Starting Your Own Insurance Agency: Setting Out on Your Own

If you're an insurance professional eager to increase your earnings potential, starting an agency of your own may be just the right move. 

With a little risk, setting out on your own can provide the independence and profitability you desire, while helping you gear up for a solid future.

Establish a Business Plan

Every successful agency starts with a clear vision and sound business plan. 

First figure out where you're going and the road you'll take to get there. This is your business plan. 

Ask yourself the following questions to help sharpen your focus and define your objectives:

o Where will my business be located?

o Will I buy, lease or build?

o Who are my competitors?

o How can I identify my customers?

o What method will I use to sell to them?

o Where will I find qualified employees? (if applicable)

Get as much measurable information as possible about your competitors, the area surrounding your potential business, and your community's plans for business growth. (You may also want to consider purchasing an existing agency to save time and start-up costs.) 

If you've never operated your own business before, don't expect to know everything there is to know about it. Glean as much knowledge and information from others as you can, and use this valuable information to guide you in your own start-up. 

Find and consult with qualified lawyers, accountants, public relations professionals and business experts to help you address all the aspects of a sound business plan, based on your objectives. 

Ask local business owners for referrals and advice, and talk to other agents in your area about their experiences getting started. 

Based on the information you collect from your research and inquiries, reexamine your business plan. Don't hesitate to make revisions if you find your agency vision collides unfavorably with your business opportunities.

Determine Your Product Line

What type of insurance you handle should be based, at least in part, on your expertise and the marketplace. 

If you're already licensed to sell property and casualty insurance, for example, and that is your area of expertise, it would be wise to establish your own agency based on this preference. 

However, expanding your horizons can be a good experience too; so don't limit yourself to only what you know. Take advantage of the opportunity to expand your knowledge and skill to other areas.

Since heading in a new direction may require additional education, licensing and state approvals, keep in mind the extra time and expense involved in these efforts. 

For more information on state and local requirements, contact your state department of insurance.

Secure Financing

Finding adequate financing is a primary concern for most agents forging out on their own. 

Unless you have large sums of money at your disposal, you'll need to approach a bank, the Small Business Administration (SBA) or a private individual to secure the funding needed to start your business venture.

Many banks are wary of new business loans because of the risk involved. However, the SBA is usually eager to help—but competition for this type of funding can be intense. 

If you have contacts within the business community who might be willing to lend a hand by investing in your business, this may be a good avenue to pursue.

Before you apply for financing, carefully prepare a thorough loan proposal containing detailed figures. Include the capital you need for start-up, a salary for yourself, and any other initial expenses you foresee. 

A detailed expense map allows lending institutions to examine your objectives, ensure that your business plan is solid, and determine the amount of risk involved in loaning you money.

Develop a Marketing Plan

Now that you've acquired the finances you need, develop a marketing plan so you can get down to business. To do this:

o Identify your target market 

o Decide what makes your product unique

o Develop a strategy to communicate this distinctiveness to potential customers

Once successfully established, all business decisions should be based on this plan. So put these items in writing, and refer back to them before making any major changes. 

Determine Pricing, Distribution & Staffing

Material, labor and overhead costs are the three main components of pricing. 

Before pricing the policies you'll sell, conduct a complete cost analysis and set prices in line with your marketing strategy.

Your method of distribution should be based on the quickest, least expensive way to connect with your customers and get them the policies they need. Whether through face-to-face meeting, fax, email or postal mail, the method you choose should meet your customers' needs in the easiest possible way.

Finally, if you plan to hire employees, define their roles clearly based on job function. 

Allot funds for training and continuing education so you and your workers can stay current in the industry.

Gaining Your Independence

If you're an agent seeking freedom and increased profitability, consider starting your own insurance agency. 

With some hard work, time and perseverance, your efforts will most likely pay off, rewarding you with a lucrative future!