Thoughts on a Comp Plan...

[GMANPRO]

Hi everyone!

I am a new member on the forum just looking for some advice. I would like to start hiring producers for my agency and I have developed a compensation plan that I think will work well. The problem is, this will be my first time hiring producers so I am hoping one of you guys know if this would work.

I would pay them $500/month base pay
8% on auto 16% on fire (writing commission only)

The thought is this. If they produce an average of 35 policies a month with a $500 premium average then I will break even on their payroll.

The concern is this. Is this enough to keep people around long term?

**i will be providing voice broadcasting calls, internet leads, cold call lists, all supplies, and everything else you could think of.

Let me know what you think!
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Oh and the amount of leads they will get is more than enough to do 35.. I do 65-70 right now off of the same amount.

 

[Guest]

what the hell is YOUR commission on fire, if your gonna pay someone else 16%?

If they are getting a salary, then they arent a producer......now your gonna have to deal with EMPLOYEE issues, taxes, WC, etc....

None of my producers make any kind of a salary.....

 

[Aram Fingal]

Here is what I've found from my hiring experience:

It's more important to spend time making sure you hire the right person than worrying about how you pay them. You need to interview many candidates, in multiple interviews, and have a clearly defined expectation of what you want them to accomplish. If you don't know EXACTLY what you want from someone, in every detail, you won't be able to determine if the people you're interviewing are the right people.

If you don't hire the right people, be throwing money away if you pay a base and a lot of your time and energy either way.

It is really hard to find good sales people. If you aren't absolutely sure, keep looking. You're better off without one than one that isn't up to par.

Ok, now back to your actual question. In my opinion, if you're going to pay a base, you should probably pay a higher base (if you can afford it) with strict production requirements and a bonus structure based on production rather than a commission split. If you want to go the commission route, pay straight commission. I've seen this done successfully two ways. Either pay them the full first year commissions and no renewals (this seems to work well for captive agents who have requirements and bonuses based on apps submitted), or a reduced first year commission and a further reduced amount of the renewals (this could be a pain to track depending on how your agency is set up). But in either case, cover all their office expenses, marketing and buy them leads.

Do NOT pay a base unless you have a strict minimum production requirement. I'm even tempted to say weekly production instead of monthly so you have an earlier "out" if they don't produce. If you do pay a base and make it a monthly requirement, you might want to be prepared to let them go after the first month if they come up too far short. If you give them another month to make up the difference, you might just end up paying another month of base for no reason. I personally had this happen where I hired a guy who seemed like a good fit and was very gung-ho, but after I hired him, he seemed to stop listening to what I was telling him, and thought he could do things his own way. The agreement I signed with him said that he had a monthly requirement and if he didn't hit it, he could make it up the next month before terminated. Well, he didn't produce anything his second month either. In fact I found out that while he was out "prospecting" he had actually gotten hired by ANOTHER agency that was ALSO paying him a base and wasn't producing any business for either one. The only deals he really closed were the ones I spoon fed him so it really just ended up costing me a couple thousand dollars out of my pocket for nothing.

So basically, the moral of the story is, before you hire know exactly what you want them to do, know exactly what kind of person you need to do that, and know exactly how to figure out if the person you're interviewing is that kind of person. Take the time to be sure. Never hire after the first interview. And be very careful about putting money out there prior to them actually selling anything, you might not get it back.

 

[GMANPRO]

what the hell is YOUR commission on fire, if your gonna pay someone else 16%?

If they are getting a salary, then they arent a producer......now your gonna have to deal with EMPLOYEE issues, taxes, WC, etc....

None of my producers make any kind of a salary.....

My fire is 20% and 14% renewal.
- - - - - - - - - - - - - - - - - -

Here is what I've found from my hiring experience:

It's more important to spend time making sure you hire the right person than worrying about how you pay them. You need to interview many candidates, in multiple interviews, and have a clearly defined expectation of what you want them to accomplish. If you don't know EXACTLY what you want from someone, in every detail, you won't be able to determine if the people you're interviewing are the right people.

If you don't hire the right people, be throwing money away if you pay a base and a lot of your time and energy either way.

It is really hard to find good sales people. If you aren't absolutely sure, keep looking. You're better off without one than one that isn't up to par.

Ok, now back to your actual question. In my opinion, if you're going to pay a base, you should probably pay a higher base (if you can afford it) with strict production requirements and a bonus structure based on production rather than a commission split. If you want to go the commission route, pay straight commission. I've seen this done successfully two ways. Either pay them the full first year commissions and no renewals (this seems to work well for captive agents who have requirements and bonuses based on apps submitted), or a reduced first year commission and a further reduced amount of the renewals (this could be a pain to track depending on how your agency is set up). But in either case, cover all their office expenses, marketing and buy them leads.

Do NOT pay a base unless you have a strict minimum production requirement. I'm even tempted to say weekly production instead of monthly so you have an earlier "out" if they don't produce. If you do pay a base and make it a monthly requirement, you might want to be prepared to let them go after the first month if they come up too far short. If you give them another month to make up the difference, you might just end up paying another month of base for no reason. I personally had this happen where I hired a guy who seemed like a good fit and was very gung-ho, but after I hired him, he seemed to stop listening to what I was telling him, and thought he could do things his own way. The agreement I signed with him said that he had a monthly requirement and if he didn't hit it, he could make it up the next month before terminated. Well, he didn't produce anything his second month either. In fact I found out that while he was out "prospecting" he had actually gotten hired by ANOTHER agency that was ALSO paying him a base and wasn't producing any business for either one. The only deals he really closed were the ones I spoon fed him so it really just ended up costing me a couple thousand dollars out of my pocket for nothing.

So basically, the moral of the story is, before you hire know exactly what you want them to do, know exactly what kind of person you need to do that, and know exactly how to figure out if the person you're interviewing is that kind of person. Take the time to be sure. Never hire after the first interview. And be very careful about putting money out there prior to them actually selling anything, you might not get it back.

THANK YOU!! That is exactly what I was looking for. You guys are just awesome! What kind of base and bonus structure would you run?

 

[wappahso]

Pretty Informative Aram, thanks

 

[b61mack]

What state are you in. Bottom line is how much is an agent going to make with you. Commission 1099's only will be easier, for your books.

 

[NCAgent]

What seems like a reasonable split for producers if they are being spoon-fed exclusive leads? I work with a company that can provide them but the P&C is done almost all on the phone.

I was thinking 60% new business for the first year then for years 2+ do 50% new business and 30% renewals. Does that sound fair?

Office space, internet, phone, E&O, and leads are provided. Book ownership is possible after 3 years of business generated outside of these leads.

1099 commission only.

Does that sound reasonable? Too high? Too low?

 

[Guest]

What seems like a reasonable split for producers if they are being spoon-fed exclusive leads? I work with a company that can provide them but the P&C is done almost all on the phone.

I was thinking 60% new business for the first year then for years 2+ do 50% new business and 30% renewals. Does that sound fair?

Office space, internet, phone, E&O, and leads are provided. Book ownership is possible after 3 years of business generated outside of these leads.

1099 commission only.

Does that sound reasonable? Too high? Too low?

I wouldnt work for you at 30% renewals........how can someone build anything off that?
You have to pay them enough to market and grow their busines....

 

[NCAgent]

I wouldnt work for you at 30% renewals........how can someone build anything off that?
You have to pay them enough to market and grow their busines....

Going with that then, what seems fair to you for renewals? 40%? Or higher? Keep in mind that EVERYTHING is being provided to the agent and they have book ownership opportunities as well for things produced outside of the leads provided. The only thing I don't do is sell for them... They get the leads provided at no cost, and they reasonably can get 15-30 each week at this time. I'm just worried about making it where the agency doesn't make any money off of this as well, and I don't need it to be where if they leave and there is a bunch of chargebacks or anything afterwards there was no net gain for however long we had the client.

Given these things, RBA, what would be a reasonable compensation plan to give them in your opinion?

 

[Bertolinoins]

Just my opinion... but you don't need producers If you are going to provide leads. Producers are well compensated because they have to prospect and keep their own pipeline full. Somebody who closes inbound leads over the phone is not a producer and should not be compensated like one. I would pay a base salary with a new business bonus based on policy count with no renewals. Prospecting is the hard part.