Instead, the focus is on sales.

Clean room

A clean room environment allows you to build a sales branch that’s free of full-service concerns, such as bookkeeping, claims, and routine policy service. These vital, but highly time-consuming functions are best handled from your main office, where you already have the infrastructure to handle them. All non-urgent client service is handled there, where it enters the ordinary workflow.

This frees your self-franchised office (SFO) to focus exclusively on selling. However, the scope of these activities depends upon the prospects and areas to be targeted.

A SFO only makes sense when there are compelling sales reasons to open a branch, in a specific geographic area. These may include establishing a quick presence in a fast growing suburb or to better compete with a rival insurance office. Another reason to open one is that it is far easier to market to consumers and businesses when there is physical proximity.

Many people still prefer to buy their insurance face-to-face. This is mainly why the Web hasn’t swallowed up the entire industry, as once predicted. Immediately after opening, send multiple “Dear New Neighbor” mailings to surrounding homes and businesses, run print ads in neighborhood publications, and send out press releases to announce the new branch. Also use the SFO to cross-sell to existing insureds who reside or do business near the new location.

Services

While the branch’s goal is to minimize service, clients who stop by should never be turned away. ID-cards should be issued, payments accepted, etc. However, as the requested help is being provided, take the opportunity to educate your insureds that these services are normally performed at the main office. And clients who call the branch for service are transferred to a main office staffer or a company claims rep who helps them. Soon, most (but not all) SFO clients will contact your central location for their routine service needs.

Conclusion

Before committing to this type of expansion, don’t overlook the obvious, including selecting the best possible location, spotting nearby competitors, identifying prospects and their proximity to the prospective SFO, staffing, and running pro forma numbers.

Run a series of P&L projections for at least three years forward.

Carefully estimate your personnel, marketing, automation costs, plus other routine selling and operating expenses. If the numbers don’t look right, defer opening the SFO until they do.

Furthermore, young agents, with a few years experience, are often anxious to further prove themselves. Setting them up in their own office gives them the opportunity. It simultaneously gives a sales-minded CSR the chance to show that he or she has what it takes to become a producer.

That’s another benefit of the SFO; they provide affordable growth paths for producers and CSRs, as well as the agency itself.