Posted by Scott Richburg on December 29, 2005 at 13:27:44:
If you are captive to a company, the following letter might ring true
for you. It was sent to a gentleman that asked for advice on which
way he should go with his career.a captive term environment or on
his own. After reading it, if you would like to investigate doing it
on your own, I would love to send you some info. As alwaysjust the
info and no annoying follow-ups. Call me at 325-573-7178. Dear ****, His numbers are good. The system is working. How does that stack up
to us? At the $1500 average and at his volume, his average commission
would be $1995 with us. His current average commission is $1125.
Using the fact that that he is averaging 5-6 sales at $1500 and 75%
commission, he is earning $5625-6750 per week. He is paying $300 per
week for leads. With us, the $1500 average sale would pay up to 133% commission. For
5-6 sales a week at that level, he would earn $9975-11970 per week.
We will assume that he can close the same number of sales, because
there should be little, if any, difference in the term products.
Gross dollars, he is leaving from $3350 to $5220 per week on the
table. In addition he has lost 5-6 customers per week to the
company after he developed them. That's 250-300 customers per year
that can be sold multiple products over the years by him or an agent
that he sponsors to sell other products to this base. This market,
homeowners, will buy annuities, medical, LTC, etc......and they are
very likely to buy it from the person who sold them their last
policy. It takes much less effort, time and money to keep a customer
than to develop a new one. Part of the earnings potential in the
insurance business is the customer base. This is where you build
equity in a business. If this base only averages $1000 premium per
household in follow-up sales, your friend is losing $250,000 to
$300,000 in future commissions per year. His company has value without doubt. It works, but at what cost to
the agent? Based on the numbers he provided you, he is potentially
leaving $174,000 to $260,000 dollars of commission on the table per
year, losing $250,000 to $300,000 in future commissions per year, and
giving away a customer base that could build large equity value.
This is a pretty high price to pay for a system that your friend
seems capable of doing on his own. The only unknown would appear to
be a source of leads, and it would appear that leads of an equal
quality can be purchased or developed at a reasonable cost. I believe that his company has put together a good program and made
it easy to participate. I think they have marketed it well to
potential agents and have given good results to many. I just don't
think they have told the whole story. Their leads may be a little
cheaper, but I don't think they are of higher quality than you can
get on your own. The commissions they pay are good, but when
compared to other opportunities, they come up short. For the long
term, the agent has sacrificed large long term dollars to
participate in the system. His company recognizes that dollar
potential, that's why they keep the customer base. The value of the
system is that they train you to sell insurance if there is no other
way to obtain that training. That training does come at a high cost. Thanks for sharing the info with me. I hope I have done the math
correctly. I would share this info with your friend, and see if he
agrees with what I have said. I may be missing the boat here
and I may not see the total value of his company. From a financial
standpoint, however, there would appear to be better options. Sincerely, Scott Richburg
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