As we enter the fourth quarter of 2020, I would like to talk about budgeting and planning for 2021. Every professional business builds a budget and a business plan year by year, so that they can maximize their success in the coming year. And the fourth quarter is the time to be finishing that, actually, not starting it. So undoubtedly, you're planning to do that this year.
2021, however, is going to be a really interesting year and different from past ones. Why? There's just simply more things that you don't know - you don't know whether COVID is going to still be a problem in the fall and into the winter and spring months next year.
Is that going to cause more people to go out of business?
Meaning loss commission for you?
Does that mean that your staff is going to continue to be disrupted, and perhaps you should be thinking about a small office space on a permanent basis?
Those are questions you simply don't have answers to. Will you be able to go out and see people face to face, and write new business and new accounts? I don't know, and neither do you. Those are complexities that you need to think about in the planning session for your business for 2021.
But there are some things that we do know that we can count on for sure, and those ought to be in your planning for next year.
The first is, what are insurance companies going to do with rates? You should be asking them right now what their plans are. In general, I would tell you that rates are going to go up. Why? Because they seem to go up all the time. Certainly personal and commercial auto rates are going to go up, and we're in a hard market for commercial property. That's good news for you, because it means more commission dollars. To offset some of those, you're going to lose clients who go out of business, or who have lower payrolls and sales, driving more revenue down.
The other thing that we know is how many policies per customer you're writing right now, that's a simple question for your AMS (Agency Management System.) So one of the things you can do is build a plan to make sure you're writing all of your customers’ business. The average agency in America writes 1.6 policies per customer, when many of those customers buy five. And if you include their personal insurance in the mix, as many as 10 policies! You should set goals and build a plan for next year to capture that business, and actually drive your organic business growth.
The other thing that you can do when planning this year, is to look at whether or not your business is with your highest paying carriers. If not, it should be a part of your plan to move that business to maximize revenue next year.
The other thing that can be in your plan that is unique for 2021: our people. Why is that unique? Because people have always been a brand. Well, here are two things that are different.
The first is there are more high quality people who don't have jobs (and might take one working for you) than ever before, at least in the last decade or so. More people means more opportunity for you, if you're clever about recruiting, hiring and training.
The other thing about people is that you can now hire them anywhere in the country, they don't have to be in your hometown. So your talent pool is much bigger. How are you going to take advantage of that to grow your business in 2021?
As you can see, there's a lot to think about. The main thing is, don't get rattled by the uncertainty: build your business for 2021 based on what you know, and build a solid business plan. I think that an annual business plan that fits on more than two pages is too long to execute. I love a “one-page and that’s it”. That one page plan has the key bullet points are the things that you're going to try to hit during the year.
You can break it down into quarterly actions for tracking if you like, along with a simple pro forma or budget for the business which says: “Here's the income we're gonna receive. Here's the expenses that we're planning for and the profit we plan to make.” The value of the budget is that it's not the plan - it just illuminates the plan and it becomes the tool that you get to use all year long.
To stay on track, answer three important questions every month:
Is this what we expected?
If not, why not?
And what are we going to do about it?
If you take those three questions with your one-page business plan and your pro forma budget, you're gonna have a great 2021. Good luck!
I'm talking to people all the time about subjects like this, including our 185 insurance agencies. If you would like to talk to someone on our team, please click this button or respond to me by email and we'll call you right back. Thanks and have a wonderful 2021!