Exclusivefocus Summer 2012.pdf - National Association of ...

agency financesDon’t Allow Debt Aversionto Stunt Business GrowthBy Carissa Newtonagency is $52,629 and $33,834 for a supportstaff employee. And the combinedexpenses of technology, software andconsulting to manage advertising andmarketing campaigns can run anywherebetween $25,000 and $50,000 – andthat’s for a conservative plan.Successful companies have demonstratedthe necessity to make significantinvestments for growth. They see positiveresults of reinvested capital while stagnantbusinesses struggle to manage costsas revenues decline. Despite this reality,many owners scale back or completelyabandon their strategies because they lackthe necessary capital. In effect, this failureto invest decreases competition, allowingthose who choose to invest in their businessesto write more business.The credit crunch felt by businessowners of every industry in recent yearshas given way to more available and accessiblefunding. But some agents arereluctant to take on a business or commercialloan. Instead, they turn to creditcards and personal lines of credit whichcan negatively impact their individual financialhealth.With growing optimism and faithin a recovering economy, agentsare dusting off the plans they puton hold a few years ago and are now lookingto transition out of simply maintaining theiragencies to growing and thriving again.Many agency owners are ready to grow bypurchasing technology to implement newsales and marketing processes, acquiring anotheragency or book of business, or takingon additional licensed sales producers.As agency owners contemplate acquisitionsand organic growth, they face thechallenge of resources. Although thereare many low-cost initiatives agencyowners can use to grow, most plans requiremore capital than these agents haveon hand.Consider the cost of hiring just one extraemployee. According to the NationalAlliance Research Academy’s 2010-2011Insurance Agency Growth and PerformanceStandards, the average compensationfor a producer in a personal linesWhy are agency owners averseto commercial debt?Assets. Many believe that financial institutionsprovide loans based on balancesheet financials and are not likely to lendagainst the agency’s biggest asset — futurecash flow, which is embedded in theagency’s in-force book of business.Angst. Agency owners believe theseinstitutions prefer hard assets like real estateor inventory as collateral, and they’renot comfortable with that scenario.Skepticism. A common presumptionamong agency owners is that actually30 — Exclusivefocus Summer 2012