Episode 163: True Profitability

Welcome to the Unstoppable Profit Podcast. This podcast will give independent insurance agents all of the tools to grow your business and live life on your terms. Wherever you are today, if you're starting with nothing or well on your way to the success you desire, with the right people, processes and promotions in place, you will be unstoppable. And now I'd like to introduce your host, Mike Stromsol.

Greetings, everybody, and welcome to the next episode of the Unstoppable Profit Podcast. Today, I want to share something with you that I just don't understand completely. And it's why. Why agency, entrepreneurs and business people, period, don't pay closer attention to their numbers. It drives me absolutely batty because at the end of the day, if you don't know your numbers, you don't understand your true profitability. You don't understand the value, the true potential lifetime value of a lead. You can't effectively and properly lead your business and manage your business into a greater realm of greater profitability without understanding what's going on at the foundation. You know, I talk about it in my book, which, by the way, if you're watching or listening to this podcast right now, email me, email me your shipping address. I will ship you a complimentary copy of my book, the Unstoppable Profit Producer in part two, under processes, chapter nine, watch your money. And I'll be happy to ship you a free complimentary copy of my book, just mike@upplife.com mike@upplife.com email me your shipping address. Put watch your money in the subject line and I'll ship you a copy of my book because at the end of the day, you've got to know your numbers. So I want to talk with you a little bit about numbers. I'm going to go right to the numbers from some of our most profitable years in the agency business, including historically. I went back and looked at 10 years of numbers historically because I kept meticulous numbers over the years and I always want to know exactly where we've been, where we are and where we're going. So I went back and reviewed 10 years and I pulled out some of the very best years that we were able to achieve. Incredible numbers. And I want to share these with you from a perspective of the profit and loss statement. By the way, you should be looking at your profit loss statement at least once a month. Your reconciled bookkeeping should be up to date as of the end of the prior month, at least two weeks after the end of the prior month. You should have currently reconciled bookkeeping done and I asked agents about that. In fact, I recently asked an agent about that before I jumped onto this podcast and they were months behind. Don't let it happen to you. It's not acceptable. You've got. It's. You have a duty and a responsibility to yourself, to your teammates, to your business, to your family to make sure that you keep up on these things. And that's why I'm sharing this with you, because I don't want to happen to you. So I'm looking at a profit loss statement from our agency operations well into the seven figure revenue realm. Okay. And so this also was asked of me recently in group coaching sessions. Where should our numbers be? Our platinum coaching group sessions. We recently had one of our six round of sessions that we have throughout the year and this question came up. Where should we be? So I am going to share it with you. I shared it with them and I am going to share it with you here. Where should you be with relation to percentage of gross income attributing to certain ledger items? Okay. Percentage of gross income that should be going to certain ledger items. And I'm not going to go through every ledger item. I've got full blown budgets in the whole nine yards that we've created over time. And I shared it with some of the members in that session because they asked for it. That's a much deeper dive and I'm not going to go into that on this particular podcast. But this is at the core of true profitability. Okay. Which is what I want for you. True high profitability. True high profitability. And the 20 to 30% range of gross income should be your net profit. Yes. And if you're not there yet, that's okay. You have a spotless future. We can help you get there. Okay. So we're going to talk first about. There were three main topics that people were interested in. Marketing and advertising, technology and payroll. Employee payroll. Okay. So I'm going to tackle those and I'm going to tackle them in that order since the PNL that I'm looking at has advertising and marketing first. So percentage of gross revenue or gross income attributed to advertising and promotion or marketing. 11.5%. This is in one of our very best years. And that's what I went and pulled out. 11.5%. Could it be higher? Yes. Could it be lower? Yes. But that particular year when we had incredible numbers, that was that year we did 11.5% attributed to. Now when I talk to agencies that are not getting the Results that they want. One of the very first things that I go to after the people and the processes is absolutely promotion. And if their pipelines are not full of quality, ideal prospect potential clients, that there's an advertising pro promotion and marketing problem in that business. And so what's the way to fix that? We'll do more of the right kind of advertising, promotion and marketing. Okay. And there's an investment to that. 11.5% is the number. And I think that's respectable. I work with agencies and I'm aware of agencies out there that do well into the 20% because they can. It just depends on your situation. And there are lots of ways where you can do a better job of advertising and promoting and marketing at less of a cost. It just has to be very strategic. And those are some of the things that we teach as well. So advertising, promotion and marketing. As a percentage of total gross revenue, about 11.5% technology, technology investment in technology, computer operations, digital technology, phone operations, etc. That is about 3.2%, 3.2% of gross annual revenue attributed to technology, digital technology, computers, phone, etc. Etc. In our agency business. So I think that's a respectable number as well. You might be a little bit higher, that's fine. But you know, you don't want it to be exorbitant in any way. And you've got to watch your money, you got to pay attention, you've got to inspect what you expect. So be aware. What the heck is going on. I'm going to come back to group benefits because I'm going to piggyback that onto payroll, because that's the next part of the conversation. Payroll. The highest number in any business, if you got employees, is payroll. And this particular payroll number does not include officers compensation or owner's compensation, if you will. Okay, so the percentage of gross revenue or gross annual income revenue for payroll is 25.8%. 25.8%. Honestly, that's running pretty lean and very efficient, but that's the percentage. And again, that does not include officer or owner compensation. It does not include taxes. That is the raw number for. For employee payroll in today's marketplace. I'll suggest that's higher in a lot of situations. And that's just the advent of the marketplace, because employees or team members, if you will, in a lot of marketplaces are commanding and earning higher salaries. Because that is the trend in a particular marketplace. I understand that there's ways to structure the compensation, however, to make it advantageous for not only the business but for the team member as well. And it gives them a higher opportunity to earn even more. But it's got to be strategic and thought out. So 25.8%, I think anywhere in the 30 to maybe 35 to 40% range is totally fair and adequate. It may not get you to the 30% net profit number, but you should still be able to be really respectable even with that number. It depends on what your benefit situation and the other costs. Speaking of benefits, let me add that on. I went back and looked at the group benefits because we have traditionally always been a very rich group benefits organization. And the group benefits percentage of gross annual revenue runs right at 3%. Runs right at 3%. And that doesn't include a lot of extras that we do, things like Wheel of Fortune, spontaneous incentives and lots of other cool stuff. Team health days, outings with the team, etc. Etc. But the group benefits is running about 3%. So to give you a quick recap, advertising, promotion, marketing, about 11.5% of gross annual revenue. Total computer and digital operations running about 3.2% and payroll running about 25.8% of gross annual revenue. That does not include owners or officers compensation. And the group benefits about 3%. Again, the payroll might be higher than that. But I just wanted to give you something to understand where you should be approximate and if you're not there, there's always opportunity to get better every single day and improve. Now, I want to share with you the other numbers that you should be aware of all the time. If you are an agency owner entrepreneur, the number you should have your finger on the pulse of consistently is your revenue, not your premium. I talk to agency entrepreneurs all the time. They say, well, I'm at 5 million premium or I'm at 10 million premium. Here's the honest truth, and I'm here to tell you the truth. You can't deposit premium in the bank. It's really that simple. You can't deposit premium in the bank. You can only deposit revenue or commissions in the bank. So you've got to understand what your revenue is. You've got to keep your finger on the pulse. I mean, me personally, I look at my bank accounts every single day. Online banking was a godsend way back when. When it arrived, I'd just log in really quick. I don't spend more than 20 seconds, but I know what the numbers should be consistently all the time. And I always have. And if something's off, boom. I know something's off and I fix it. It's really that Simple. I have a duty and a fiduciary responsibility to my team, my organizations, my family and everybody else to make sure that my fingers on the pulse, if that's what I'm responsible for, you need to know your revenue. You should be aware of your premium as well because that's how the, the, the carriers think. It's how your teammates think is what they talk about, is what they talk to your customers and the prospects and the community members about this premium. So have your finger on that pulse as well. Next, you need to know how many in force clients you have off the cuff all of the time. It's amazing to me. Well, I'll be talking to an agent, I'll say, how many clients do you have? And they'll go.

And I'm thinking to myself, are you kidding me? You don't have any idea? Then I got to prompt them to guess. I say, okay, guess. 5001-000150-02000 or more. But you should know that right now, all the time. Number of enforced policies. You should have those KPIs on your brain at your fingertips all of the time. What about retention, the super complicated business plan that you should be executing every single day? Get ready. It's complicated. Here it is. Get clients, keep clients. It's really that simple. And the keeping clients portion is your retention. Do you know? It should either be client retention or policy retention primarily, the majority of the time, premium retention isn't going to do you any good because those keep going up and you're not going to get a good gauge under the growth, true growth and profitability of your business. That's not a fair gauge. Premium retention, forget about that. It's either client retention or policy retention. And I know very successful agencies who manually keep track of both just so they always have their finger on the pulse. Next, number of annual referrals, Number of annual referrals. Do you know? Are you keeping track of where your business is coming from? Do you have a production log? Do you know the top five sources of new business getting written within your agency? If you don't know, shame on you. You should have a production log. You should be able to pull that information just like that. You should immediately know how many referrals you got last month. You should immediately know how many referrals you've gotten so far this year. You've got to keep your finger on that pulse. It's a huge opportunity. Next, you need to gauge that against number of full time employees, number of part time employees, as an example, because you're taking that equivalent. And here's the, here's the key. Let's say you have four full time employees and two part time employees. Those two part time employees are one full time equivalent. So you're taking your gross revenue and dividing it by 5. That's your revenue per employee. That number should be north of 100,000. The best agencies out there, it's 135 to 150,000 per team member. That's an agency that's becoming mature as well. If you're just starting it out, just starting out in business and you're, you've been in the agency business say five years or less or three years or less, don't worry about it right now. Just get out there and write as much good business as you can every single day. You should have your ideal client prospect profile for personal lines, commercial lines and if you're doing life and health as well, you should have those three and be aware of that all of the time and be out there marketing to and promoting to with a very full pipeline consistently every single day. The last on the sheet for the KPIs. You should know your breakdown of commercial insurance versus personal insurance versus life and health if you do it consistently all of the time. The numbers that we talked about, I wanted to give you a gauge what the percentage of your advertising, promotion and marketing should be based on gross annual revenue, your technology and your payroll. And I finished it up and intentionally added on the KPIs the key performance indicators that you should be aware of all of the time. Again I talk about it in my book the Unstoppable Profit Producer in part two under Processes chapter nine. You've got to be aware and you've got to watch your money. You, you have a duty and a responsibility to do so. If you're not doing it, you do have a spotless future. Get started today doing it. And you know I have another huge opportunity as well. I'm going to go ahead and throw this out. You have an opportunity. I have it in my hand. Two tickets to Paradise. Our be unstoppable boot camp this year is at Paradise Point, beautiful San Diego. Everybody's got an opportunity having two tickets to paradise to learn to become more. To co mingle with some of the brightest minds in the industry for two and for two and a half, almost three full days learning and becoming more. And we're not only going to be talking about watching your money, we're going to cover everything about the three Ps excellent people, world class processes and systems and promoting the heck out of it. And we have incredible people that are coming to help teach you. Not only some of the brightest minds in the business industry, but many very successful agents will also be there teaching. Just go to beunstoppablebootcamp.com that is beunstoppablebootcamp.Com I can't wait to meet you. I can't wait to see you there. This is critical to true profitability. These numbers, the percentages of gross annual revenue and your KPIs are critical, absolutely critical to your true profitability. I hope this has helped you. And if you didn't catch all this, please go back and watch this again, listen to it again, make sure that you've got your finger on the pulse every single day and every single way. And when you know what is at the core of your true profitability, it gives you the greater ability to shift on a dime when you need to shift. Because the bottom line is this. You have incredible, amazing opportunity before you every single day. And it's simply up to you to go take advantage of it. This incident industry that we're in, this amazing industry is dripping with opportunity for you. And it only starts with two things, a decision and action. And all we want is your higher achievement and success. Go get it for yourself. And if this is your first time on the podcast, welcome. My name is Mike Stromso. I'm also known as the Unstoppable Profit Producer. And you can learn more about me and what we offer in our programs@unstoppableprofitproducer.com that's Unstoppable Profit producer.com if you're interested in attending one of our virtual or live events, our virtual event portal is upfaststart.com and to attend one of our live events like our Be Unstoppable Boot Camp, just go to Be Unstoppable Bootcamp.

Both these events are designed with some of our best money making strategies developed over 35 years of research in the insurance agency business, in the trenches of our own independent insurance agency. Specifically developed to help you grow your business, create wealth so you too can have more freedom to live life on your own terms. Again, all we want is your higher achievement. And again, again, this is your first time here. Please go to unstoppable profit podcast.com go up to the top. Subscribe so you don't miss one episode of these money making strategies that we share on our podcast. And remember, the podcast is available on all of the networks out there such as Apple podcasts. Spotify, Stitcher, YouTube. You can go to our YouTube channel. Just go to YouTube in the search bar. Search Unstoppable Profit Producer. Click on the link and then go to videos. All of our podcasts are right there. You can have the pleasure of not only listening to them, you can watch them because I tend to get a little excited because I'm so passionate about helping independent insurance agencies grow their business, create wealth so you can have more freedom to live life however you wish. I want to thank you for the privilege and honor of serving you through our podcast and thank you for joining us today and until next time. Get out there. Make a difference. Be unstoppable. Leave no regrets. We believe in you. You got this. Until next time.

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