Page 199 - The UnCaptive Agent

172 THE UNCAPTIVE AGENT

Operating Ratios and Measures

1. Average Revenues per Account: This is deter-
mined by dividing your gross commissions, or
gross income, by the number of customers in
your agency. As you seek to grow your income,
increasing this number is one of the most
important things to pay attention to. As we
began to maximize the number of accounts in
our agency that we could service, we focused
on raising this number by selling more policies
to each client and by eliminating clients who
fell below our minimum threshold and who
could not purchase more from us (this raises
profitability as well). Gradually increasing
your minimum revenue per account will grow
your top and bottom lines. I often ask agency
owners, “If your average revenue per account is
$500 and you get the opportunity to write an
account that can only pay you $300, would you
do it?” The nearly universal answer from newer
owners is “Yes!” That is, in fact, the wrong
answer. If you follow that line of thinking, your
revenues per account will decrease, as will your
profitability, and you will find yourself going
relentlessly backwards. The experienced owner
does the opposite.

2. Average Revenues per Person: This is calcu-
lated by dividing total annual revenue by total
number of employees (you should use Full
Time Equivalent—FTE - employee counts
where you have part time employees where
you add all the fractional people into a total).