You are more than just a benefits broker. You do more than just sell insurance. You are a small business owner looking to meet the needs of your clients with products and services that check all their boxes. As such, informed decision-making and sound business management are important. Both require relevant metrics.
A metric is nothing more than a performance indicator. It is a quantifiable measure of how your business is doing in key areas. As a broker, the metrics most important to you are different from those important to businesses in other industries. The key is identifying the right metrics that will make for better business management and decision-making.
As a general agency representing hundreds of carriers and thousands of brokers, we suggest the following five metrics:
- 1. Variable Costs
A lot of companies focus on revenue and margins at the expense of other financials. From our perspective, brokers need to pay close attention to the variable costs. The point of tracking variable costs is understanding how much money you spend on product and service delivery. That amount should be commensurate with your margin targets. If it's not, you have to spend less, increase revenues, or both.
- 2. Lifetime Value
It has been said many times that it costs more to win new customers than it does to keep existing customers happy. Let us take that one step further. Longtime customers who stick with you year after year add value. Their total lifetime value is largely responsible for your business's bottom line.
Lifetime value is a strong performance indicator in that it tells you how loyal your customers are. It offers great insight into how to bring in new customers and turn them into loyal partners. As a broker, you should know how important that is. You need a certain core of longtime customers to offset the natural turnover inherent to your industry.
- 3. Win Rate
Being an insurance broker ultimately means being a sales pro. Sales are what you do. That makes win rate an indispensable metric. What is win rate? It is the rate at which you close deals. It is the rate at which you turn inquiring customers into paying customers. It is an important metric in that it tells you how effective you are as a sales professional. If you don't know your win rate, how do you know if you are selling as effectively as you should be?
- 4. Retention Rate
Win rate tells you how effective you are at closing deals. Retention rate tells you whether or not you are successfully keeping up with your client's changing needs. If there is only one thing you take away from this post, let it be this: retention rates are that which separate the most successful brokers from those just getting by.
Insurance is an evolving business. It takes a lot to keep customers happy year after year. That is one of the reasons we so strongly advise working with a general agency. At any rate, your ability to retain customers directly affects your ability to keep your business going long-term.
- 5. Referral Rate
Finally, your strongest marketing asset is the referral. Customers pleased with your service and products recommend you to colleagues. If you are getting a strong number of referrals, you are doing something right. Keep doing what you're doing even as you seek to improve.
Certain parts of the insurance business can be hard to quantify. But with the right metrics, you can get a good handle on how you're doing. That should lead to better business management and more informed decision-making.