Page 78 - The UnCaptive Agent

PREREQUISITES FOR SUCCESS 51

or more. The only way to determine the exact amount
is to build a start-up expense and capital budget.

Cash Flow Planning

Once you build the initial expense and capital budget,
you will now need to build a cash flow budget. You do
this by estimating not just the sales that you will make
during the first year, but also when you’ll receive the
commission income from those sales. How long it takes
to convert a sale to cash flow depends upon the carriers
that you contract with and their payment methodology.
It also depends on whether you’re selling policies written
on a direct bill basis or agency billed policies. This is
critically important to understand, so let’s take a brief
detour into getting paid!

How Independent Agencies Get Paid

In general, if you write direct bill policies (those where
the insurance carrier bills the client and you are only
responsible for collecting the initial down payment), you
can expect to receive somewhere between twenty-five
and one hundred percent of the agency commission on
an annualized basis about sixty days from the end of
the month in which you sold the policy.
If you sell a policy under agency bill (where the
agency is responsible for billing the client each month
for their policy and remitting the premium to the insur-
ance company after deducting the agency’s commission)
you will need to wait much longer to receive all of your
commissions. Using agency billing, you should not
plan to receive any commission income until about
ninety days after you sell a policy. And then, you will
only receive the commission attributable to the down