About 10 years ago I attended Dynamics of Sales Management, which is a program put on by the folks who have the CIC and CISR programs.  It was excellent. Not just for the class content but mostly for the opportunity to visit about managing producers with a bunch of successful insurance agency owners. 

One of the topics we addressed was the real cost of getting an insurance producer from date of hire to validation.  Validation means the day on which the producer is finally earning his keep.  It is not the date on which he has paid back the agency’s investment in him.  That comes much later.   

This discussion related to commercial lines producers in the central U.S. so your mileage may vary.  But, at that time, the consensus was that it takes three years and $250,000 to bring a producer to validation.  On average.  Certainly, if your base salary expense, your service expense, marketing costs, etc. are lower the cost may be less.  But, let me remind you that we’ve had a lot of inflation in 10 years so it could be worse.  And remember, not all producers validate!

Ok, so we’re making this expensive investment.  What are our expectations?  

We could manage based on a certain amount of production each year.  Ultimately that is critically important.  But I’ll argue that initially we need to manage on activity.  

The reason for this is simple.  We know that certain activities lead to sales.  We know this is just a numbers game (and we know our numbers right?).  We know the right activities, in the right amounts, given our average sale size will lead to predictable results.

So, working backwards determine the annual production requirements.  MarshBerry, the insurance agency consulting firm, recommends 25% of annual base salary at 6 months, 50% at 9 months, 75% at 12 and 100% at 15.   These numbers make sense to me.

Now, based on closing ratios and average sale size how many initial and closing appointments does the producer need?  How many prospecting calls must he make to achieve them?  Now, we have numbers we can manage with.

Using a simple activity sheet we can see week by week, month by month and quarter by quarter if the activity is going to generate the required sales!  

If the producer is doing the activity and not getting the sales you need to evaluate:  The market – is he in the right one?  Account size – is the producer closing business but the size is too small?  Do you have the right producer?

The day you decide it’s the producer is the day to let him go.  How long should that take?  I don’t know.  Three months at a minimum.  Fifteen at a maximum.  But, the first day you know it’s not going to work is the day to fold ‘em. 

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