Episode 171: How to Have ONLY Great Clients

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. This is Mike Stromso and I am pumped, excited and peanut butter to bring you the next episode of the Unstoppable Profit Podcast. I want to pour out to you everything that I've learned in the last 35 plus years as a proud independent insurance agent in the trenches in the agency business to help you grow your business, create wealth so you too can have more freedom to live life on your own terms. That is why I am here, that is why I exist and I love sharing with you everything you need to know. Today I'm going to start a series, if you will, a number of the next podcasts, if I don't have guests on, will be strategies that were learned in our most recent Mastermind sessions with our top performing platinum and elite coaching members. And it was all put on the table, revealed, redesigned, updated, whatever they needed us to help them do, to get them continually pointed in the right direction so they can have the results that they're looking for. And that's what we want for you as well. So one of the things that commonly was discussed a lot through all of our groups was something that we've talked about for quite some time. So I'm going to bring you some updated ways of thinking about this strategies and everything else concerning a very simple principle. But once I learned this a number of years ago and applied it to our own agency insurance business, it changed everything forever. Everything. Everything. I thought about every decision I made as far as an investment into a marketing program, or maybe not investing in a marketing program, or, or, or team members, et cetera. All of it was because of this principle and it's called the 8020 rule. And in our agency business we called it client segmentation. So it was based on the principle called the Pareto principle. And in 1906 it was named for Vilfredo Pareto, who was an Italian economist. In 1906, Petto noted that 20% of the population in Italy owned 80% of the property. He proposed that this ratio could be found because of many factors in many places in the physical world and theorized that it might indicate natural law law. So let's dig into this just a little bit. I want to help you understand the 8020 rule, if you will, or the Pareto Principle so that you can apply it in your own agency business. I'm going to give you takeaways today that you can implement in your own insurance agency business, starting right now to make sure that you are investing in the right places, whether it be your clients, your prospects, your your centers of influences, your agency team members or anything. I want you to remember what you learn on this podcast today to help you make the right strategic decisions to grow your grow your agency, create wealth so you can have more freedom to live life on your own terms, so you can make those on the fly, on the spot decisions that affect the future of your business and to help you make the best decisions for your agency business. So again, the Pareto Principle was originally developed years ago. More generally, it's just the observation that most things in life are not distributed evenly. I get that life is not fair sometimes, but in business, and we've talked about this, and I'm going to continue to talk about these two things and I'm going to weave it into everything that we talk about always going forward. And it's something that I believe is a missing item in the insurance agency business. And that's the numbers. The numbers don't lie. You've got to know your KPIs and you've got to have goals. Knowing your destination is all you need to get there. You cannot hit unidentified targets if you don't have agency goals for the year. If you do not continually train your team, if you didn't teach your team what the goals are in the creation of the goals, get them on board to make sure that you can reach those goals and exceed those goals, and then continually train them on an ongoing basis. And if you don't know your basic KPIs are for your business, I'll just say it transparently here because I'm here to tell you the truth every day. Shame on you. You need to get it together. Let's get back to the matter at hand. The Pareto principle, the 8020 rule. So most things are not distributed evenly. Okay, so, so let me give you some examples and basic thinking concerning the 8020 rule. Then we'll jump into how it applies in the insurance agency business, maybe your insurance agency business, and I will bet that it does in more ways than you're thinking about currently. So 20% of the input creates 80% of the result. Think about it. 20% of the team members are workers produce 80% of the result. Think about that for just a minute. 20% of the customers create 80% of the revenue. And that's what we're going to dig into in just a couple minutes. Think about that. 20% of the bugs cause 80% of the crashes. Haven't studied that, but I will suggest there's a good chance that's the case. 20% of the features cause 80% of the usage.

And it likely does. And of course, we could go on and on, but that's the beginning of the thinking on the Pareto principle. So why is this so useful? Okay, so let's take three of the examples that we just talked about. Okay. 20% of the workers or team members contributed to 80% of the results. And why is this useful? Well, focus on rewarding those team members who might be doing as much as 80% of the work. 20% of the bugs caused 80% of the crashes. Focus on fixing those bugs first. I get it. That's not in the agency business. But think about it like that. 20% of the customers contribute to 80% of the revenue. And here's the key. I found this back before I really understood the Pareto principle and how it applied to our agency business. And once I did, and I implemented it and started doing it consistently changed everything forever. Here's the idea. 20% of the customers contribute to 80% of the revenue. Focus on satisfying those customers. But what happens in the insurance agency business, Exactly. The bottom 20% consume possibly as much as 80% of our time, because we used to call them in the agency trenches, ankle biters or sometimes other things that I can't mention on this family channel, but you get the drift. There's always that bottom 20% who are sucking our time, who are pulling us down, pulling us down, pulling us away from the top 20% and not allowing us to serve and build relationship. Build deep, significant, meaningful relationships consistently with those top 20% of the customers. Because the bottom 20% are pulling us down all the time. So you might be thinking, well, Mike, what should I do about the bottom 20%? Well, what we decided to do after we really started to understand this, we really started digging into our clients and the number of clients and the makeup of the clients and all of that. We decided to start firing them. Exactly. And so we developed firing client letters, ways to fire clients. We've got it all documented and everything else, and we just started firing clients. It was that simple. Now I get it. In some states, it's more difficult Nowadays because of regulatory law. But do what you need to do. Okay. And I know I'm thinking of one of our current platinum coaching clients, I'll just say in the middle of America, who made a strategic plan and is doing a great job with the 8020 rule, has their clients segmented into three different categories. Not the same as I'm going to talk about in just a couple of minutes that we did in the insurance agency business, but same thought process. Okay. That client has VIPs and they have gold and they have silver. Fantastic. They've got them segmented and they have levels of care that they provide to each of those levels for. In other words, if they're vip, they get, you know, the preeminent treatment. Kind of the red carpet rolled out all the time. They call, we respond immediately. Okay, move down a little bit, which is gold. They call. Yeah, they get a response pretty quickly. But they don't have the, you know, preeminent VIP experience that maybe the VIPs do. And I heard this and for many others, a similar thing in our platinum masterminding sessions recently. If it's a silver client and they call about something or this, this or this happens, we don't do anything.

So I mean, obviously if it's a, if it's an inquiry or change on a policy and all that, they do something. But you know, if it's a billing situation or something like that, it's down on the lower level because that's where they have earned the right to be. So it's like having a part time client or a full time client. Right. A full time client is somebody who trusts you and your agency for every single possible insurance policy that's available to them. They buy it from you. And those are the people that are up in the upper echelon and that's, you know, the top 20%. Because there's a good chance that they are driving up to 80% of your revenue just because of who they are. Because they're giving you every possible piece of business within your agency. They trust you, they're easier to deal with. They generally don't have claims. If you have an underwriting memo as an example, they quickly respond to it. Don't give any grief, all of that. They're pleasurable to deal with. They give you referrals, they. Oh, they give you referrals. Oh, they give you referrals. Yes, they refer you. They are what we call in some circles, raving fans. Okay? They hear the word insurance, they think about your agency because they're that kind of client.

Close your eyes.

And think about your book of business and think about who those types of clients might be.

I'll suggest that you're thinking of 2, 3, 4, 5 or more of them right now. Yes, they're there, but the bottom 20 keeps dragging us down. So let me share with you what we did in our insurance agency business with regard to client segmentation. Once I learned this philosophy and way of doing business and implemented our insurance agency business, that changed everything going forward. So we started many, many years ago with client segmentation. I've got a sheet here that documents it all. Just the fact that we need to identify and understand as an a company, as an agency company who's paying the bills allowing us to provide high quality service, good paying jobs and quality products that protect their families and their businesses and everything they work so hard for. I wrote this out and I shared it with the team in the training for them and with them on client segmentation. Okay. Industry experts estimate that your top 20 to 25% of your clients produces over 50 to 80% of your profit. And, and your bottom 20% actually lose over 20% per customer. They lose, they're losing you money. There's a good chance they're losing you money. Think about that. The labor cost hours that it takes to service these quote, ankle biters in your business. Right? We can try and say that we are different as many ways we want to be, forever as many ways as we want to be. For whatever reason we choose to delude ourselves, it's not true. And that's what I coached and trained our team on in helping to understand this. Okay. Then I created a guide. I said this is a guide to help all of us understand what makes for an excellent client, an average client and a client that will end up costing the agency more than they produce income wise for the agency. So we decided, and this just was our decision. And every agency is different. It's your business. You decide what works best for you. Fantastic. Most importantly, please do something. All right? Because hey, only two things will dictate your future. A decision and action. A decision in action will dictate your future. Okay, so we decided to go with triple A clients, the top 20%, double A clients, the middle 60%, roughly, which ultimately really is your bread and butter after the, after the top 20%. So triple A is the top 20%, double A is the middle 60% and then single A is the bottom 20%. We just decided that we wanted to call every client and a client and we did have a handful of what we affectionately call C customers, which are customers that any opportunity we have, we wanted to fire them right away. That was just a internal coding, if you will, from one of our top insurance companies. So we just borrowed it from them. There's nothing new under the sun and so that just means we want to cancel them and we're not going to reinstate, so to speak. So we just call them a C client and everybody knew what it meant. Oh, C client, they're on the phone. Oh, we're sorry that you didn't get your bill again and your premium didn't get paid. And I just needed to remind you today, because you didn't pay your bill on time again that you're without insurance coverage at this time. We're going to double check to see if the insurance company will reinstate your policy. However, because you've had multiple cancellations previously, I just need to let you know today there's a good chance that they're not going to reinstate your policy. And honestly, we don't have any other companies with your payment history. They're going to write a new policy for you. They. So you may want to start looking for a new agent or company again. We're going to do everything we can, but I just wanted to make you aware of that today. So that was an example of something that I can say to a C customer where their file is coded as C. Right. So that was our thought process. Let me give you a what to do next. If you make a decision to take action on what we're talking about today and decide to segment your client book, the first thing you need to be thinking about is your agency management system and how you're going to set that up to identify how you've segmented your customers. So as an example, let's say you segment your customers triple A, double A and single A, or vip, gold and silver, or whatever you choose to do. Some people go A, B and C, whatever works for you. Okay, you need to figure out where in your agency management system you're going to identify that. Now I will take from one of the leading agency management systems out there, hawksoft. We, because we did this so many years ago, we use we put it in the miscellaneous client info area of the system and that's why we detailed whether the double A, aaa, excuse me, AAA or single A. Okay, that's where we did it. But that particular agency management system nowadays has tags and many, many of our coaching and masterminding members have taken those tags and they've made a tag specifically for client segmentation. That's where they note the client segment because it's easier to see it's right on the front page. It's normally color coded. As an example, there's many other agency management systems out there. Some of them have post it notes, others of them have tags or something similar to that. If you decide to implement this new initiative in your agency business, and I hope you do, you need to decide where and how it's going to be set up inside of your agency management system before you do any more work to try to segment your clients. Because it will be a small effort to get this implemented. That will take time. It's not going to be an overnight fix. Now, I do know some agency management systems can help you with this. In addition to that, if your data is clean or mostly clean, it's going to be a lot faster. Okay. And the first thing you'll need to do after you decide how you're going to set it up in your agency management system is you need to then run a list. And one of the things you're going to want to run, some of the criteria that you want to have on that list you're going to run. One is annual premium for the entire account. Two, number of policies for the account. That's a good way to do it. Okay. And I've got some criteria on our original client segmentation sheet and any other information. Obviously first name, last name, business name, maybe a client since, and then number of claims. That's also important. So get all of that criteria on the list. First name, last name, business name.

Annual premium for the account, because that just tells you what the size of the account is, number of policies that that particular client has with your agency business, and then the number of claims that they've had over time. As much as your agency management system can measure the value of all of that is contributing towards profitability of the client, which is really what we're trying to do. Right. Wouldn't it be awesome if 80% of your clients were very profitable and they didn't contact you all the time for useless questions? Yes. Right. And if 80% of your clients trusted you with every potential possible policy that they write a check to somebody for for insurance, wouldn't it be awesome if it was your agency? It can be. And I want to help you get there. That's part of my goal. Okay. So our triple A clients were broken down into personal insurance and commercial insurance. We had different characteristics for each of them. I Have a pretty detailed, you know, bullet pointed characteristic lists on our original document. But one thing that we found in our agency after our team started working with this fairly often because we also gave them permission or they owned being able to update a client from say AAA to AA or from AA to AAA or from single A up to double A or from single A up to aaa, they had permission to update the segment in the system at any given point. Okay. The feedback from our team members became hey, we have that three page list that is a full overview of the client segmentation practices within the agency business. But on the fly, every day in every single way, talking with clients. You know, I've got 13 emails, I've got three callbacks. Oh, I got two, somebody on the phone, I've got an escrow closing, I've got a certificate of insurance request, you get the gist, right? So they wanted a quick take and so we gave them a quick take and it was pasted right to their scanner lid or something similar to that where they can see it all the time. Okay, so I'm going to share that with you here. Okay. And it's a quick take for personal lines as an example. This was just our agency and I'm going to give you something super simple that you can implement right away if this, what I'm going to share with you is too complicated. Okay, so quick take personal lines, triple A, three or more policies.

One or fewer claims in the last three years.

No late pays.

That's it. Pretty simple. Now I will say this. In commercial lines, we've had large commercial lines clients that have had north of 3,000 employees and they have claims, in fact they have quite a few claims but the account's still highly profitable. Why? Because of the size of the company. So that's where the training comes in.

With your team to help them understand. But really the seed we want to plant in their head, three or more policies, one or fewer claims, they're not. There is not a claims frequency problem and we don't have a late pay problem. That's the thought we want to put in their head. Again, personal lines, double A personal lines, two policies.

Two plus policies, two or fewer claims. Again, no frequency problem. We might have a bit of a temperature, but no real frequency problems and no excessive late pays. So there might be one or two present over the last three years. There might be a good reason for whatever that is, but it's not excessive. The other thing is all of our team members, because of the ongoing training with regard to client segmentation they always had permission.

To make a judgment call. They always had permission to make a judgment call. Okay, single A personal lines, one policy, excessive claims. They have some late pay activity, but they're not ready to be fired yet, we want to keep them. Otherwise they're friendly, they're coachable, etc. Okay, now let me add one other thing on. If I had to do this all over again, One of the things that I would add in the triple A and the double A section.

They are referring US business. Okay? So case in point, AAAs, they've given us three, at least three referrals in the last three years, or at least two referrals per year, something like that. You got to figure out how many you want to call referrals. And double A is also refer you. So that's really, really important if you, especially if you're looking to create a buy referral agency by referral type agency where most of the new business opportunities that you receive are by referral, which we strongly recommend, by the way. Okay, so let me do a quick take on commercial lines. Very similar commercial lines, same thing. Three or more policies, one or fewer claims, again contingent on the size of the account they pay on time, they refer us business.

And they might be in one of our niches. Okay, aa, two or more policies, two or fewer claims the last three years, again depending on size of the account, complexity of the account and all of that. No excessive late pays. And they do refer us business and single A everybody else one policy. They might have a pattern of claim frequency developing and they have some late pays, back pay activity, but they're not, they don't have so much to the point where we want to terminate them as a client yet. Okay, so that just kind of gives you a quick overview. Again, I've got the more complex one loyalties mentioned in the complex one. They're friendly to deal with. They value our time, they value our advice. You know, one of the things that we would not stand for from a core value standpoint is abusive clients. Okay?

All of that stuff. So I've got that entire detail as well. So I hope that this makes sense to you. And it is my goal that you make a decision to take action on this. So let me share with you one other huge opportunity that's before you when you decide to segment your clients. So as you know, the fastest growing businesses, the most consistently growing businesses are businesses that are consistently marketing. Consistently marketing. They have a plan and they are consistently, consistently marketing every day, every week, every month, ongoing Consistent marketing. With that being said, there is a resource money investment to consistently be marketing to that particular level. So when somebody says, well, this particular program, let's take hypothetically newsletters, because I get to have this conversation with coaching and masterminding members fairly often and agents across the board, frankly. And so newsletters, especially if you're snail mailing the newsletters or you do a newsletter postcard and you're snail mailing that in addition to delivering it electronically, okay, Remember, you want to be building deep, significant, meaningful relationships all of the time with everybody on your list. So let's take that. Let's say, you know, the snail mailing in the newsletters, the newsletter postcards getting really costly. I want to trim that cost down a little bit. What can I do? Simple. If you have your client segmented, I will quickly interject, don't stop delivering it electronically. Obviously, there's no cost to that except the time to push it out. However, if you want to reduce some of the snail mail costs, just simply keep sending it to your AAA's. Don't ever start, don't ever stop nurturing and marketing to your AAA's. Whatever you do, not never, never, never. Okay? And of course, you definitely want to keep sending it out to your warmest prospects and your centers of influences. And if you have any money left, send it to some segment of your double A clients. Like we used to flip flop it. You know, if we ever got to that point and we decided to do that in the early days, that happened because until we grew to the point where we just had revenue rolling in, we didn't have to think about it anymore. We had to think about this kind of stuff. So what we would do is we would do, you know, A to L one month, we turn around, flip it, and we do M to Z the following month as an example. So that was just the double A's, and then the single A's. They didn't get anything because they're single A's. Okay? So always, always, always be sending to your top trip AAA clients or your top 20% all the time. And you can make this decision all the time with regard to many, many endeavors. Like if you decide to have an open house because you're having your 40th anniversary for the agency, et cetera, et cetera, et cetera, who are you gonna invite? Will you always start with your AAA's? And as far as referral sources are concerned, who do AAA clients hang around? Exactly. Other AAA prospects. So that is why it is. That's Just one of many, many, many reasons. There's long list of reasons why you should consider segmenting your clients. So it's my goal that this has helped you it's my goal that this has helped you think differently about your business because your business has a massive upside in front of it. And I'm starting a series in the coming months about how that upside is going to benefit you in a major way and I'm going to help you do that. So please stay tuned. Until then. If there's anything more that we can do for you, please let us know. We're here to serve you and the only reason that we do this is to help impact agencies personally and professionally for growth, for wealth, and to have more freedom. We love what we do and we want to help you in the same way. All right, and if this is your first podcast, thank you so much for joining us. My name is Mike Stromso. I'm widely recognized as a leading author, speaker and coach for the independent insurance agency industry. You can find me @unstoppable profit producer.com if you're interested in attending one of our virtual or live training events to learn to grow your business, create wealth and have more freedom to live life on your own terms, please visit us. For the virtual events, go to up fast start.com or our live event portal is be unstoppable boot camp.com both events. Both events. The virtual and live events are designed to share with you some of our greatest money making strategies developed over 35 years in the insurance agency business, in the trenches in our own independent insurance agency and we want to help you install those in your business so you can grow your business, create wealth and have more freedom to live life on your own terms. And please make sure that you go to unstoppable profit podcast.com go up to the top, click the subscribe button so you don't miss one podcast that is going to give you information to help you grow, create wealth and have more freedom. That is why we do this. It's what we do for agents across North America and we love helping you. And our podcast is available on all the channels out there. Apple Podcast, Spotify, Stitcher, Amazon. We're now on Amazon as well and on our YouTube channel. If you go to our YouTube channel you can see this live. You can see the video, you can see my hands flying all over the place and my expressions in addition to obviously the audio portion. Go to YouTube search Unstoppable Profit Producer, click on the page and just go to videos and they're all right there. In addition to that, our our Money Making Strategy series is there and so much more. All designed with one goal in mind to help you. We're proud to be serving you. Thank you so much for joining us today. I will see you on the next podcast. Until then, get out there and make a difference. Be unstoppable and leave no regrets. You got this. We believe in you. Remember, a decision in action will lead to your next steps. Until next time, thank you.

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