Let’s say it costs less than $20 to acquire a customer(it should)  and most times can just be measured as a fraction of fixed operating costs since there is no official advertising expense?  Is this really possible?  Yes,yes and yes!!!

Even if we broke down all your fixed costs, which are hopefully almost ” to the bone” and put some slight variables in you are hopefully at a very, very manageable daily cost.

Is being hired by one new household per day unreasonable?  NO NO NO.  If it is, time to change business.

But what about retention?  I think the industry accepted amount of the high 80’s, maybe topping out at 92% is PATHETIC.  Think about it, in any sales/business article I have ever read on the topic the prevailing wisdom is that it costs more to acquire new customers.  Sure someone could disagree but I don’t.  There is also the overriding human piece of it that does not seem to have a big role in the life of an insurance agent.  So let’s do some math;

The average gross commission is 15% with the average premium, lets be conservative and say $2000 per year.  So the gross revenue per account is $300.

Why can we lower rates? **This could be a post by itself but here is the short answer.   Well because $300  is better than $0.  $285 is way better as well.  Lets say we reduced the rate by $100 annual.  Is that really a marketing expense of $15?  Who cares.  We really have two years with them and lots of unmeasurable potential so why wouldn’t you want to keep them.

I HAVE NO IDEA.  Every other industry seems to be focused on getting and keeping customers.  Not as much in insurance.

Let’s put another way, I had heard and then read about what an agency should expect as far as referrals.  This was from one seemingly reputable place and the other was from an “iffy” consultant.  None could really show where their numbers came from except by saying they did surveys of agencies.  Many of them were talking about the amount of referrals you should be receiving per household.  It was said that the very best of them were receiving 1 referral per 50 households.

I THINK THIS IS ABSOLUTELY INSANE!!!!!

How is it possible that everyone you work with does not want to refer you business?  Now wanting to refer other people to you and actually referring them are two different things.  That being said, I am still baffled.  You provide a good service, follow a process, create some rapport, etc and yet you still only see one referral per fifty households?  Some, most actually, were even worse.

**Much bigger issues surrounding advertising, marketing expenses, lean agency, etc.  Save this for some other posts**

Take this as an alternate scenario;  You have 100 households.  Hopefully you are striving to keep 98 of them, not some week effort of 92 or less that the industry seems to think is acceptable.  Now, let’s say you average a 1/2 of a referral per household.  So you get 50 referrals from them which is WONDERFUL.  Now, with the right mix of companies, and being conservative,  7 out of 10 should be what you  are able to “close” as new business.  so net 35 new household.  Minus the two that left for whatever reason and you increased your households by 33.   This is wonderful!!!  Oh and it is also extremely realistic.

**start of what could be a much bigger post