When I started in the insurance business, I needed to create income. All of my career since then, priority one, has been to create income! The problem is always forecasting and planning. It’s very hard to try to manage “sales” because when you do that you’re trying to manage the small end of the sales funnel. The simple way is to manage what goes into the top of the sales funnel, and that’s activity.
What I do is determine three facts first. They are: what is my average premium, what is my average commission amount, and what is my closing (or “hit”) ratio. If I know these three facts, I can back into a sales activity rate that will give me the results I need.
Let’s start with average premium. This is easy to obtain from your management system or, if you’re new, your marketing reps. Average commissions are obtained the same way. Your closing rate you need to determine by looking at the number of quotes you have done (or your producer has) and divide that by the number of sales made.
What we do with these facts to determine activity needed for a given result works like this:
Determine Income Needed
Divide income goal by average commission amount
Divide that result by closing rate
So, if we need to generate $50,000 and our average commission per account is $400, we need 125 sales. If our closing rate is 30%, we need 417 prospects who will let us quote. As a manager, I can focus myself or my team members on finding 417 prospects to quote. I can manage the “activity” required to get those 417 whether it is cold calling, asking for referrals, a mail program, or something else. I can ignore the peaks and valleys of sales and just focus on generating the activity required to get in front of 417 people.
Managing activity is much easier than managing sales. You can establish weekly or monthly targets for the activity and measure actual results against it. If you don’t see the necessary level of activity, you can adjust easily and much earlier than if you wait to measure sales. This helps you get and stay on track to reach your goals and gives you the ability to make any needed corrections more quickly.