While I was working in commercial banking I always had a desire to be my own boss. My clients were businesses and I have watched success stories happening around me every day. One of my former clients in Florida was third generation owned parking garage construction contractor with over $100 million in sales. This company dominated the market in the state and was winning all kinds of industry awards. Owners were taking home millions of dollars every year. Although the beginning of this business was very humble. Grandfather started it with one pickup truck back in the 40’s. Several times business was close to bankruptcy, but hard work and tenacity of the founder prevailed. Lesson learnt was that you have to do it and then commit to it.
Make The Leap
The advice I give now when somebody asks when is a good time to start your own business is: “Yesterday”. I wish I started my insurance agency when I was fresh out of college, single and with no kids. When you are young and don’t have much to lose it’s easier to make that leap. Also you have more energy when you are in your twenties vs late thirties. I missed my twenties window, but instead I got married and I had two kids. My plan was that before I turn 40 I’ll have my own business. I contemplated different ideas from tech start-up down to trucking, construction and even a crazy one – restaurant. After all the research I set my mind on independent insurance agency.
I picked insurance since it had a lot of similarities with my job in banking – selling intangible products and services to consumers and business. It’s very important to chose a filed you have some experience and knowledge. One thing I knew for sure I couldn’t just quit my well paying banking job and start insurance. It takes months to get licensed and line up all the carrier appointments. My plan was simple. I’ll continue working my day job and I’ll have my wife who was stay at home mom at that time to start building the agency. I was going to help her on nights and weekends with administrative, marketing and prospecting efforts. While she was getting Florida 2-20 Property & Casualty insurance license I was doing all kinds of research. You have to decide if you want to be a captive agent like State Farm Insurance or Allstate vs an independent agent where you can represent multiple companies such as Progressive or Travelers. For research I would go on Insurance Forums . It’s a great source with all kinds of useful information. You can also network there and build relationships with other agents.
Independent Insurance Agency vs Captive
We chose independent agency route thinking how exciting it will be to help consumers or business with whatever insurance needs they might have. The biggest challenge for the new independent insurance agency is getting appointed with carriers you want to represent. No reputable company such as Travelers would sign up a start up agency with no experience and proven production. In addition, carriers you represent have written premium commitment expectations of anywhere from $50,000 to $100,000 per year. Also no single carrier offers all lines of insurance. One might do just homeowners or cars, but no business. When speaking of commercial insurance it’s even more complicated. Some carriers only offer general liability insurance, but no workers comp or professional liability. Commercial auto and trucking is another isolated niche. As we were interviewing with all those carriers one thing became clear that we need to focus on one or two segments:
- Homeowners Insurance
- Auto Insurance
- Business Insurance
- Commercial Auto & Trucking
- Professional Liability
- Workers Comp Insurance
We picked homeowners and business insurance. We ruled out personal car insurance since Geico, State Farm and Progressive are dominating this market. It’s so easy these days to shop for a car insurance online and independent agents are getting squeezed out of this segment. Interestingly in Florida because of all the hurricanes big insurance carriers have left the state so market for small homeowners insurance carriers and independent agents was pretty good. We picked business insurance because of all my connections from my banking job.
Insurance Agency Startup Budget
You can start independent insurance agency with several thousand dollars:
- Licensing $400
- Errors & Omissions Insurance for your agency $2,800
- Computer & printer $700
- MagicJack phone $50
- Business cards and marketing materials $250
- Office – you can start working from home. We ended up sharing a space with CPA practice. Our rent was $350 per month. In addition we worked out great referral flow between CPA firm and our agency.
- Total $4,200 (without the office)
It took about four months for my wife to get licensed and line up at least few carrier appointments to begin with. It took another there years when I was finally able to quit my banking job and join my wife at the agency full time. When I look back at how we started and where we are today I wish we’ve done it sooner.
