Agency Peak Performance EXchange For the last 18 years, APPEX has been focused on improving performance by bringing entrepreneurial business leaders together in order to collaborate, share and challenge each other to get better. The performance of the group over this period speaks for itself. Firms that attend APPEX have improved their business in numerous and different ways. Whether it’s enhancing margin by finding an expense that is out of line with the average and understanding how other agencies budget for it or improving your strategic planning process based on an agenda shared by a client, there is power in the forum. APPEX brings idea sharing and thought leadership from the best-performing agencies in the country.
What is best practice if that best practice does not improve results?The 2015 Fall APPEX Summit is dedicated to Organic Growth Best Practices. Building on the Spring meeting, our goal is to introduce and reinforce what the best firms in the industry do to drive predictable and profitable organic growth. Stop and look around your geography. How many firms are worthy competitors? How many have sold? How many will sell in the next 12 months? We are currently in a window of time where every firm, I mean every firm, is questioning its commitment to independence. You have to. The numbers are too big not to. Historically when a firm sold, the press release would hit my computer and I would think, “Ok, that makes sense. Aging owners, aging staff, weak sales culture and no exit strategy. Most of our clients that competed with this agency didn’t bat an eye.” Now, high-performing, well respected, top-100 firms are the names in the acquisition daily subject line. Diversified ownership group, tight perpetuation plans and wildly successful sales infrastructure. These firms aren’t selling for an exit strategy. These firms are using the capital to fund their growth strategy. Imagine this. You are a great firm that does everything right: hire and fire systematically, build infrastructure in resources, drive a sustainable margin, implement best practices in sales management, right-size compensation plans, laser-focus your service and stewardship processes, develop a robust service staff, institute corporate governance to protect the firm’s interests and manage the strategic plan and perpetuation model. Then, an institutional buyer walks into your boardroom, and your advisor negotiates a number and structure you cannot even fathom with favorable terms and conditions. Depending on the buyer, your people may have better resources then you could ever employ or provide on your own. Your realistic growth expectation could double in a second. The value of the asset you just sold is rolled into a higher performing, much bigger asset and your compensation as an employee of this enterprise could be larger than your ownership distribution check was in your best year. This is what is happening in the industry today. Buyers are smarter. Sellers are using the acquisition market to deal with inevitable capital challenges that exist when the firm gets to a certain size and they aren’t going anywhere. Taking control over the growth of your business will have a tremendous impact on future valuation.
Who knows what will happen to the market economics that will impact the valuation in the next 5 years? The only thing you have control over is the performance of your business. Organic growth is a function of two very important metrics: new business production and account retention. For decades, insurance agencies have boasted a high retention ratio. For some, the bragging rights are justified because the insured-to-agency relationship is institutionalized, forged by providing valuable resources through a long-term relationship with the producer and the agency’s team through proactive risk management. For others, the high retention ratio is a testament to the industry’s biggest challenge: getting your clients to care enough to question the relationship.
The industry is about to get more competitive. Is your agency ready?
Use APPEX as a vehicle for focusing on continual improvement and peak performance.
Sincerely,
 Tommy McDonald
Vice President
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