Are You a Sales Builder or a Business Builder?

Are you a great producer running an agency on the side or are you an executive running an agency where one responsibility is making sales?

There has always been too much truth to the old adage that doctors are the worst business people. For some reason, many doctors seem to believe their medical degree also gives them all the knowledge they need to run a business part-time, never realizing or accepting the reality that running a business is a full-time job and running a business well has no similarity to the practice of medicine.

Similarly, I have met so many wonderful craftsmen who failed in business because their love was their craft, not running a business. But they had to run a business to practice their craft.

After almost two decades of consulting with agency owners and teaching agency management classes throughout the United States and Canada, I have learned that a great many agency owners are agency owners because they are good producers who need their own business in order to work and practice their craft. Their key interest is not in building a business. They may have an interest in building sales, but that is not the same as a commitment to building a business.

The lack of commitment to building a real business versus trying to build sales explains why in many agencies, such a high percentage of sales actually lose the agency money. It explains why such a high percentage of producers fail to build adequate books of business. It explains why so many agencies are out of trust. It explains why the vast majority of agencies are small. And it explains why clusters are so popular.

Mighty Struggle

There is absolutely nothing wrong with being more interested in sales than building a business. The challenge arises when the agency owner is really only interested in increasing sales but is forced to run a business. The problem is running a business well often limits sales, on both a personal and corporate level.

On a personal level, managing an agency often takes up too much time so there is not sufficient time to make all the sales calls the owner might desire. So the owner has to be proactively selective about which sales to make.

On a corporate level, the agency has to set boundaries relative to account quality. Quality may be defined by size, market, underwriting characteristics or other criteria. Regardless of the definition though, a healthy agency requires boundaries for account quality. If an owner’s real driver is making sales, these limitations fly in the face of what the owner really wants to do, thus creating perpetual conflict and often eroding their enjoyment of the insurance business. In these situations, sales and management both falter.

The struggle is mighty. For those who love sales first and foremost, the pressure to institute systems, bullet-proof the agency against errors and omissions, deal with IT systems, manage relationships with carriers, and force producers to sell – all in order to attain enough size to remain a feasible agency – can be overwhelming. These are not issues these owners enjoy and yet they are matters that cannot be ignored or easily delegated to anyone else in the agency.

This is why so many agencies grow to between $750,000 and $2 million in revenue but cannot grow any more. It is possible to build an agency of this size purely on sales and without real business strategies or discipline. Building beyond these limits without real business acumen is extremely difficult. And just because you read of agencies that have grown far larger, don’t assume they have better strategies or discipline. Often, they are worse but they have less regard or more ignorance of the need for professional management resulting in a precariously teetering enterprise.

Owner vs. Salesman

The other side of the coin is the agency owner whose love really is in building the agency and its systems. They truly enjoy running a business much more than they enjoy making sales. These agency owners are often completely committed to not only building the best agency possible, but also building a real business. To build a real business, though, requires sales, usually lots of sales. Small agencies rarely employ more than one or maybe two people who can really sell. So rather than having sales without a real business, these owners have a real business without adequate sales.

In working with these agency owners, their eyes light up when they talk about the metrics they measure, the quality of their business, how companies really love their upfront underwriting, and how their agency is perfectly situated to grow. But rarely do they have a real sales strategy. It is natural for people to spend the most time in situations they enjoy and avoid what they don’t enjoy. So these owners spend as much time as possible managing the business.

In an interesting twist, the one area they do not like to manage is producers or producer development. Whereas the owners who like sales more than management can still fall back on their own sales when their producers fail, the owners who prefer management over sales do not have this fail safe option.

Agency owners who do not recognize they don’t do sales because they don’t like sales, but are always pushing sales in their office while trying but failing to build their own books, are poisoning their own agencies. I am a huge believer that agency owners who are salespeople create a better culture. But if this just is not going to happen, it is better for the owner to stop pretending to be someone they are not. Otherwise, they foster a gloomy environment. I have seen this occur far too many times.

Many agency owners who prefer to manage have a great opportunity if they use their management skills to build a great business. The key is for the agency owner to have the discipline and money to hire a person (or two) to develop and manage the agency’s producers or have the ability and luck to hire enough of the extremely rare $400,000-plus producers who need no management. It takes extreme dedication and a real sense of urgency, plus a lot of capital but if achieved, the results are phenomenal.

Otherwise, those owners who really want to manage must figure out how to increase sales to a level where they garner respect. Then they can employ their management skills, which are a more valuable advantage, and their lack of selling desire is not an anchor.

Recognize the Need

Conversely, owners who mostly like sales have it somewhat easier. Regardless of agency size, if they recognize the need to grow into a real business, their greatest opportunity may be found by hiring a quality chief operating officer (COO). The agency owner must give that COO considerable authority and responsibility to build and manage the business, even if it means the owner does not play as large a role. An ego check is definitely involved, but finding a quality COO is easier than finding the production necessary in the other scenario.

In smaller agencies, the COO role cannot be as big and that person likely will have other responsibilities. In these situations, owners should never confuse the COO with an assistant as so many agency owners have done, because the result is always failure.

In larger agencies, the COO role is a full-time job, but it is a job that will be conducted more efficiently if the COO builds a small book of business on his or her own.

The key here is for owners to determine who they really are. There is not a right or wrong solution. They have to be true to themselves. Or they may even choose to embark on a disciplined journey with a coach to help facilitate the change.

Owners pretending to build a business when they really just want to make sales is not a formula for success. Odds are good, as long as the agency is not too small, that a well-run $1 million agency designed to provide a sales-base for the owner to make sales, will return much more money and joy than the same situation in which the owner is always attempting to build a real business, even though his heart is not into it.

Owners pretending to make sales and emphasizing sales when they really just want to manage is not a formula for success either. This just may not be the right industry for them and there is nothing wrong with acknowledging this. It sure is a lot better than being perpetually unhappy.

It’s time to stop trying to pound round pegs into square holes and square pegs into round holes. It’s time to line up skills and desire with strategy and execution. It’s time to accept the limitations of pretending to be something you are not and look forward to less frustrating and more enjoyable lives.

Topics Agencies