The All Aboard Newsletter

Hey everyone and welcome back!

In today's newsletter, I'm diving into something every insurance agency owner needs to know: How to figure out your Cost Per Acquisition (CPA).

But thats not all.

We’ll also cover how to optimize your marketing in a way that allows you to impact your cost per sale and return on investment.

Its not enough to know what your cost per acquisition should be.

Its a whole other thing to make it happen AND get enough sales to hit your various goals.

Lets dive in.

Optimize your Marketing and Lock in your CPA!

If the embedded link doesn’t work, you can access the video here: Click Me

For the best experience and most information, I highly suggest you click the video!

What Should Your Cost Per Acquisition (CPA) Be?

One of the most common questions I get when it comes to marketing or analytics is “What is a good cost per acquisition?”

The truth?

There's no single number that's right for everyone. Your CPA depends on your business model, your location, and your goals.

If you must have a rule of thumb, here is what I usually suggest:

• For most of the U.S. (average premiums around $750-$1,100 per item), a good target CPA is about $400-$450.
  

• In higher-premium states like Oklahoma, Arkansas, Louisiana, Texas, and Colorado, spending $600-$750—or even $1,000+—can still make sense.

The reality is that different carriers pay different commission rates, so that can impact these values quite a bit.

Additionally, if you' average 1 policy per sale vs 3 policies per sale, that can have a huge impact too.

Which leads me to one of my next points: There is no singular metric to use (More on that later).

How to Quickly Calculate Your CPA:

If you want a simple way to calculate what your cost per acquisition should be, here is how:

• Take your average premium per item.

• Multiply by average number of items per sale.

• Multiply by your commission rate.

• Decide what percentage of that cash you’re willing to spend.

Example:

• Avg premium: $1,050

• Avg items per sale: 3.1

• Commission: 25%

• Willing to spend: 60% of Y1 Cash

This gives you a CPA of about $488. Easy, right?

Note - We look at everything in items. You can do this with policies too, so long as you capture the full value of the premium that is coming in for each sale.

Then, when you pick you ideal % of year 1 cash (in this case 60%), you land on the right number.

And look - Its not only about getting your CPA locked in.

Don’t forget about Return on investment!!!

You can have a super low CPA, but also have a low ROI if you’re not getting enough premium.

Similarly, you can have a high CPA but if you’re ROI positive, then who cares!

This week’s edition of All Aboard is brought to you by:

Justworks

Looking to optimize payroll spend?

Look ya’ll - I’m a massive fan of Justworks.

Today’s newsletter is all about understanding and optimizing your marketing costs.

People often focus heavily on optimizing marketing spend, but forget to optimize one of the other expenses in their agency:

Payroll, HR, and Benefits.

We’ve worked with Justworks for 5 years now and they helped us reduce our healthcare premiums, payroll costs, and eliminated our need for an internal HR person while handling all our state compliance for remote employees.

Their team is stellar and they have so many solutions to help agents beyond what I just listed.

If you’re not 100% satisfied with your payroll and health benefits provider, I highly encourage you to reach out to them.

Want an introduction, I’m happy to make it happen - Just let me know.

If you want to reach out yourself, you can email our account rep TJ Quinn at [email protected].

Check em out!

Advanced CPA Approach:

We use a more detailed method at Peachy Insurance that looks at Lifetime Value (LTV) to determine our target cost per acquisition and marketing bids.

We never want to spend more than 20% of LTV to get a customer. Why? Because that keeps our model profitable and scalable.

For reference, if you have a ratio of 5:1 on LTV/CAC (Lifetime value is 5x higher than cost per acquistion) or better, you’re in an amazing position to scale.

Here is how that model can differ in action:

• Multi-car + home + flood policies have high LTV, meaning we might spend $850-$1,500 per sale. This is because the premiums are high, and the life is long (high retention)
  

• Single-car renters have low LTV, meaning we might only spend about $300 per sale. That’s because even though auto policies for renters tend to be expensive, the renters policy is extremely low premium and the return is poor.

Can you see how the “rule of thumb” might not always work?

I run this type of analysis for my consulting clients to help them determine:

• What segments to focus on.

• What to spend on each segment.

• What to do to improve the value of each segment.

Optimizing Your Leads:

*Note - This section has A LOT more detail in the video.

Marketing optimization is about more than just making your CPA better. You also need to understand how to make it better.

Start here:

• Quote Rate: If low, your lead source might be the issue. Talk to your vendors and see where your leads come from. See if they have any quality checks they can implement, or back-end sources they can turn off.
  

• Quote-to-Close Rate: If quotes aren't closing, check your targeting and filtering. Are you focusing on the right ages, vehicle types, or claim histories? What about geography? And don’t forget to make sure your team is closing.

Tips for Success:

1. Check your data regularly (at least monthly). Stay aware but don't make impulsive changes. Less can sometimes be more.

2. Meet with your vendors every month or at least quarterly. Most vendors genuinely want you to succeed. If your rep isn't helpful, ask for a new one. Look at them like a partner and share your goals!

3. Be patient with changes—give it 90 days. Sales cycles take time, so don't rush adjustments.

4. Know your goals clearly. Whether you're chasing profit, bonuses, or employee satisfaction, know exactly what you're optimizing for.
   

Last thing here…..

Watch Out for Small Samples:

Be careful when making decisions based on small samples. You might think a zip code is bad because you haven't sold anything there yet, but with only a few leads, it's too soon to know for sure. Use sample size calculators online to see if your data is reliable.

I go over proper sample sizes in the video!

Until next time!

Three ways I can help you:

1.) If you need leads, calls, or data analytics - We’d love the opportunity to show how Next Call Club can help you grow faster and more profitably than before. We’re ready for the TCPA changes and can help you be ready too!

2.) Looking to scale in 2025? Maybe you’re shifting your strategic direction. Want a person you can work through plans with? Lets talk about 1:1 Consulting for you and your agency!

3.) Want to sponsor this newsletter? Lets talk about whether you’re a fit to reach 1,000+ agency owners every week!

As always - Thank you for the support! I’m looking forward to bringing you insights, ideas, and actionable strategies multiple times per month! If you enjoyed this newsletter or it gave you value, please consider sharing it with a friend!