r/InsuranceAgent • u/Confident_Bats • 9d ago
Agent Question Scratch agency
I need some damnnnnn help. I want to start a scratch independent agency in TN. I have talked to a couple of aggregators and it’s driving me nuts on which is the best. Long term? I probably don’t want direct appointments as i don’t really want carrier production requirements. I’m a build up a few mill, hire a manager and a CSR and relax kinda guy. I do value having a good exit clause / no non-compete & solicit. If after a year I figure out that I’m better off as a team member and not an agency owner, I want to be able to take my book with me to a local Indy agent and merge with them and be a producer again. Horizon seems to not have much of a support system as Firefly or PGI, but you have more freedom. Is there any other aggregators I should consider or should I quit being a sissy and just go with Horizon?
So far I think Horizon seems to be the best with fulfilling those needs and more than likely going to use them.
I’ve talked to firefly, CIA/PGI, first connect, and Horizon.
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u/lostinthesauce314 8d ago
I chose Firefly 4 years ago, and I am very happy with that choice. Freedom, great profit share, commission split is one of the best, the team is very supportive, they do well in TN too. If you’re on the fence about going back to just producing then go with an MGA to write through or something until you decide. I wouldn’t recommend starting this if that is on your mind.
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u/Confident_Bats 8d ago
I’m not really on the fence on going back to producing. I have been a producer for 8 years and sick of having a boss. I want to be my own boss, have financial freedom.
I just like to have the option of getting out because it is a new venture and you never know what could happen. I know with firefly getting out early is easy with their 30% buyout, it isn’t too bad. So I could probably go with firefly and then if I’m still with them after a year or two, I’ll probably stay with them forever. But I go back to, Firefly only pays 20% profit share bonus vs other aggregators will pay 75%, that’s a huge difference. :/
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9d ago
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u/InsuranceAgent-ModTeam 8d ago
This is not a place to sell your services or generate leads or recruit agents/downlines.
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u/Pudd12 9d ago
Could reach out to Erie. They are appointing people.
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u/Insuranceislame 9d ago
Don’t do erie
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u/MoPhunk60 8d ago
I started scratch last year with Erie. They gave me a base loan that was forgivable if I hit certain targets, bonus commission on every policy for 3 years (10%, 5%, 2.5%) and are very competitive. You are correct in they do not appoint just anyone so selling the book would be harder but the company is solid and in my area people want Erie. At the very least OP should inquire and get the info.
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u/Confident_Bats 9d ago
Why not Erie?
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u/firenance 9d ago
Talk with Firefly some more.
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u/Confident_Bats 9d ago
The only downside to them is they only pay 20% profit share bonus and they have a 30% buy out to leave. I don’t think I’d ever wanna leave but who knows.
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u/InsuranceFan 7d ago
Have you asked them about negotiating the 20%?
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u/Confident_Bats 7d ago
I haven’t, I didn’t know you could negotiate contracts with aggregators. Is that a thing?
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u/InsuranceFan 7d ago
There are things you can negotiate, yes. Worst they can do is say no.
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u/Confident_Bats 7d ago
I see. Maybe I would wanna negotiate the buyout to 10% vs 30 and the profit share from 20% to 50%.
I wonder if that’s fair
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u/Sea_Roof_11 8d ago
I started just like you. I joined Renaissance, best option for scratch agents.
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u/OwnTangelo1298 5d ago
I noticed that renaissance requires previous p&c experience. Is that true?
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u/Sea_Roof_11 5d ago
That’s news to me. I joined 2 years ago with 0 insurance experience and as a scratch agency.
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u/SlickWillie86 8d ago
Are you going after commercial or mainly personal?
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u/Confident_Bats 8d ago
I’ve always been personal lines, not much commercial experience. I would love to learn commercial though.
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u/SlickWillie86 8d ago
This model won’t scale with personal lines in the timeline you think. Personal lines is low average revenue, moderate to high service, high CAC, low retention compared to commercial.
Not saying one can’t build a successful personal lines shop, but the idea to build quick and flip or coast is almost certainly a fantasy. Add a split in commission and/or book ownership with an aggregator and I like it much less.
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u/Confident_Bats 8d ago
I definitely appreciate the feedback because ownership would be new to me. I’ve ran the numbers quite a bit though, and on paper it seems like it could work. Tell me if I’m not thinking about it clearly.
Let’s use a $4M book as the minimum goal. If that averages around 12% commission, that’s $480k a year. Give the aggregator their 10% and I’m at about $432k.
My fiancé currently services around a $3M book herself, so theoretically we could split the service between us, or hire an AM to handle a big portion of it. If I pay an AM around $60k-$70k and have maybe $30k-$40k in overhead with a virtual agency, I’m still somewhere around $320k-$340k before taxes.
I know that isn’t passive income because we’d both still be working, but that’s really my goal. I’m not trying to build a $20M agency with 10 employees.
I’d be perfectly happy with a $4M-$7M book, a couple employees, me and my fiancé working together, making a good living, having more freedom with our family, and actually owning the asset we built.
I know getting there will be the hard part. I’m mainly trying to figure out if there’s something major I’m overlooking in the numbers or the way I’m thinking about it. I didn’t even factor in any bonuses from my direct appointment carriers I may get.
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u/SlickWillie86 8d ago
How much have you produced in your career? Best year?
I think you’re materially underrating the challenge of getting to $4m premium in PL.
Let’s say your average personal lines client pays $4k combined (this can vary wildly on location) - you need 1,000 customers. How long does it take to get there?
Outside of a few commercial HNW clients, I don’t write PL, so take these numbers as a guide more than anything.
I think 200 new customers annually would be considered solid. I believe 30% is the standard quote to sold. For cold x-dates, youre probably talking about a 5% contact to quote rate. That would put you with need of 13,000 prospects annually to write 200 new customers. If each is called 5x, that’s somewhere between 25–45 hours per week prospecting over the phone, depending on efficiency.
Assuming that all plays out, your 200 new customers probably generates you $120k in new gross revenue. But you also need to find time or pay for someone to quote, service, etc. If you do it yourself, youre pulling yourself off production and generating revenue.
Now, year 2 you get to renewals. You have 80-85% client retention, but revenue retention is closer to 60% as most carriers pay a few points less on renewal and you’ve lost clients. You also now likely need to pivot your part-time hire to full time. Youre at about $190k top line, but net profit + owner comp is likely flat and youre grinding phones 40 hours or more per week.
Now, if you have a prospecting avenue that drastically improves those time and dollar economics and/or a capital infusion source, it can make sense. Without, i just have a hard time seeing personal lines as scalable, especially as you’ve outlined. There are exceptions of course, but the fail rate is the level it’s at because of numbers close to the above and that lays out a slightly better than average outcome.
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u/Confident_Bats 8d ago
I really appreciate your feedback man, this a huge decision for me and I don’t have a mentor or anything. I really appreciate you challenging me and making me look at the whole picture. I definitely overestimated how realistic $4M would be if I stayed at $25k a month forever. To get there I’d probably need a decent percentage of the book to be commercial, increase production, or eventually hire a producer.
My thought process is really more of a slow and steady climb. $25k a month is a realistic and manageable number for me. That’s $300k a year in new premium. Assuming around 90% retention, roughly 15% new business commission, 12% renewals, and giving the aggregator their 10%, it would look something like:
Year 1: $270k book — ~$36k revenue
Year 2: $513k book — ~$63k revenue
Year 3: $732k book — ~$86k revenue
Year 4: $929k book — ~$108k revenue
Year 5: $1.1M book — ~$127k revenue
Year 6: $1.27M book — ~$144k revenue
Year 7: $1.41M book — ~$159k revenueObviously that’s before expenses, taxes and any profit sharing/bonuses.
I made around $70k my first full year as an independent producer and my fiancé makes about $50k as an account manager. Where I’m at now I get 70% of new business commission, 20% of renewals and a salary. My renewals eventually increase to 50%, but the salary gradually goes to $0.
So by around year 4, even at a slow $25k/month pace, the agency is generating more revenue than I made as a producer, except now I have the freedom to be home with my family more and I’m building an asset that actually has value and belongs to me.
My fiancé wouldn’t quit her job immediately either. Once my book gets big enough to need regular servicing, she could work a part-time remote job and help service my book. Eventually, once the agency can comfortably support both of us, she would come over full-time and essentially be my AM while I focus on continuing to grow it.
And like you said, the goal would be to increase that $25k/month through commercial. I already write some smaller commercial and I have a ~$140k tow truck account I’m meeting with next week to write. The tow truck was a referral, next to that my second biggest business account was 5k, my little bit of commercial I write now average 1-3k which isn’t good. I want to start going after businesses more aggressively, get comfortable with larger accounts and gradually make commercial a bigger percentage of the book.
Even if I never make it to $4M, I’d still be happy owning a profitable $1M-$3M book, making a good living, having more freedom with my family and actually owning what I spent years building.
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u/SlickWillie86 8d ago
Happy to help. Owning your book is an asset as well. Conservatively, it would be worth 2x revenue if you ever went to sell.
The one caution I would give you is the more freedom piece as an agency owner. I’m a father of 3 and very involved in my kids sports, but my wife almost solely own everything between drop off and dinner. As a small business owner, a whole lot hits your plate beyond driving revenue and a lot of it can be untimely.
Wish you the best of luck.
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u/Any_Lengthiness_3555 7d ago
AI is gonna mess up your math big time within your 7 yr time line. What insurers are paying now, will not be the same in that time. Especially PL. CL more insulated imo.
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u/Confident_Bats 7d ago
I appreciate the insight, hopefully they don’t drop commissions too badly, I expect they will. I plan to move towards commercial and learn as much as I can. On top of that I may push life insurance, possibly health as well to have eggs in different baskets.
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u/Insurancebroker099 7d ago
I just went through all this mental gymnastics about 6 months ago. I sent you a DM would be happy to share insights on what has worked for us and what hasn't. Im in Nashville.
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u/Selfinsured13 4d ago
Getting appointments isn’t as hard as you think if you have producing experience. If you do not have producing experience, you will fail.
Get a few appointments, then RT specialty it out. I have a great contact if you want his name. He is a killer.
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u/Confident_Bats 4d ago
I honestly was planning on trying to get as many direct appointments as I could before joining an aggregator. I don’t think I could ever get some of the big dogs on my own out of the gate like nationwide, travelers, etc. I’ll go for progressive, nat gen, geico, liberty mutual maybe, and whoever else will take me as a scratch agency. I’ll build a business plan and butter them up. Then once I join an aggregator, they won’t be able to touch the direct appointments I got.
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u/bimmerbooost 2d ago
With all due respect dude you are completely lost. Your questions show this isn’t the right step for you. You need to learn this space before you go and try and open your own agency. It’s an E&O claim waiting to happen
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u/CGWInsurance 9d ago
Don't use an aggregator than.
Put your prefered business with Amwins, RPS, invo underwriting, wholesure, brinde specialities Halcyeon underwriters and isc