State Farm Assignment Agency

I appreciate all the feedback, but nobody has helped answer my question. I really don't want to muddy this thread with the captive vs. indy discussion. There are already plenty of threads about that.

I am really trying to understand how a SF Assignment Agency could turn into a money pit. Please help me understand this if you have any insight.

I found out that my wife would only get to keep $1.8MM of the existing BOB. I believe that would bring in at least $15k/month in guaranteed revenue. This is of course assuming she could grow the BOB. If we kept our monthly expenses down to $12k-$15k, how would we lose money. I know this isn't ideal and she wouldn't be making much money, but how could we LOSE money?

My understanding is that she is not even guaranteed that she will have a job unless things go to SF's liking. If her supervisor suggests she spend more money marketing or wants her to hire another employee will she say no knowing that whether she is retained or not boils down to this person being happy. Most new agents have to spend money like a drunk sailors the first year and then they only cut back expenses to something managable after they are awarded the contract.

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Have you read things like this?

A lawsuit was filed against State Farm last Friday. This one is going to be big and expansive. Finally, something is being done about the fraud and deceit that State Farm uses to get people recruited and into their agency system. So many people have lost everything they owned. Kudos to the legal team on this one.

[FONT=Verdana, Arial, Helvetica]LAWSUITS FILED AGAINST STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY


Friday, July 13, 2012: State Farm Agent, Jack Tahanian filed a lawsuit today in Los Angeles County Superior Court against State Farm Mutual Insurance Company. The lawsuit accuses State Farm of fraud and deceit in the way the company presented its "new market" business model. In addition to the fraud claims, Tahanian's lawsuit makes additional claims under California's Unfair Competition Law.

John Fisher, one of Tahanian's attorneys says "There are an estimated 3000 "new market" or "scratch" agents suffering under the extremely adverse conditions created by State Farm's scheme. This estimated number doesn't reflect a larger number of agents whose contracts have been terminated by State Farm, or who had to completely walk away from their agency due to the detrimental impact of the State
Farm agent contract."

"The number of adversely affected agents we have been in contact with in the last several weeks is extraordinary. Hundreds of agents from all over the United States and Canada are in desperate financial trouble and are seeking relief from State Farm's schemes. Many of these agents have suffered severe financial ruin, and have been forced to either seek protection by filing for bankruptcy protection, or are on the verge of doing so. The similarities in each of their stories of their treatment are strikingly similar. This program is a shocking failure and State Farm continues to promote it in a positive light, knowing full well they are dooming the vast majority of these men and women to financial ruin. It is truly a disgrace to the company's long history of commitment to its agents. It's also a disgrace to the legacy of a company that once represented the elite in insurance agency opportunities" said Fisher.

Fisher is working within a network of law firms who specialize in large scale, national litigation such as these cases. The key attorney in the case is Archie Lamb of Birmingham, Alabama. Lamb has spent numerous weeks meeting with agents all over the United States and Canada listening to their desperate circumstances.
Lamb's national practice is focused on mass torts and class-actions. Lamb previously represented the California Medical Association and numerous other medical societies against the HMO industry. Lamb and Fisher are also collaborating on the State Farm case with The Sizemore Firm out of El Segundo and the Whatley Kallas Firm out of New York City.

All agents are encouraged to contact this group with any and all questions regarding a potential claim at 1-205-324-4644. All calls and inquiries will be kept confidential.
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That's what I'm trying to figure out by starting this thread. The only 2 expenses I know the numbers on are about $6,500 for 2 employees and about $3,500 for rent. I know there are several other monthly expenses but I don't know the $$$ specifics. That's why I started this thread. To get some insight from all you experts.
 
That's what I'm trying to figure out by starting this thread. The only 2 expenses I know the numbers on are about $6,500 for 2 employees and about $3,500 for rent. I know there are several other monthly expenses but I don't know the $$$ specifics. That's why I started this thread. To get some insight from all you experts.

She shouldn't need two employees, herself, and you part time for a $1.8 million book.
 
The cost of going broke comes from the cost to acquire new customers. The rent, payroll, utilities, insurance, etc are all fixed and easy to add up.

The unknown is how much will your wife and you need to spend in order to acquire 1 customer. What is the marketing plan and budget? Will you buy tons of leads and spend $1 to make $1 or will you grow through other organic methods at a slower rate. How competitive is SF in your area? Your wife should know all this....

I owned a captive agency that was similar to your scenario. The commissions from the book paid to keep the lights on. I made great money for a few years then lost my shorts for a few years. Underwriting and rates changed dramatically. Plus the every looming life and financial goals that will take an entire bonus from you if you cant meet the minimums. Everything depends on how much it costs to acquire a customer.

Would I change my experience? Nope, because I cant.... I learned a ton.
 
You are all forgetting the elephant in the room! SF will expect you to spend a minimum of $40K to $50K a year for auto and fire marketing. The marketing will include internet leads, mail leads and other miscellaneous advertising. The team members you hire will be following up and closing said leads. You will need to pay the team members a salary and commission. Salaries will be in the $25K area with another $25K in commission, you will be expected to have at least two team members. Your rent seems high... What part of the country are you looking at for the office? The 1.8M assignment will be $180K in revenue before new business commissions and Scorecard bonus. Also, you will be expected to earn Ambassador Club to get your permanent contract at the end of the year. Scorecard and Ambassador is based on financial services production, i.e. life, annuity, bank. SF just pulled the mutual fund production from agents effective 4/2017 due to new DOL rules. I can promise that your $180K revenue will just cover expenses and most of your first year auto fire commissions will go to acquisition costs. You might make some money on the scorecard bonus if you are lucky. Expect to make no money for one or two years, but after that you should be OK. It might take you 4-5 years with $800K annual P&C growth, financial services commissions and Scorecard bonus to make in the $250K net range.
 
Clearly we as insurance agents don't need to have reading comprehension skills to be successful...because no one here has any.

"P.S. I know every thread on this site talks about how much better Independent is than Captive, and I'm convinced that's probably true. Maybe that's a choice we will seriously consider in 5-10 years, but I'd like to keep that off the table for this particular thread please."

Or, we just want to save this individual from their fate if they go to SF.

The marketing is going to be the killer. As a SF agent, you'll be paying to have your mug on a billboard. You'll be buying a phonebook ad. I get the same mailer from two nearby SF agents at least twice a month from EACH of them. To put that in perspective, if I were to use Safeco's homeowner mailer program for just the zip code I live in, it would cost over $3k to do it just ONCE.
As I mentioned in my previous post, lots of passive advertising, which has a low ROI.
 
Or, we just want to save this individual from their fate if they go to SF.

The marketing is going to be the killer. As a SF agent, you'll be paying to have your mug on a billboard. You'll be buying a phonebook ad. I get the same mailer from two nearby SF agents at least twice a month from EACH of them. To put that in perspective, if I were to use Safeco's homeowner mailer program for just the zip code I live in, it would cost over $3k to do it just ONCE.
As I mentioned in my previous post, lots of passive advertising, which has a low ROI.

You're like the only one in here who actually gave advice the OP wanted. I don't see why you would take exception to it.
 

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