Page 155 - The UnCaptive Agent

128 THE UNCAPTIVE AGENT

minimum salary, but enough guaranteed income to get
the salesperson’s monthly bills paid while he is becoming
established. There are a number of ways to structure
salary and commission arrangements, and the National
Alliance Research Academy publishes an excellent book
that you can obtain as a reference to see how many dif-
ferent combinations of salary and commission new and
renewal work out over time (see the Resources section
of this book for more information).
One of the mistakes that inexperienced agency own-
ers make is to pay a greater commission rate to producers
than they should. I often hear of producers being paid
fifty percent or more of the agency commission as pro-
ducer commission. This is almost as bad as allowing the
producer to own her book of business! When you pay
that much money in commissions, you rob the agency’s
ability to make a profit.
I recommend that every new agency owner obtain
a copy of the current issue of Insurance Agency Growth
and Performance Standards published by the National
Alliance Research Academy (additional information is in
the Resources chapter) and a copy of the Best Practices
study published by Reagan Consulting on behalf of the
IIABA. These two benchmarking surveys are useful for
a variety of things, but they publish compensation rates
as a percentage of income for agencies of all sizes and
locations as well as product specialties.
A careful review of these two studies will show that,
in order for an agency to make an adequate profit, they
cannot afford to spend more than thirty to thirty-five
percent of agency revenue on commercial lines produc-
tion (including salary), or more than about twenty-five
to thirty percent of agency revenue for personal insur-
ance production. There are many ways to get to these
numbers, and many agencies prefer to use commission