Why are you thinking of starting an insurance agency?

Let's face it: starting a business is a risky proposition. You're probably going to move from a secure job with a regular income and a future that is more or less laid out for you, or at least visible to yourself, into sole proprietorship, a place where uncertainty rules your life.I remember talking to my father many years ago about being an entrepreneur. He told me that he had not known how much money he would make in any month for the last twenty-five years. Strangely, I found that compelling and exciting. I have now not known how much I would make in any month since 1982 - that’s thirty-eight years and counting! At the same time, I have seen my personal income grow more than I could have foreseen when I embarked on an entrepreneurial career in the insurance business. That level of uncertainty is not for everyone. But the rewards are certainly there, in this business, for those who can embrace the uncertainties.

When you embark on the journey of starting your own insurance agency, you will have to learn at a rate, and a level, greater than at any other time in your life. No matter how experienced you are as an insurance agent, or even as a businessperson, you are taking a new level of risk with your career. And the risk is real.

According to the American Chamber of Commerce approximately seventy percent of all businesses fail within the first ten years.

So, as you begin the journey to independence, to setting your own schedule, to making more money and building more wealth than you can possibly imagine, it's important to take the time to think through why you would take those risks.

Clearly, building a small business of your own is a part of the American dream. Being an entrepreneur is something that many aspire to. In this country, we venerate business owners. If you missed the opportunity to be a football hero in high school, you'll have an even bigger opportunity as you build a successful business. Building the business itself is incredibly rewarding. The personal growth that you experience, along with the income and business success that you enjoy, are tremendously satisfying. The money that you can make as an owner of a business, and the wealth that you can generate for your family and your future, are unparalleled in comparison to being an employee.

What Are You Trying to Accomplish?

Before you decide it’s time to start, and get to choosing an agency management system and hiring staff, it is important to be clear on WHY you are doing this.

There are endless reasons for starting a business, each one of them very personal. What are yours?

What are you trying to accomplish by becoming an independent agent and creating your own insurance agency? 

Are you looking for greater freedom? That is certainly one of the benefits of owning your own business. You get to decide who you will do business with and what kind of insurance you will sell, and you can determine your work hours to a great degree. You have the freedom to invest your time, money, and other resources in the way that you see best. You can take time for your family when it's convenient for you. We have many agency owners in OAA who cite freedom as the reason they started their agency. One of our most successful principals spends much of his time out of state, and when he is home, he dresses very casually (shorts, t-shirts and flip flops). Yet his business, which he designed to run very well without his presence every day, has made him a multi-millionaire. 

Or, are you starting your insurance agency because you want greater control over your future? Are you frustrated because you can't do things the way you think they should be done? Do you have ideas about how things would work better for you and for your clients? Do you want greater control over the processes you have to work with every day, from prospecting to proposals to servicing your client’s policies? Do you want greater control over the quality of the people you work with? Do you want more control over the culture of the business that you will spend a huge part of your life working in? Do you want to control to a greater degree the way you live your life (and how your working hours relate to that)? This has driven many successful OAA agency principals to leave insurance companies like Farmers, Allstate, Farm Bureau, and other captive insurance carriers. In the process of building freedom, these individuals have also built better incomes and real wealth. 

Or, are you interested in having greater flexibility with your time? As an employee, your employer tells you when and how much you must work. Even as an insurance producer, your time is dictated to a greater degree than many realize. How much vacation time can you take? How often do you have to be in the office? Are you missing your children's plays, performances, or games because someone else requires you to be somewhere else? Many people begin their businesses simply because they want to have greater flexibility of time. My wife wanted this capability so that our children, when they were babies, could come to the office with her, and she could build her business while never missing any “mom” things. Owning your own business is the ultimate way of creating your own time system. 

Perhaps the biggest reason that many people take the risk to launch their own business is because they want to make more money. If you're working for somebody else, the truth is that they intend to make a profit on your labor. They're taking the risk to provide office space, a work environment and an opportunity for you, so that they can make more money. If you own your business, that additional income can be yours. And everyone looking at starting their own business has that in mind. Is that why you're beginning your own business? If it is, you need to be clear, and honest with yourself about that—and also understand the truth about how much more money you can actually make (along with the fact that you may make less), and how you feel about that risk.

Many people are motivated to start their own insurance agencies because they want to build wealth. I remember my partner in my insurance agency telling me, in the early days, that the insurance agency business was a wonderful business for growing a big income, but that you really don't get rich as an insurance agency owner. Over the last twenty-five years, I've seen over and over again that he was wrong about that. In fact, I remember when I began building my book of business (and before there was a lot of cash flow), I took solace in the fact that for every dollar of commission income that I put into my book of business, I was adding about a dollar and a half of wealth to my financial statement and ultimately my retirement account. The truth is that today, that dollar of commission is worth far more than a dollar and a half of wealth. In fact, it's often worth two-and-a-half to three dollars, and even more. So, building wealth as an insurance agency owner is not only possible, it's a very realistic reason why many people choose to start insurance agencies. 

For some founders, the reason for creating their own agency is to create a family legacy. In America, the family business (like the family home) is a cornerstone, not only of our economy, but also of our culture. Many agencies in the independent agency channel are in their second, third, and even fourth generations of ownership and operation. Many prospective agency owners who I have visited cite one of the reasons that they want to be an independent insurance agency owner is to build a family business where they can work with other members of their family and pass on a business of value. This is particularly true of exclusive agents and captive agents who are seeking to make the transition to the independent agency channel. They realize that the business that they have built with their hard work is actually owned by a huge corporation, not by their family, and it's very difficult or impossible to leave as a legacy to a son or a daughter.

Another possible reason that you may want to start an independent insurance agency is because you have unique ideas about how to move the way we do business in this industry to a different level. Technology today is creating many new business models. Many new opportunities are being tried and proven for doing things faster, cheaper, or better. Perhaps you have unique ideas about that, and starting your agency is the way to demonstrate them. Perhaps, believing that you will be successful, you're driven to create something new and different. 

Maybe what is driving you to create your own independent agency is the sheer thrill of it. Is finding a new and increasing challenge a driver of everything in your life? If it is, starting your own business can be the biggest thrill of your life. Pitting yourself against others in endless competition for biggest and best is certainly possible as an independent insurance agency owner, and it’s one of the motivators that drives many successful founders. 

There are many reasons for starting your own independent insurance agency. Yours will be different from anyone else’s, but it's very important to get clear about your goals, dreams and priorities. I encourage you to think carefully about this and to write down your reasons. As you start, and as you build your agency, you're inevitably going to come up against many roadblocks, difficulties, and things that are discouraging to you. Pulling out that list, reminding yourself about why you started your agency in the first place will be a tremendous encouragement to you. Also, being very clear about why your business exists will become the foundation and cornerstone of the culture that you create.

Who Is in Your Support System?

Regardless of your motivations in launching your business, it is very important that you have the support of your friends and your family. There will be many late nights and weekends spent working, instead of with them. They should understand that up front. More than understanding, you will need their support in many ways, not the least of which will be emotional. In some respects, beginning a business is intensely personal because, after all, it is your ambition and desire that is driving the decision. But you’ll have a very difficult time running the race to victory without the cheering support of those you love. If your family - and particularly your spouse - is not fully behind you, it would be wise to wait until they are. When start-up costs start to add up and your business plan doesn’t show results when you expected, you will need support and encouragement no matter which type of insurance products you’re trying to sell.

Your Why Has Power!

As you build your company and your culture, it is also important to think about the why of the business itself. This can be how you treat clients differently. It can be the way your agency is involved in the community. It can be how your work style and your environment are unique compared to others. 

One founder I spoke with wanted to create a business where everyone in the agency was involved in service to others and the agency could support those activities out of profits and time freedom for employees. He was frustrated that he couldn’t do that where he was. His vision of a great business involved more than only making money. He was driven to create an agency where he could make his values live with his work every day.

Your why will become something that you use in recruiting talented people to work with you. It can be something that you use to help screen out the people who you don't want to be a part of your organization. Why is very powerful, not only for you, but for everyone associated with your agency, including the clients that you'll attract. So, at the very beginning of putting your agency together, take the time to think through why. 

So, there are two why’s: your personal why and your organizational why. They may be the same but are likely slightly different. It’s important to begin by being clear on both. 

Pick up your copy of Tony Caldwell's #1 Amazon New Release and Bestseller, The UnCaptive Agent today for even more insights and guidelines on how to start your own independent insurance agency.