Backdrop of Burnout
It’s 7 in the morning, you crack open your email inbox to see if there are any work red-alerts before you take the kids to school. You get them to school and get to the office at 7:30 just so you hopefully have an hour of uninterrupted time to get your inbox back to a manageable level. That’s when you head to the bathroom and notice the drop-down ceiling is leaking; add that to the list. All-the-while, you are mentally preparing for an unpleasant conversation because you are delivering a 30% rate increase at 9am. Not to mention the 10:30 CSR interview because your 40-year veteran is planning to retire soon. Then, if you’re lucky, you might find time to eat lunch.
This day in the life of an agency owner has more to do with consolidation than many would care to admit. So, why is our industry experiencing the consolidation that it is? The easy answer is because the price agencies are fetching is higher than ever. However, the real reason owners are selling is camouflaged by the flashy headlines about the size of the deal. In our experience, a major contributor to why an agency chooses to sell is that they are burnt out from the grind of being an owner. They are ready to liquidate their asset and get back to what they are best at: being a terrific risk advisor.
At IA Valuations, every day we hear first-hand about what it looks like to run an agency. The asset an insurance agency is to the individual, their family, and their community is invaluable. Even so, the asset demands a lot from its owner.
No matter the industry, when consolidators conduct an acquisition, they do so because they believe they can achieve efficiencies that unlock more cash flow. This begs the question, what is the biggest efficiency gained by a consolidator when they purchase an agency and retain the former principal?
The former agency principal can focus their primary attention on risk advising again. This efficiency is unrivaled.
This efficiency of an an agency owner getting to focus on risk advising does not need to be reserved for the deep-pocketed consolidators; why can’t the efficiency apply to more agencies today? It can, but the better question is how? How can an agency principal avoid burnout?
How to Avoid Burnout
IA Valuations works with agencies for one of three main reasons: business planning, an external sale, or an internal sale. Of the agencies we’ve worked with in 20, those who are business planning had the highest EBITDA profit margin, on average. IA Valuations thinks this is evidence of correlation between an agency owner’s intentionality and their results. If an agency owner’s intention is to decrease their stress levels, there must be a plan that is executed. So, what are some ways to reduce the chance of burnout?
Triage your role in the agency
Hurricanes or tornadoes tragically leave chaos in their wake. If you’ve ever been on the scene of a town recently terrorized by a CAT event, it can be overwhelming. Let’s look at medical first responders for an analogy. The first step that EMTs or paramedics take in response to a disaster is patient triage. This is the process of attempting to quickly assess the severity of patients’ ailments and then prioritizing care based on severity. The patients with red flags will be the first in line for ambulances and those with yellow flags will have to wait. The point being, the first attempt to restore order to the chaos is by taking inventory of the situation.
As an agency owner, IA Valuations would suggest that an owner who wants to reduce their levels of stress first triage their role in the agency. No role is too small to be noted. Examples include personal lines producer, commercial lines producer, personal lines CSR, commercial lines CSR, payroll specialist, office manager, etc… If you can’t think of the corresponding job title, then just write down the task verbatim.
After naming all the jobs and tasks, rank the roles of the agency from what you most enjoy doing to what you least enjoy doing. This is the first step to understanding how to better delegate tasks amongst the agency.
Delegate, delegate, delegate
Consider the makeup of your current staff. Are there employees who have the capacity and/or the skills to take on additional responsibilities? After you have your list of tasks, see which tasks could be delegated to other staffers, if available. Ideally, these roles could be framed as professional development opportunities. Maybe a CSR has only dealt with personal lines for their tenure but could start to dive into commercial lines. Maybe the receptionist could get their license and start to service some business.
Whatever it may be, use this opportunity to strengthen the loyalty and career of your staff!
Good operations win
No two agencies are alike, we could show you a profile of two agencies with similar revenues and their path to said revenues could not be more different. However, a way to add value to your agency while reducing the chance for burnout is to have a winning operations strategy. Does your agency have an operationally-minded employee? Is your agency in a position where you could afford to bring on an agency operations manager? This role is not an office manager who restocks the paper and staples, rather someone who likes to get into the weeds of the issues. This person would have a detailed knowledge and experience with carrier billing systems, agency management software, and combining information from different carrier portals. They should demonstrate an ability to understand, optimize, and implement efficient processes. Many agency owners are the archetype of people who move so fast that they do not like to get bogged down by details. However, the details of clean operations should never be sacrificed for growth. Some of the most sophisticated agencies IA Valuations has worked with have an operations manager or even a Chief Operations Officer on their payroll.
Spend money to make… time!
If time is money, then spending money will also make time. Let’s look back at the profile of agencies who received valuations because of business planning. Of agencies with operations leaders, the majority received valuations for business planning purposes. These agencies, aside from being profitable, are more likely to have a higher compensation spend on operations.
It does not need to only be operations, but if an agency owner is seeking to decrease their stress levels, then they should generally be willing to spend more expense on payroll or equipment in order to make that happen. It may hurt the bottom line for a time but remember, the greatest efficiency your agency could gain is for the agency owner to spend the majority of their time doing what they enjoy!
For the agent, service staff, or agency owner who is experiencing the effects of burnout in this marketplace, stay the course! This industry is cyclical. However, do not become complacent with how things are. IA Valuations and our team of agency consultants would be happy to connect with anyone and share thoughts tailored to their agency about how they can achieve their agency’s goals. Whether it’s to triage the agency or develop a growth plan, we are there to assist. For any more information, please contact me at jarod@iavaluations.com or at contact@iavaluations.com.
By: Jarod Steed, Business Planning & Valuations Analyst
About IA Valuations and Agency Link – Founded in 2017, the IA Valuations team has performed over 270 valuations to independent insurance agencies across the U.S. Our advisors have 25+ years of experience guiding agency owners on maximizing their agency value, planning, and legal needs for ownership transition. In addition, IA Valuations has provided perpetuation planning, financial modeling and business planning for independent insurance agencies. Finally, IA Valuations has advised dozens of agency owners on selling their agencies through our Agency Link process. Agency Link is a platform that connects buyers and sellers together to further the growth and strength of the IA system. To learn more about IA Valuations, please visit IAValuations.com or contact@iavaluations.com.
The information provided in these documents is general in nature and shall not be construed as personal legal, tax or financial advice for your situation. Please contact@iavaluations.com to discuss your personal situation.
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