The All Aboard Newsletter

In today’s newsletter we’ll be covering our June Results, Talking about a concept referred to as Regression to the Mean, How we work to offset a slow month, and I talk about expansion vs divesture.

Lets take a ride!

Reading Time: 8 Minutes

June Results + Breakdown

Above: Established Books

Below: ECP Book

Momentum continued in June.

We had a slow down in the middle of the month, but surged in the final week finishing with 892 items.

Thats our 2nd best month ever as measured by items.

However, we can’t help but feel a little disappointed in the results

While the total item production was something to be happy about, a few factors that ultimately threw some cold water on our excitement.

For instance, in May, our average premium per item was $843/$1,286 (Written/Annualized)

In June however, it was $854/$1,386.

But you might be saying: “Andrew, June’s premium per item was higher!”

Sure, but when you have 100 less items, thats obviously not ideal.

Contributing to these two factors, was our worst bundling month year to date.

Call it fatigue, bad luck, or people getting lax, a 65% bundle rate isn’t going to cut it

Especially when we’ve been writing new business at a 90% bundle rate YTD.

Its seems kind of ridiculous to complain or point out these seemingly small factors that I’m down about.

We pushed nearly 900 items and I’m nitpicking a few things here and there.

I should just enjoy it right?

Maybe so, but it leads back to a key practice that I try to teach everyone I work with:

It is just as important to identify what went well, as it is to identify what went poorly.

Its normal to want to dive in when we have a down month or a result we don’t love

To analyze and identify what happened

Why we didn’t perform how we wanted or expected.

But that’s all reactive if you’re only doing it when you don’t like the results.

By the time you figure out the problem, its already too late for a quick fix.

However, if you continuously assess both the good and the bad, you can identify what is working well for you and either double-down on that strategy, or ensure it keeps working for you

Keeping a close eye on your metrics and indicators when you’re winning is the practice that KEEPS you winning.

Do you think Nick Saban sits back and says “Wow - I just won a National Championship, now I can relax!?

Hell no he doesn’t!

He dives in, figures out the good, the bad, and the ugly.

Then he attacks.

There is a reason the greats are upset about the small stuff

They know the fundamentals are 80% of success

They don’t depend on luck

June Breakdown

June was a weird month

We wrote 100 less items than we did in May, but close rates were up across the board.

NB had an overall close rate of 21% (Items/Quotes) with Auto Close improving to 30% and Home Close holding steady at 15%.

So based on everything that I’ve talked about the last few issues, our first thought should immediately go to Quotes right?

Quotes dropped from 216 per day in May to 202 per day in June - roughly a 6.5% drop.

However, items dropped around 11%!

So why did items drop more than quotes?

Remember how our average premium went up?

Its all because of our extras - You know all the EBs and extra products that round out a household. Those third and fourth lines.

Quotes dropped overwhelmingly on these extra lines.

Given how high the close rate is on these product lines, that drop in quotes had a massive effect on items sold.

In May we did 110 extras, and in June we fell back to around 55. Which coincidently is the average monthly production for extras YTD.

While it is disappointing, it shouldn’t be surprising.

Its classic regression to the mean (which I’ll talk more about later).

So, while we’re doing well, we’ve got some work to do.

And indicators are showing us that our July might be a little bumpy.

We’ll break down our plan to minimize a slow-down in July later in the newsletter.

Monthly Goals

For the last three months, we’ve had three main goals for the agency:

1.) Write 100 Extra Items → Miss

Extras were amazing in May, and disappointing in June. Just a great reminder that its hard to do “a lot of things well.”

People can only focus on so many things, but approaching NB with a three-line mentality isn’t going away for us. As we add life insurance into the mix, there will be few instances where there is truly no opportunity for a third-line.

2.) Add Platinum to 50 Households (Service) → Hit!

In June we added Platinum Coverage to 51 HH and Gold to an additional 22 HH! As a reminder, we are huge fans of Platinum/Enhanced over here for a few reasons.

First, the surcharges from claims in GA are absolutely massive which leads to retention challenges post-claims.

Second, the additional 10% in premium really adds up. On average, adding Platinum or Enhanced is worth about $250 per item per year in premium.

At 2.2 Items per HH, 50 platinums is about $28,000 of annualized premium being added to existing households each month.

Do that every month and you’re increasing premium by $300k+ per year on your existing book.

Its an easy sell, it helps with retention, and over the course of the year could add as much premium as a full month of selling.

Not bad right?

3.) Home Close Rate of 15% →

Self explanatory and given that we’ve hit this goal the last three months, it is time to raise the bar.

New Goals for July and August

1.) Issue 5 simplified life apps from our Sales Team

2.) Write 50 PUP per month

3.) Write 30 items from our monoline customers per month

Regression to the Mean + Slow July Forecast

By now, you’ve heard me mention the concept of Regression to the Mean a few times.

But what does it actually mean?

The general idea is that over-time, your results will fall generally in line with the long-term average.

Think of the red line in the graphic above as a trend line. When the black line goes above it, your trend-line goes up. When the black line goes below it, your trend-line goes down.

Pretty simple right?

The concept of “Regressing to the Mean” is an important concept to learn and observe in your own business.

Remember last month how I said I thought we over performed when we hit 994 items?

I said that specifically because I knew that our mean was nowhere close to that type of production.

I didn’t expect us to push 1,000 items again in June. In fact, I expected us to write about 850 items which would have been in line with our moving average.

We weren’t too far off, outperforming that expectation by about 5%.

But how did I know that should be the target?

Well, take a look at our own production line YTD:

Looks similar to the graphic explaining Regression to the Mean above right?

Tracking your trendline can give you a better idea of what to expect from month to month.

Its easy to get emotional after a big month and think its going to last forever.

It’s not.

Its just as easy to get emotional and down after a poor month and think that will last forever too.

It won’t.

The trendline, or the mean is a moving target, but that target keeps you honest.

Its both a check on reality and your ego

July Expectations + How we forecast

Based on the graphic above, we should reasonably expect a bounce back month toward the mean.

So why do I expect a slow or bumpy July?

We have some troubling indicators that could lead to a July that underperforms expectations.

A few factors are playing against us:

Quotes slowed down in June.

Close rates have been relatively flat.

And July is a month with a ton of scheduled PTO for the Sales Team.

To make it even tougher, July is a 20 day month.

Ouch!

Add in that the Fourth of July was on a Tuesday, and Monday the 3rd becomes a psuedo half-day.

So while we hope that we have a high production month that moves our production curve towards the mean…

Hope isn’t a viable strategy

So, to counteract these factors, we’ll focus on three-strategies to hit the production numbers (900+ items) that we need.

Typically, quotes have a 2-4 week lag.

That means that a large portion of the production for July from June quotes should be in the hopper.

Some could make an argument the die is already cast on a slow month.

But we never say die.

Three Tactics to get Sales Up in a Pinch

Our three strategies are going to be focused on driving quick wins this month while working to get quotes back up to around 220/day.

1.) Increase Training to Increase Close Rate

Quotes are the easiest lever to pull to increase your sales.

But Close rate has the biggest effect.

There will be more training with our veterans around our core products based on overall quote volume.

Auto, Home, and Renters are the lines with the highest quote volume.

If we can increase the close rate of each of these lines by 10%, we’re going to see massive results.

For example:

Auto Close from 30% to 33% = 55 Item Lift

Home Close from 15% to 16% = 19 Item Lift

Renters Close from 12% to 13.2% = 6 Item Lift

A 10% increase in close rate for these three lines will equate to roughly 80 Items and $75k of written premium.

Yee Haw!

2.) We’ll be Over-Marketing

While increasing close rate provides the most leverage, Increasing quote volume is quicker and easier.

While our quotes from June were below expectations, we want to ensure that quotes in July are HUGE to set up a nice August.

Therefore, we’ll be overspending on marketing for the team.

We tend to buy about 350-400 Leads per day, so we’ll be looking to increase that to about 385-440 Leads per day.

By over-doing it, we might see a slight increase in our cost-per-acqusition in the short run

But if you think about the Variable Compensation and Renewals, its worth spending an extra $5k to $10k every once in a while to make sure you hit your goals.

When it feels slow, people always want to slow down marketing.

That makes no sense

Thats when you should be spending MORE

A 10% increase in leads per day should lead to around a 8.5% lift in items sold over the course of the month.

We’ll shock the system to get back on track

3.) High Close Opportunities

Last, we’re going to be focusing on high-close rate opportunities.

If we can train people to get close up, and overmarket to get quotes up, we can reasonably expect to get back on track.

The high-close opportunities are just a cherry on top.

So what do these opportunities look like?

For July, its going to be Referrals and Monoline clients.

We don’t hit Monolines very hard on a month to month basis which gives us a nice pool to draw from.

And while we do cross-sell consistently, we don’t often make outbound calls to these clients for solicitation purposes.

More importantly though, we’re running contests and spending a lot of time focusing on generating referrals.

We don’t do much in the way of lender referrals, but we are huge believers in asking every person we sell for 2-3 people they think we can help.

We ask them if we can have their names and numbers, and if the customer feels uncomfortable, we instead ask if they’d send people to us.

They almost always do

You just have to ask

And by the way, we’re seeing referrals close at 6x the rate of an internet lead.

JUST ASK!

To sweeten the deal, we’ve recently started a “Lifetime Drawing” that all referrers get entered into forever where we’ll raffle off gift-cars, and items that people can win.

So, why spend so much time thinking ahead?

It is important to me that we don’t get surprised with a bad month.

There are enough unexpected setbacks we won’t be able to avoid, so if a setback can be reasonably avoided - we’re going to do everything we can to hedge our risks.

Being surprised in business can have real consequences in both the short and long-terms.

Add in the emotional drain and stress that comes with a bad month, and this whole entrepreneurship thing can become un-fun very quickly.

We often overestimate what we can do in a day, and drastically underestimate what we can get done in a month, year, and decade.

I like to think of the month as four quarters of a game. We’ve all seen a sports team mount a huge comeback.

It seemed like there was no hope, until they scored 4x in the final quarter and won!

Sales is no different.

A slow start of the month, or a slow middle doesn’t mean your month is shot.

How many of us have had massive weeks?

Almost all of us.

How many of us can tell someone else why the week was massive?

Almost none of us.

Every month spend some time looking back on your production and progress towards goals.

Document what went well, what went poorly, and what was a complete and utter failure.

Dust yourself off, make some adjustments, and then keep going.

How to get the team to pick it up

So, the last piece of this puzzle is team-buy in.

I won’t spend too much time here as everyone’s team is different and are motivated in unique ways.

We’re going to get buy-in by:

1.) Shock the system

This is the over-marketing and training that we’re going to be doing. We need a catalyst, and we’re hoping that these two things combined give us some nice lift.

When people see that you’re investing in them, they're going to buy-in. They want to know you’re invested in helping them hit their goals if they’re going to help you hit yours.

2.) Talk about the targets/focus every single day

This cannot be overstated enough.

All those lines about people needing to hear something “three times to get it to stick” are bullshit.

I think its more like 20+ times.

Talk about the focus, goals, and expectations every single day.

Drill it in and drive it home.

3.) Buy-in or you’re dead in the water

This is the last but most important piece.

You need buy-in from your team, or there must be recourse.

I’ve talked about it before

Energy is contagious

Good energy, bad energy, and middling energy.

Ensure that the energy is good

Or get it out.

But make sure that you’re being fair to them, and doing your part too.

People follow the leader.

On my mind this week:

Should we Divest or Double Down?

For the last 2.5 years, we’ve been working to purchase an additional agency every six months or so.

While many people are looking for $5mil to $10mil agencies to buy and merge into their portfolio, we do something a little different.

We’ve been buying what some people would call “The scratch and dent special.”

We look for smaller books that are underutilized or underserved.

Think distressed assets if you will.

These are often agencies that are owned by long-term agents who have been resting and vesting on their books.

We do this because they’re usually sold near TPP values and have a ton of opportunity in the book for bundling and generating referrals.

But as we approach Q3 and Q4, we have to make a decision.

Should we continue to buy agencies every six months, do nothing, or perhaps even divest?

Our strategy has been to keep all of our book numbers separate rather than merge them

When we take possession of a book, we keep the book separate and focus on growing that book to about $4million to $6million.

Once it hits that number, we rinse and repeat.

We’ve operated this way because that tends to be the rough sweet spot for buyers of books and you fetch some of the best multiples.

Rather than have one big $30million+ agency, ideally we’d have 6-7 agencies around $5 million in premiums.

This gives us the flexibility to buy and sell books as needed.

And it might be time to consider pulling that lever.

We’re set up to run for profitability in the back half of the year if we don’t think we can hit a bonus because of our loss-ratio.

While we’re not ready to make the call, it could be a win-win for us and a buyer to take acquisition of a book that is 5,000 points positive on the year.

We sell a book for profit to generate capital for reinvestment in 2024

They buy a book that pushes them closer to a 4.0 bonus.

Its too early to make the call, but something that we’ll be watching in the coming months.

There will be years we want to buy, and years we want to sell.

But this flexibility is why we aren’t fans of merging books.

Having the freedom and ability to do a partial sale or full-sale is something we’ve built into our strategy and will continue to build into our strategy.

Andrew’s Picks

We’re so busy building, its easy to forget to pause, reflect, and re-examine. Robert Green is one of my favorite authors and shares a prescient message in the 4 min video here: Link

Shaan Puri mythbusts on the idea that the rich are simply lucky. While luck might be involved, its not all of it: Link

I sat down with Nick Sakha and A1 Agents last September. While a lot has changed since that interview, the principles have not: Link

Have a question you want me to answer in the next newsletter? Submit a question here: Link

What did you think of this week’s newsletter - Shoot me a reply with a comment, question, feedback, or something else!

I’d love to hear from you!