It will soon be contingency season! We hope you enjoyed a great 2015 and will be rewarded for growth and profitable business. Contingency bonuses are based on achieving predetermined premium volumes, loss ratios and other objectives – things you’ve worked hard to accomplish. Don’t waste these dollars! Thoughtful use of these funds can make a true difference in your agency growth and value.11 Ways to Invest (Not Spend) Your Agency Profit Sharing Check Click To Tweet
When your check comes in, take a minute to deliberately plan how to INVEST the money. Here are a few ideas:
- Hire a producer. It may be time to hire that new producer you’ve been talking about. You can instantly add to your profit sharing production by hiring a producer with an established book of business. Hiring a producer who is driven to build a book is also a consideration. The bottom line is it’s never too early to start building for the future and with, a check in hand, now could be the time.
- Dry Powder for an acquisition. Many times an agency or book of business can be purchased for little or no down payment. A buyer that has 5% of the purchase price for a cash down payment can improve the interest rate on the loan, and exhibits to the seller that he or she is “acquisition ready.”
- Invest in legal services. If you have been procrastinating a buy-sell agreement or other corporate housekeeping issues, now is the time to spend a few bucks to address this. Providing a formal process will drive an organized perpetuation plan for an owner who is ready to move on.
- Consider employee education. Why not earmark some money for employee education courses? Investing in your employees’ continued growth makes them feel valued and can lead to strong morale in your staff.
- Offer employee bonuses. Many agency owners share a little of the pot with key employees. If you have not given raises, a bonus may be appropriate.
- Develop a new marketing initiative. Are there updated marketing efforts you should be using to increase production? If you don’t have an agency newsletter, consider developing one. Have you updated your website? If not, invest the dollars to create a better user experience. Can customers find you online? Search marketing is one of the best ways to develop a presence online, driving leads in your door. Purchasing lead lists, developing an educational blog and local press are also valuable to agency growth.
- Pay down debt. Look at your current debt situation and determine where you could use this money to pay existing debt.
- Stash a little cash. When you have extra profit, it’s good to think about putting money in your savings account. Good agencies typically have a working capital cushion. It is recommended that you have three months of business operating expenses as a cash reserve.
- Don’t forget taxes. Set aside the money now that you will need to send to Uncle Sam in the spring.
- Upgrade technology. Invest in tools that make running your agency more efficient. As your products become more complex, upgrade to accommodate. This includes new billing systems and invoices, updated quoting systems, and even mobile-responsive websites. This will allow your agency to run smoother and your customer interaction to be more efficient.
- Fund a personal goal. A vacation, new vehicle, college expenses – all of these are real life needs. While planning and saving are important, you should also be rewarded for your hard work. Just try to ration those profit sharing funds to also advance your long term wealth.