P&c Agency Structure Advice Needed

Milkman1265

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Ok, now I know this may sound like a broken record for those repeated questions, but this one is a little bit more in-depth.

It is directed toward agency owners and their profit and expense.

Ok so how much is the p&c profit margin suppose to be? I'm having trouble figuring out what to pay people.

How much should I offer a person that will handle all back end office? They handle everything but accounting and sales. I will handle all sales.

Assuming i will be paying producers 50% new business and 10% renewal with targets to reach higher commission.

Should i offer him 30% of new and renew after producer split, before producer split? For sevicin and handling all issues in office. A salary instead? Or a split with a cap at 75k then if business is good bonus for the year?

What is deem fair in the industry? I will pay all overhead and he will just service and deal with back end.

If i do before split I as a agency owner will only have a 20 % margin with out calculating expense.

After I have 40% margin.

What Bout a different split for new and renew for the him?

Anyways let's say an agency makes 1000000 in commission. How much do you pay producers how much do pay the back end office guy. Keep in mind the back end office guy is a kinda like a partner situation but no shares in company. I put out money, she put out expertise.
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Should the splits be something like this? How would you allocate your agency profits.

25% agency profits
50% payment to producers
25% expense payment / staff
 
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I would make sure that individual is licensed before you start offering them a commission split or I would hire a CSR to handle the day-to-day servicing.
Good luck finding a producer willing to accept a 10% renewal commission based on traditional P&C sales. Industry standards are at least 20%.
You margin will vary dependent upon your line(s) of business. Some are more profitable than others as they require more staff, additional software, etc. However, you're on the right track.
Lastly, make sure you get that individual to sign a non-solicitation agreement. It sounds like you want to drag it in then not touch it again.
 
would 30 up front 20 renewal starting, be fair?

as a agency owner, its always about the bottom line, and im trying to figure out what profit margin a successful agency needs.

Also from your point of view does producers of an agency make more money than the agency owner?

Everyone will have to be licensed, and the back end office is licensed and sort of an in house underwriter, he will be responsible for accepting and rejecting risk before submitting to company.

the producer commission is in tiers and can earns upwards of 50% new 40% renewal. i know a lot of people offer 75%/20% renewal, but how can this be profitable if you are left with 25% and you hire staff and overhead to take care of the servicing?
 
would 30 up front 20 renewal starting, be fair?

as a agency owner, its always about the bottom line, and im trying to figure out what profit margin a successful agency needs.

Also from your point of view does producers of an agency make more money than the agency owner?

Everyone will have to be licensed, and the back end office is licensed and sort of an in house underwriter, he will be responsible for accepting and rejecting risk before submitting to company.

the producer commission is in tiers and can earns upwards of 50% new 40% renewal. i know a lot of people offer 75%/20% renewal, but how can this be profitable if you are left with 25% and you hire staff and overhead to take care of the servicing?

I don't know how many people you can recruit offering 30 new/20 renewal. You really have to look at how much a new producer can write and what is an acceptable amount of first year income. Your back office person should be on salary or hourly. Unless you plan on hiring 4 guys right off the bat you could probably get away with a part time person. You will make your money on the renewals, you have to offer enough first year commission so that the producer can earn a living.

Lets say you think a new producer can write $30k a month and the average commission percentage is 12%. The gross income to the agency is $3600. Can the producer live off of $1,080/month? I am using random numbers and yours could be more or less. Depends on your market. We usually offer 50/25 with everything included. We will also consider raising the percentage the first couple months until they have a solid pipe line.
 
how much will you raise their commission if they are producing very good? or you will do year end bonuses?

here's the full situation,
i have been working for indy for 3 years, and i've met a season agent, who has been in the industry for 40 years. he knows all the local cluster head officers (decision makers) / direct carrier reps. But he is an old cat, and doesnt want to sell anymore.

what he brings to the table, direct lines and accesses to all the competitive carriers. run the whole back end office as manager.
he handles all the servicing needs, (billing, endorsements, phone calls, emails, etc...)

i will be the face and front lines, i will go out and sell and bring in clients. he handles all the servicing needs, (billing, endorsements, phone calls, emails, etc...) i handle bringing in income and filling up pipe line.

what is fair to offer the manager?

at what revenue or policies/clients do we need to hire a CSR to help him in the back end office? i will be sole producer for now.

i will add producers as time goes and when opportunity exist. so im just trying to make a financially sound plan and execute it and follow along.
 
i will own 100%, he only wants to be an employee and when things take off (in good faith, that i will take care of him and maybe give him some shares for him to retire)
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also should i treat myself as a producer and get the 50% and then the additional agency profit? or this doesnt sound fair?



also how much policies can one CSR handle? 500? 1000?
 
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You are over thinking the whole thing right now. Worry about getting set up and figure out a split between you two. There shouldn't be a whole lot of processing that needs to be done in the beginning.
 
what if we are purchasing a book of business, that will get the revenue running, but obviously need me as the sales to keep the prospects coming in.

im trying to figure out a plan for the long run.

is it normal for any one person/staff/producer in the agency to make more than the agency owner?
 
I don't know how many people you can recruit offering 30 new/20 renewal. You really have to look at how much a new producer can write and what is an acceptable amount of first year income. Your back office person should be on salary or hourly. Unless you plan on hiring 4 guys right off the bat you could probably get away with a part time person. You will make your money on the renewals, you have to offer enough first year commission so that the producer can earn a living.

Lets say you think a new producer can write $30k a month and the average commission percentage is 12%. The gross income to the agency is $3600. Can the producer live off of $1,080/month? I am using random numbers and yours could be more or less. Depends on your market. We usually offer 50/25 with everything included. We will also consider raising the percentage the first couple months until they have a solid pipe line.

50/25 split is that for a non-servicing producer? I was approached by a mortgage broker / real estate guy who is licensed in P&C as well from his last job. He wants to handle initial meetings, gathering information and myself or my CSR will punch things in for quotation and then I'll join him for a final meeting (more so for commercial on this, personal is easy enough to close). All service work myself and CSR will handle. But he said he would be ok at handling renewals.
 
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