Hey everybody, and welcome back to another edition of the All Aboard newsletter!
I know it's been a little while since the last issue - conference season and travel have made it tough to keep a consistent cadence. But I'm hoping to drop some serious value for you today on a topic that's been on the minds of agents, corporate reps and carriers alike: retention.
Specifically, I want to dive into the actual dollar amount that retention is worth. If you move retention by 1%, what does that mean financially for your agency? The numbers might surprise you - for better or worse. So let's jump in and do the math together.
$ value of retention!
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!
The Dollar Value of a 1% Change in Retention
To better express the idea, I’ll share an example.
For a $5 million book of business with an 8.5% commission rate on renewals, a 1% change in retention is worth about $354 per month. Doesn't seem like much, right? But for a $45 million book (where I'm at currently), that 1% change equates to $3,200 a month.
Basically, the bigger your agency, the more cashflow is affected by a change in retention.
To put that in perspective, my was roughly 87-88% a couple years ago. Now it's closer to 80%. That 7-8% drop multiplied by $3,200 per 1% change is well over $20,000 per month in lost revenue. ...we're talking over $20,000 per month in lost revenue…. and that doesn’t even factor in the opportunity cost of premium growth as customers walk out the back door.
The question is always the same though: Can we actually impact retention?
Moving retention is…. complicated.
There are a lot of theories out there about what moves the needle on retention.
Some swear by a specific tactic that boosted their numbers. Others point to something that tanked their percentages. But the reality is that retention is complex, and the numbers can get a bit wonky depending on how it's calculated (are we looking at pure attrition or are new business policies included? Is it based on renewals issued or paid?).
At the end of the day, retention changes, positive or negative will affect cashflow (see below)
Various cashflow changes per 1% change in retention.
A 5% lift for a $5 million agency might be an extra $1,500 per month. That is probably not worth a large investment.
But as the agency gets larger, 5% could mean tens of thousands per month, making retention efforts and investments a no-brainer.
The point is, you've got to run the numbers for YOUR book to determine if it's worth pursuing.
But here's the kicker - the examples above only look at a single year of cash flow. Let's zoom out and consider the long-term impact too!
The Long-Term Value of Increasing Retention
I'm going to walk through two scenarios:
A $15M agency with 80% retention (5 year average customer lifetime)
The same agency if they achieve 90% retention (10 year average customer lifetime)
We'll factor in variables like attrition, rate increases, discount rates, and the time value of money. I'll spare you the nitty gritty of the calculations (though I'm happy to share my spreadsheet if you want to plug in your own numbers - just shoot me an email).
But before we look at the numbers, I want to share the concept of Net Present Value.
It basically looks at what a future stream of cashflows (renewals) are worth in today’s dollars. The NPV is almost always lower than the sum of the cashflows in these scenarios.
We use something called the discount rate, to look at the opportunity cost.
A dollar earned today is worth more than a dollar earned tomorrow because you can invest a dollar earned today and get a return on your money.
Now back to the action.
Here are the headline results:
In the 80% retention scenario, the total cash flow over 5 years is $4.6M with a net present value (NPV) of $3.8M
In the 90% retention scenario, the total cash flow over 10 years jumps to $9.8M with an NPV of $6.8M
Here is a visual representation:
We're talking an extra $5.2M in cashflow over the life of the customer and $3M in NPV by increasing retention by 10 percentage points. That's massive! Of course, going from 80% to 90% is incredibly difficult, especially if you're writing a lot of new business. But the long-term payoff is clearly worth some serious effort and investment.
So what can we actually do to boost retention? We’ll cover that next.
Strategies to Improve Retention in a Challenging Market
I’m going to be up front: I am not an expert on retention (see my retention number above) but here are some general best practices that I’m implementing that I have learned from some of the best retaining agents in the country.
Omnichannel outreach: Don't rely on a single method to reach your customers. Utilize email, text, phone calls, social media ads, etc. to ensure your message is getting through. We're seeing open rates of 35-40% on our renewal emails, which means 60%+ never even see them. But by running Facebook ads and sending texts, we're closing the communication gap and more people are scheduling reviews. When they talk to us, good things happen.
Proactive conversations: Don't wait for renewals or rate increases to talk to clients about discounts, coverage, and recommendations. Position yourself as a trusted advisor who is always looking out for their best interests. The more value you provide, the stickier you become. We are offering a review on every single customer call and pushing to complete it!
Set expectations: Educate clients that rates can fluctuate like the stock market (Stole this line from John and Nancy Wells!). Encourage them to check in at every renewal to ensure they aren't missing discounts or important coverage adjustments. Be their advocate and problem-solver.
Build your brand relationship: When we survey customers about their experience with Peachy Insurance vs. the carrier we represent, our agency scores significantly higher. We make a concerted effort to position Peachy as THEIR agent who will fight on their behalf. Remind your clients that you're a local, friendly resource - not just a cog in a big corporate machine. We will be investing in “local” in a big big way in Q4 and 2026.
Scale smart: The strongest retention often comes from being deeply embedded in your community. But it's tough to grow if you're hyper-local. Look for ways to maintain that personal touch and brand affinity even as you expand. It's a tricky balance, but it's possible. We grew swiftly using outbound calling, and now we’re facing the growing pains that come from that (Loss Ratio in 2023 and 2024, and retention in 2024 and 2025). Building your brand locally is going to make clients stickier. Branding is about associations, and we need to want clients to associate with us and our agencies.
Closing
The bottom line? Retention is an incredibly valuable lever, but it requires real work and investment to improve, especially in a challenging rate environment. You've got to be intentional and proactive. Hoping and wishing won't cut it (ask me how I know.. pain).
I hope this analysis was enlightening and I'd love to hear your thoughts. What retention strategies are working for you? Have you done the long-term math for your agency? If you want me to run the numbers or take a look at my spreadsheet, just let me know. I'm always happy to help however I can.
Until next time! Cheers!
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!