I recently did a web presentation about moving from the captive to the independent agency world and how to have the right ‘perspective’ to make a successful transition. I wanted to take some of the topics in that presentation and summarize them in a brief article. Here are the 5 Steps to successfully move from being a captive agent to becoming an independent agency owner.

1. Making the decision

This may sound simple, but making the decision to go independent can be stressful. It is important to begin with an honest assessment of your current situation and equally important to understand the good and bad side of where you are headed.

Being a captive agent does have its benefits. You are provided with excellent training and support from most captive agency environments in the market today. They essentially provide the ‘book’ on how to build, run, and operate daily as an agency owner in their system. Another positive side of this setup is that there is only one carrier system to learn and one carrier to understand from an appetite and underwriting standpoint. This can also be a negative… you only have ONE carrier, which can greatly reduce your overall closing ratio. True ownership can also be questionable, and you will most certainly brand a name, just not YOUR name.

On the independent side, there are also positive and negative aspects to consider. When you are truly an independent agency owner, you really can do business your way. No one is telling you how to market or brand or grow; it is up to you, and that can be extremely rewarding. You can also partner with dozens of carriers, which will greatly increase your closing ratio. True ownership is also attainable in this structure and can be very lucrative (if you would like to read my full article on this subject, go HERE). There is also a ‘flip side’ to becoming an independent agent. Support can be limited depending on your set up and training is minimal unless you pay big bucks to a franchise group. Be sure to weigh your options and know what you are getting into. Also, having dozens of carriers to deal with can be a mess. Try to limit your carriers to those you will use frequently and take it slow, learn the systems, and find carriers that want to help you grow.

During this initial process, you want to maintain a realistic perspective on your current situation and where you're headed. Remember that many recruiters will only focus on the positives of your possible move and may sugarcoat the independent agency world.

2. Figure out how you will gain access to independent carriers

There are several ways to gain access to represent and write business with independent carriers. Most choices can be broken down into 4 categories: direct access, master general agencies (MGA’s), franchise organizations, and cluster groups/aggregators. The important part when considering the direction you want to go is to take some time to do your research.

You also need to understand how carriers tend to operate. If you decide to pursue direct appointments, you need to expect some pressure from carrier sales reps to perform. Many will require premium commitments and some larger carriers will require 3 years of production summaries and loss reports (which you most likely will not have) before giving you an appointment. These various hurdles are why more and more independent agencies, both new and established, are joining cluster groups where they can benefit from the strength and size of the overall group.

If you would like more in-depth information about your options to gain access to markets, take a moment and review THIS article.

3. Do your research and ask tough questions

Don’t be bashful. Once you have decided on how you want to access carriers, ask each organization you consider some hard questions. I have written an ARTICLE on the questions to ask and why, but here is the summarized list:

· Do you charge upfront fees and why?

· Do you have commission splits and what are they?

· Are there ongoing monthly fees and what do they cover?

· Can I write business outside the group?

· Do you share profit sharing or annual carrier bonuses?

· Do I have binding authority with carriers?

· Can I use my own agency name, or do I have to use yours?

· Can I sell my agency on the open market if I retire?

· What do I owe you if I want to leave your group?

· How do you (group ownership) make money in this arrangement?

The answers to these questions will give you a clear picture of each organization and how they operate. Be sure to also review their contract and beware of anyone that tries to side-step any of the questions above!

4. Set the correct expectations for your first year

I have been granted the privilege of helping dozens of captive agents transition to the independent agency world. In my experience, the first year is the hardest! There are a few obvious reasons for this, but some may not be so obvious. Try to remember that working with multiple carriers can be both a blessing and a curse. It is great to increase your closing ratio with a host of new carriers, but try to limit your initial carrier access to 6-10 of the ones you believe will fit your customer target market. You will be juggling a lot during your first year and keeping your initial carrier set under a dozen will cut down on the work you need to do in understanding each carrier, their appetite, and their systems.

Also, be sure to have some money in the bank if possible. You will spend your first few months getting the agency set up. It will take time to learn a new management system, comparative rater (if you choose to get one), and each carrier system. This will limit your time to write business and thus limit your initial agency revenues. It is also important to note that all carriers do not pay commissions at the same time. You may have a couple of months delay before seeing your first commission checks hit the bank, so be prepared.

Most importantly, take heart dear agent friend, you will get through this! The first six months are daunting, and you may even second guess your decision, but after those initial months, you will start to see the light at the end of the tunnel. After your first year, you will wonder why you did not make the transition sooner! I see this play out daily and if you can make it through that first year, you are off to building an incredible business.

5. MOVE FORWARD

The last step… move. I see it all the time, captive agency owners that are perpetual ‘tire kickers’ but never move forward with their transition to independence. Many have gone before you and, as discussed above, if you can just get through that first year, you will wonder why you did not make the transition sooner. Sometimes, all it takes is to set a date for the move. Put a timeline together and stick to it. I have transitioned many agents from the captive to the independent world and NOT one from the independent world to captive.

Well, that is it! I am sure I missed something that will be specific to your individual situation, but these 5 steps should give you a good place to start your journey. If you are truly considering a move to the independent world, we have a library of articles to help with various aspects of owning an independent agency. To view these and other resources please visit our website at www.ISGUnited.com and good luck in your new venture!