Episode 024 — The Digital Broker Podcast

Ensuring the Perpetuation of the Agency – Growing Owners from Producers (Featuring Cooper Jones)


In this episode of “The Digital Broker”, Steve and Ryan speak to Cooper Jones, the President of The Crichton Group, the largest independent insurance agency in Middle Tennessee. Together, they discuss the methods that agencies and brokerages can use to ensure their perpetuation over time.

By listening to this episode, you’ll learn:

  • What it is like to grow from being a producer to an agency owner
  • What it takes to be positioned to buy an ownership role in an agency
  • How to identify a successful producer
  • How to transition and empower an agency to being service-oriented
  • The different options for agencies to self-perpetuate

Full Recap

There have been significant changes over the years regarding the perpetuation of small to medium-sized agencies in the insurance market. Steve, Ryan, and Cooper discuss some of the changing ways that an agency can continue to exist in today’s environment. The episode looks not only at the changing nature of the agency and how to ensure perpetuation, but the changing definition and key indicators of a successful producer. In addition, changing roles within the agency are examined, focusing on the transition from a sales generation structure to greater focus on service and customer experience.

Who is Cooper Jones?

Cooper Jones is the President of The Crichton Group, the largest independent insurance agency in Nashville, Tennessee. Cooper has a bachelor’s degree in Business Administration from the University of Mississippi. He began his career selling staffing services and was attracted to the insurance business, joining Crichton in 2002, starting out in the Property/Casualty lines. At that time, the Crichton agency had 15 to 20 people with revenues of about four million dollars. He was promoted to President in 2016 after 14 years with the company. Currently, Crichton employs about 105 people and revenues have reached 22 million dollars.

Was Your Original Goal to Be an Owner (5:00)?

Cooper knew he wanted to be an entrepreneur but was not sure what area he wanted to enter. He did not know much about insurance but met Jimmy Ward, the CEO and majority shareholder of Crichton at the time. Cooper was presented with the opportunity to join Crichton and start his own business within the company. He was told that if he did his job effectively and profitably he would get an opportunity to buy into the company. This was the standard method that agencies used at the time for self-perpetuation.

What is the Secret to Success to Acquire an Ownership Stake in An Agency? (6:20)

The most crucial factor is having the drive and a sense of commitment. There are many excellent producers who can make money in the industry by merely treating the position as a job. While it is certainly mandatory to produce revenue to successfully buy into an agency, there must also be the commitment to the industry, to the employees, and to the clients. It is truly a big-picture approach of having the commitment to not only the job with everything else that it entails. In addition, it is important to have the ability to win the respect of people.

What Defines a Successful Producer and How Has That Changed?

There is a difference of opinion as to whether a successful producer is one that inherently knows insurance or one that understands the business and problems of the client. There are two important aspects of being a good producer. Firstly, a top producer understands insurance, not necessarily at the level of knowing all the inherent details of the policies but more in the sense of the agency’s value contribution in solving client problems. This places the producer into the role of being a quarterback calling plays, rather than simply someone that executes.

Secondly, there is a critical need to have business acumen. This is one of the toughest things to teach and especially difficult for newer and younger producers to grasp. Experience has often been the best teacher, through the process of trying and failing and then trying something else. Leadership positions can often help create a better producer by giving an understanding of business problems and how insurance fits into the solution of those problems.

What is Meant by Business Acumen? (8:35)

The business approach to insurance sales is needs-based. In this regard, the job of the producer is to first go out to potential companies or prospects and ask the right questions to identify problems that need resolution and then bring those problems back to the office for analysis. The agency then will consider what can be offered to provide the needed solution. The producer will then return to the prospect with a solution that is both understandable and quantifiable. Obviously, a good producer will have the ability to deliver that solution convincingly, as people are buying trust and need to feel confident in the value of what the agency is delivering.

What Are the Key Indicators of a Successful Producer? (9:55)

An important attribute is a sense of urgency, especially for a newer producer. A great producer needs a drive and must genuinely enjoy the job. They should want to solve the customers’ or prospects’ problems. If the producer focuses solely on making money and on the commission, they will fail.

Another factor is specialization. Success comes more easily if a new producer is provided with a roadmap for the industry. Agencies are more often getting into niche markets, partially to provide depth of expertise and a scalable value. There is also considerable consolidation in the insurance industry and competition is changing the industry. To compete with the large brokers, regional agencies, and private equity firms with a lot of money, a smaller agency needs to figure out which market or markets to compete in. The agency needs to invest in those markets, focus and be willing to commit the resources.

Tied into these factors is enablement. There is a leadership layer in an agency which sets strategy and vision, an operational layer that implements the strategy, and the staff which is following the path of the operations team. These teams must have focus and be on the same page or confusion will result. Transparency and getting people to understand the agency mission and rationale is a key to success. The agency must deliver a consistent message about the importance and benefits of growth especially regarding benefits to the employees. One of the biggest issues facing the insurance industry is the talent gap. Employees stay in positions for shorter periods of time while the industry continues to age at a rapid pace. For an agency to be successful, it must provide an opportunity for people to do different things through growth. Growth is not entirely about revenue growth but also includes providing opportunities in terms of career pathing at least to help in retaining people longer. A frequent problem is the churn of employees. Agencies will often believe their employees are happy in their roles and then suddenly learn they’re leaving to another agency.

Agencies should remember that there are two types of growth related to revenue – writing new business and retaining existing business. The most commonly recognized type of growth is writing new business but it’s important not to lose sight of the need to keep current business. There is a dangerous assumption common in the industry that that business, once won, will stay. Many agencies are incapable of understanding the impact of retention because they are not measuring it or not measuring it correctly.

What Is a Successful Retention Mindset? (14:45)

The producer needs to go out and deliver a quantifiable solution and the agency needs to be able to implement it. Specialization is important because it ensures resources are available and they can be replicated. To have retention, quality data must be available, and to have quality data, one must have leadership that places an importance on it with their staff.

How Can Producers Quantify and Articulate the Value of an Agency? (16:00)

It is important to know what the ideal customer looks like. Sometimes an agency must walk away from a customer because they’re not the right fit for the agency. The concept of pursuing the right business must be communicated to the producers to find the clients that fit what the agency is doing. This is something hard to communicate and harder to impose. Sometimes producers must be given leeway to pursue business even though it will not end well.

How is the Role of the Producer Changing? (17:50)

A continuing change in the industry is the concept that a client is a client of the agency, not a client of the producer. It used to be that a producer called on an account, wrote the business, and serviced the account for upwards of 40 years. If an agency is going to compete in the middle market space it will need to let great salespeople have time and space to sell as well as letting proactive client service people have the time and ability to service. It’s important that agencies understand that these are two totally different things. The larger brokers have been employing this separation of function for quite some time. The agency needs to be committed to the sales and service model. A producer’s role can be compared to the role of a pilot, in which they’re responsible for takeoffs, in-flight emergencies and landing with an account manager who can be responsible for the rest.

How is the Transition from a Sales to Service Team Structured? (20:10)

The transition is not always a painless process. To make the transition happen, the agency needs to invest in the right people. In addition, it is necessary to determine the right time to do it. It is easier to implement with new clients. With others, it takes time to transition and can often be a lengthy process. In some cases, the transition can take a couple of years. It is important to explain this process to the client. It is sometimes difficult for senior producers to let go and give the account executive the freedom to do it their way. It is vital that there are a uniform approach and process, or the client will end up confused and dissatisfied. The agency needs to be committed to the transition and invest in the resources to ensure success.

How Can Account Managers and Producers be Empowered to Deliver a Great Customer Experience? (21:50)

To implement this, it is necessary to look back at the value discussion. The days where the value of an agency was measured in how quickly a service request is fulfilled are gone. The value of an agency in today’s world is ensuring the service is fulfilled properly and with quality care. To do that, the agency must figure out how to offload work to the service team in an effective manner and ensure it’s done accurately. The key to doing this well comes from hiring and investing in better, pro-active, client-facing professionals.

It’s important to create a culture where the staff feels the freedom to challenge management and offer innovative ideas and try new things. The innovative ideas don’t always have to be accepted but it is important for everyone to have the freedom to offer them. When trying new ideas, it is important to ascertain quickly if they are workable, using the concept of “failing fast” and moving on to other ideas if the idea doesn’t work.

How Have Options for Agencies to Perpetuate Themselves Transformed Over the Years? (24:30)

A few decades ago, the only way to perpetuate the existence of an agency was for an internal member to buy in. At that time, a large agency averaged four to five million dollars in revenue and would trade at multiples between four and six. Without that internal investment, the agency would end up being sold.

When relying on internal perpetuation, it’s important to understand that growing a producer is not a quick thing. It’s fallacious to expect to have a producer come in and buy the agency within a few years. Good people must consistently be hired and grown. There needs to be a metric in place to measure success and there must be transparency and open communication as to whether goals are being met. If goals are not being met, the agency must move on to better prospects.

Today, there are many additional options for selling an agency. For example, there is private equity money out there looking to purchase majority equity or full ownership in existing firms.

Perpetuation can also be accomplished through the use of family offices, as well as an investment of pension money or funds from other sources. When utilizing the outside investment models, there is the tradeoff of giving up control.

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