September 8, 2021
3 min read
I get to talk to lots of entrepreneurs about starting insurance agencies, and frequently the question comes up, what's the one thing I need to be successful? Frequently, however, I find it easier to discuss what NOT to do when starting your own insurance agency.
So I'm going to share that with you today as part of my series on entrepreneurship, your career path and insurance selling.
5 Mistakes to Steer Clear of in the Insurance Industry
The first unwritten rule to be successful is not to fail. That seems pretty obvious, but it's a really big problem.
In fact, 20% of all new businesses fail in their first 12 months. Shocking, isn't it? Worse is that only half make it through five years.
And here's something really incredible for those of you who've been in business for a while: 75% of all businesses ultimately fail within 15 years, according to the US Bureau of Labor Statistics. Why is that? What is it that causes failure? According to Investopedia, there are four things, and I think these four things are right on target.
A Lack of Capital
Simply not having enough money and enough staying power to last until you're successful or to pay your bills as you go along.
Retaining an Inadequate Leadership Team
What does this mean? It means the entrepreneur is not a good business person. By keeping an inept team, it limits the long term growth opportunities of your bottom line.
A Faulty Business Model
In other words, the way you're going about doing business just doesn't work.
Unsuccessful Marketing Initiative
Marketing is changing, but the key is to have a solid plan and to test it all the time.
Where New Independent Agents Get it Wrong
Here's something that's really interesting to me about the way new agency owners think about starting an insurance agency. They're not focused on any of those things I listed above.
What I hear all of the time is, “I need something to sell!”
But according to Investopedia and my own experience, it's not the product that creates failure; it's poor planning and bad management.
For example, think about this. Restaurants don't fail because they have nothing to serve customers, right? Hardware stores don't fail because they have nothing on their shelves.
It's not having something to sell or not having something to sell that creates failure in agencies; it's lack of capital, poor management, a bad business plan, and a marketing focus that doesn't work.
How to Refocus Your New Insurance Agency
Agency founders that concentrate on products from the beginning have the wrong focus. And that's really important because most agency owners these days want to go into business with an aggregator. What does an aggregator do? Nothing more than providing a product.
If you're thinking of starting an agency and your focus is on getting into business with an aggregator so you'll have carriers to represent. And while that's important, it's not what's going to create success and it won't prevent failure.
What you really ought to be thinking about is who can help you solve the problems of capital, management, planning, selling, and marketing. That's an agency development organization like mine at OAA.
So remember to be successful, you have to have enough money to survive long enough not to fail. You've got to have a good business model.
And generally speaking, as an insurance agency entrepreneur myself, I would just tell you to be careful not to base your business solely on personal lines because that's a limited business model that may not lead to long-term success.
One Final Question
The last thing to ask yourself is, are you up for leadership? Do you have the experience to run a small business? Do you have a vision for the future that's compelling both to yourself and your family but also to your potential clients, customers, and to the carriers you'll represent? Are you focused on success? Have you decided that this is the one thing in your life you're going to do regardless of anything else? This leads to the question, have you got the commitment to work 80, 90 hours a week, seven days a week for the next two or three years to guarantee you're successful? If you do, then you're up for leadership.
I've distilled 25 years of learning from all of the professionals in our organization into a book called UnCaptive Agent, and I'd love for you to have a copy.
But whether you buy the book or we send you one, please think about what it is you need to do, what you need to focus on to stay in business and stay active and alive long enough to be successful, and that's not to fail.
Good luck. Best of success to you!
