Ep24 – Refocus! How Agents & Brokers Must Prepare In a Post-Pandemic New Normal. A Conversation with Steve Williams of Oli & Heffernan Insurance

In this episode I spoke to Steve Williams of Oli Insurance Services and Heffernan Insurance Brokers. We discussed how agents/brokers should be redoubling their efforts to focus on the business activities that are most valuable to their companies. We discussed how Oli Insurance Services can help agents with this by allowing those agents the capability to focus on value add services such as production while Oli picks up the slack in other areas such as back office etc. We also looked at the market for agencies and how agent leaders need to think about how they strategize for their futures.

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Steve Williams (LinkedIn)
Oli Insurance Services (Homepage)
Heffernan Insurance Brokers (Homepage)

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Transcript

Nick
Hello!

Steve W
Hello!

Nick
and Happy Monday!

Steve W
And to yourself.

Nick
And why don't we start off by going through, you know, giving us a little bit of background who Steve Williams is and talk about your role or relationship with Oli and Heffernan.

Steve W
That'd be great. Thank you so much for having me today. Nick. Heffernan Insurance Brokers is one of the larger independent brokerage firms in the country. I've been an owner one of the owners of Heffernan for over 20 years. And as we continue to grow our retail agency, we have also found the opportunity to support other independent brokers around the country. And that's where Oli Insurance Services was formed and founded is to take a lot of the secret sauce that we've developed at Heffernan and to bring it to other independent brokers throughout the country. And that's where Oli Insurance Services with its hundred brokers to access the marketplace and technology and outsourcing tools is ways in which we feel could help independent brokers.

Nick
Yeah, I love the name, it's a near my, my youngest...Ollie. So it's just such a cute word when I hear it, it just, it's um, you know, naming a company is so difficult. And Oli the kind of name it like puts a smile on your face just so it's like friendly, where the name come from.

Steve W
You know, it's really interesting and part of the technologies that we bring to the table at Oli & Heffernan are trying to find other sources that help independent brokers and Mike Heffernan, our chairman, wanted to come up with a proper name for this new entity, and we put it out to the gig community, and we basically asked hundreds of people to come up with a name and for a few hundred bucks, you get a name And once you have a name you put out you want a logo for a few hundred dollars more you get a kick ass logo. And before you know it Oli with our logo really was something that was fun to create. And if you look it up in the dictionary, Oli is the coolest kid in the classroom. So honestly, that's what the experience you'll get when you do business with Oli Insurance Services,

Nick
The coolest and friendliest. So you, you know, so you talked about the secret sauce and I think we're going to be spending a lot of time on in this particular recording, talking about that secret sauce, but also translating it into the current environment. So as a backdrop, have you personally, have you ever experienced anything like what we're going through? Not and I mean from the insurance sense so personally from your your business background, has insurance ever seen anything like this?

Steve W
I don't think we have and I'm a fourth generation insurance broker myself, my family having an agency in San Francisco since 1886, so over the years, as we've seen hard market, soft markets, strong economies, weak economies, I don't think we've ever seen this perfect storm, with the stock market crashing. With the unemployment numbers, with the economy being down. I think the interest rates being down, it's really an interesting time to not only be in the insurance business, but to be in business. And as we look forward to the challenges, it's going to affect all of us once we come out of this COVID-19 pandemic. It'll be really interesting to see which agencies thrive and thrive in this new era.

Nick
Yeah, so I was just having a conversation with a peer insurance professional who is saying this is probably going to be that hard market that we go through the builds a lot of careers now, from my standpoint, I'm more on the capacity side where you know, the hard market this this could be my moment, I'm going to get my prices

Steve W
right right

Nick
at the brokerage side. different set of problems. Hard market means higher prices, less capacity, a lot of wheel spinning, trying to get your customers covered. And so maybe we start off there and talk about the challenges for an agency or brokerage system in a hard market. And why don't you sprinkle in some of your secret sauce? Like, you know, I my expectations are that this market is going to be so hard it's going to force a lot of agencies to sell, close, shutter make, make decisions, they probably wouldn't be comfortable making, you know, talk talk about that and sprinkle in some Oli magic.

Steve W
Sure, sure. There's no question. We're in an unprecedented time. And I know we've all been hearing that word many times over the past couple of months. But this uncertainty is going to really change a lot of how we do business, not just in the insurance industry, but for our clients. And so until there's a vaccine or a treatment for COVID-19, I think we're going to see a new normal is going to be different. And as we talk to our prospects and our clients, you know, the inability to have face to face contacts is really going to change how brokers sell their products, and service their customers. And so it may be more difficult in the short term to project, our top line, and our bottom line. And maybe a lot of our employees are finding a new norm and working at home and maybe don't want to come back to the office. And so as we look at these uncertain times, and really what's different as an agency owner, and especially as we look to forward for mergers and acquisitions, I think it's really important to understand not just inwardly what we're doing and what we're focusing on, but the world around us. And as we talk more about the mergers and acquisitions and perpetuation and the valuations of agencies, as these uncertain times are amongst us with the stock market. Interest rates and the future of whether these claims are going to be covered for COVID-19 really sending a lot of questions to the insurance industry. And so as we pull out of this and look at the valuations of our companies, and of what the marketplace is doing in the mergers and acquisitions, the debt/equity ratios could be a challenge. And so we have a lot of concerns amongst internally and what our clients will be experiencing as they come back to work.

Nick
Yeah. So if we break sort of break down some of the business functions at an agency, you have obviously production, some agencies do claims.

Steve W
Sure.

Nick
Some agencies, so there's always the back office element of the agencies in my expectations are going going through what we're going through now. A lot of agencies are having making those tough strategic evaluations. Should we be doing claims? I don't expect that they would give up production. But where can we find more markets? And on the back office stuff? Can we outsource some of this stuff? Yeah. Can you walk through elements of Oli and how agencies, they're struggling with those strategics strategic decisions that they have to make those evaluations? How Oli can help in each of those aspects?

Steve W
Great, great questions, Nick. And that's exactly what we do at Heffernan, and we do it Oli Insurance Services at look at the individual brokerage firm, and how are they operating today? Of course, COVID-19 has added challenges to us. But absence of that, what we look at is some of the same challenges we have today that we had prior to COVID-19. So really trying to get to top valuation of agency means we need to be efficient. How do we operate our agency today? Most of the smaller agencies in in America are owned by one or two people have less than a million dollars in revenue. As they continue to grow their agency, they need to look at the new technologies, how are we going to service our customers? How are we going to bring on new clients? And we need to look at ways in which we could do business differently. So maybe it's using outsourcing. And that's one of the tools that Oli brought to the table for years for our affiliate brokers is how can we do more with less. And so by outsourcing servicing, to the mundane tasks that your staff don't want to do, checking in policies, issuing certificates, billing reconciliation, a lot of these outsourced services could be done with people that are not going to be client facing, but really support your internal people so they could do more client facing tasks and make the value relationship better for themselves. So outsourcing really adds that value to the agency to do more with what you already have.

Nick
Yeah, I mean, as you described that one or two person agency, In this tough time, what's what action can they do that's gonna actually create the most value? It's not checking in policies.

Steve W
Right, right.

Nick
It's, I mean, probably probably production.

Steve W
I mean, you need to find new customers in this world. And for those brokers that are sitting on their hands in this pandemic, and saying that it's not appropriate to be out there and talking to new business. I disagree. I think we gave those couple that couple weeks, it's time to get back in the saddle. It's time to make those calls, reach out to your clients, reach out to new prospects, and talk about ways in which you can help them create their new efficiencies. And so what we're doing internally is looking at efficiencies in which you can grow your agency you need to get a grip. Does your staff have the resources to contemplate today's environment? And how are they going to build that momentum? And so as an agency owner, this is the time you look inward? Do you have the right talent? Are you getting your brand and your vision And out into your clients so they could see what services you really can offer. And then reinforce those strategies. How can you have regular meetings with your clients or inwardly with your salespeople? So communication in these times are going to be paramount, as far as sustaining that momentum.

Nick
Yeah. So theoretically, we, with a relationship with Olie slash Heffernan, an agent that wanted to basically 99% of time focus on dealing with their current customer base in reaching out and producing new business, they could essentially outsource almost the entire element of the rest of their agency and they could just focus on prospecting, focus on selling. They could do that with a relationship with Oli.

Steve W
Yeah, that's really why we started Oli as all of us age in the insurance business. We want to find ways in which we can perpetuate the agency but more importantly, What is our best attribute to the agency and when we started it, we were mostly the salespeople, we didn't think we'd fall into this administration role to run the agency. So as we grow and refine what we want to do, it's understanding how to develop your skill set as the agency leader to do bigger and better things, and internally allow your staff to grow. And in doing that, using outsource companies like Oli will allow you to focus on what you and your staff do the best, but then outsource those other factors that maybe could be done at a better price at a better service model. And that could be access to over 100 companies. It could be using technology like Indio to help the process easier on new business and renewal business. It could be using technology if you're in the Employee Benefits business, something like clock software that helps you with your HIRS and then admin platform. So I think using the technologies and changing how you're doing business is really what's going to keep you prevalent as we grow.

Nick
yeah, so but you you in that in that list of things, you mentioned markets, and that's going to be critical. a two person agency in a hard market may not have enough resources,

Steve W
absolutely

Nick
to be able to place their businesses because you can you talk a little bit, I mean, we're talking like the bread and butter stuff, or the stuff that's just out of reach. Right. So they may they may have their preferred carriers on auto and homeowners. But you know, commercial is going to be messy. And you might might need markets...workers comp, D&O, E&O. Can you talk about those, the markets that are available?

Steve W
Absolutely. Most brokerage firms in the country pick one of four coverages that they want to focus on. It's either commercial personal lines, employee benefits, or life insurance. I'd like to see all benefits to all lines of coverage and that's where Oli steps to the plate is. If your core discipline is commercial, you don't do a lot of personal lines or benefits are life insurance. Working with an aggregator like Oli Insurance Services would allow you to focus on what you do best, but outsources other lines of coverages. So you never have to tell a prospective or client, you only do one line of coverage, I'd want you to change that messaging, we do everything. At Oli what we have found is it's one thing to have access to 100 markets. But there's another thing to have a relationship with those companies. What we discovered at Heffernan insurance brokers years ago, is having a program or a niche practice, or an affinity or a homogeneous product that really will go deeper within the insurance marketplace and within the customer marketplace. So as you look to develop your agency and it's approaching to be a hard market, you will find a retraction and restriction of the markets and underwriting an appetite and capacity. So now more than ever, it's important to refine your targets, possibly focus on two or three industries, build the relationships with good in those industries, but more importantly, know which insurance companies have the right forms, partner with those agencies and those companies to really bring that package home to the marketplace,

Nick
In the...total package gets to increasing agency value. Right. So why are you know, for those that are listening that have agencies, why are you in business? You know, it's, you know, it's to put food on the table, but at some point you want to maybe cash in your chips come join me in Florida?

Steve W
Yeah

Nick
You know, come come down and golf with me. What's the environment like for the market for agencies slash brokerages? Is it is it as bad as I'm thinking it is.

Steve W
It's not bad. It's actually very good. Coming off for 2019 has been the best m&a marketplace we've seen in the country as far as number of deals and valuations for those deals and budgets projections going into 2020. We're to exceed what we saw in 2019. And as you look at The results financial results of most of the brokers and carriers, the first quarter of 2020, they have had the best quarter of their 30/40/50 year history. So before this pandemic hit, we were on a trajectory to have an amazing 2020. With that being said, everything's changed, the whole economy is change. And as an owner of an agency, as you look to the future, if you are looking to perpetuate your agency or sell, I think the first and most important thing is to understand what do you want to do? What is your goal? Is it to put money in your pocket and retire? Or is it really to perpetuate your brand and culture to the next generation within your firm? And so once you look at what your main goals are, the dollar amount that you're going to make on these transactions aren't that different, but how you perpetuate your agency and what happens will be drastically different. When you look at the buyers out there in the marketplace today. You have the venture capital and private equity. You have the large public companies, you have the bank owned companies, the large regional companies and maybe that local agency. So when you look at the makeup of buyers in the current environment, you need to determine what's best for your staff, what's best for your clients? What's best for yourself. And so once you kind of make those determinations, do you want to sell it and roll it up into another firm? Or do you really have some future leaders within your organization, family members, long term employees that you really want to perpetuate your agency to? And if so, that's the kind of partner you want to look for. Because I can tell you, as I'm in my responsibility today for Heffernan group is the mergers and acquisitions and helping independent agencies perpetuate to the next generation is, that's what I see is the biggest value. Sure, we can come in and buy your agency and roll it into Heffernan. But I think you've worked so hard to build your brand, and your culture, and I would like to see us perpetuate all these independent agency brands around the country with some resources of Heffernan and some help to your staff. Once we look at the different deals are being done today, most of these transactions are my mind arbitrage. They're coming into by agencies get bigger bank accounts, have another transaction three to five years and do it again. You want to try to find someone that has a common vision at Oli, at Heffernan, we've had the same leaders, the same management team for over 30 years since our existence. And so once you decide that you want to sell it, perpetuate your agency, understanding that perfect partner that's going to give you top value, care about your employees, treat your employees fairly and help you grow. That kind of puts you in the right direction. And then Nick, as you asked, What's the valuations out there? Well, as I mentioned, 2019 was the most active we've seen in the past 50 years, and the valuations were the highest. And when you look at valuations of agencies, really, the most popular agency sold today is a property casualty only. Number two B property casualty & benefits, three would be a full service, then you'd have your employee benefit shop and then maybe specialty line of coverages. With that being said, the agencies that are generating over $10 million in revenue annually, they're going to get the highest valuations, those that are generating under 10 million, you're going to see the valuations drop a little bit. But again, we're looking at some of the best valuations ever. So whether you do an evaluation of the top line, people like to use that as an easy way to understand what your agency's worth. So two to three times that top line for the agencies under $10 million in revenue is what market place is today, if you were looking at from my seat, when you evaluate these, you do it based on the profitability that EBIT da of what your agency is currently generating. And we all understand in our business that if you have a million dollars or under Revenue Agency, you're living off of that p&l like it's your personal check account. So don't be afraid that if you're going to be talking to another agency, that your personal expenses might be embedded into your p&l, and how you're running your agency, the first thing that we're going to want to do together with you is create a pro forma that we can live with, that really will take some of those personal expenses out. So we could look at how will your agency be operating post transaction, if we can get that bottom line profitability to be at 20/25? I mean, we have some of our agencies that are 40/50% profit, the more efficient you are at the bottom line, you're going to see multiples of that EBITDA anywhere from seven to eight times to these larger firms. 10 to 12, even greater than that in 2019. So again, getting your house in order, being profitable, narrowing your focus, being a sales driven agency will make you attractive to all the different buyers. Okay,

Nick
So that was gonna be my next question is how do folks get their house in order? So maybe we can dig in just a little bit on those and I want to start with sales cause I just can't I don't think we can escape how important that is. How so in order for an agency to position themselves to have either an outside suitor or perpetuation what what do you what do you suggest the sales function of the organization look like? You know, I'm talking everything in terms of like delineation of roles, to training, to how would you want to see it if you were going to buy one?

Steve W
Okay. First of all, most smaller agency started out with the principal, the founder, who is a salesperson, he is or she has grown the agency to a certain point, most smaller agencies, under a million dollars in revenue are owned by one to two people. In order to really grow that agency from a million in revenue to 10 million. You really do have to open up some of your ownership to others within your operation. It's just historically when you look at how firms have grown or not Ownership does come into play, I made a mistake that I've made, we've made and many of us have made is trying to go hire experienced insurance brokers and plug them into your entity and hope that maybe they've learned a trade from someone else. And now they could prosper with you. And we've also had many mistakes by hiring people straight out of college. And so I don't want to say that that's not on the table. But I would say the best strategy prior to the pandemic post a pandemic is hiring a sales minded individual, someone that has college education would be key, someone that has a sales personality, you could teach them the insurance. And so really, it's getting someone that's going to show up to work, look at this as a career, not just a job and really mentor them. And if you don't have the time to mentor, have someone within the organization mentor, you will find it's best not just to have one newbie selling insurance, but maybe get two or three so they can compare notes and they can kind of see what their peers are experiencing good and bad in this environment. And so having the focus to hire a sales minded person, giving them a mentor to help them grow, having them focus. Ideally commercial insurance seems to be the more of an attractive industry for the new salespeople probably becuase it's bigger dollars and they can get going. So have them meet with your underwriters have them understand what markets and programs you have, what we've done it Heffernan is developed several exclusive programs, it's going to be much easier for your new salespeople, and more competent if they can go out and sell a restaurant owner a program when they know that they have an exclusive worker's compensation program that is the lowest in the state of California. And if you let me quote it, I'm going to beat that price. And by the way, we do have that product...that new broker is going to have that competence and it's going to hit those numbers that he wants. So it's having meetings with those new brokers. Again, don't just meet with them once a month and think they're going to hit their numbers. Activity is really important. Having weekly or bi weekly meetings will hold them accountable will force him to always think about something new. And so just creating that activity, getting involved with the local businesses, the local community activities, volunteer, use social media, there's so many ways we can get our messaging out as younger sales people that whether we used to blog, we're now vlogging. Because we have the social distancing, and you can't get out and see your customers, Our number one success in selling has been what we call Dropoffs, blindly showing up in a prospects office unannounced asking to speak to the owner. And if they're not, they're nice handwritten note, maybe a gift of some kind, you will get a call back. We can't do that today. What's the second best thing we could do as salespeople something like this, something this is actually the third best first would be if we could be physically in the same room talking second would be an interactive zoom type meeting where we can see each other and talk with each other. Third would be some sort of recording like this, and then we have our text and our emails in our snail mail. So don't be shy. Communication is always going to be the key, especially in times like we're in today.

Nick
So I have two questions to bounce off of that. The first one is new salespeople compensation. So especially folks that have sales minded approach may not know insurance. There's there is a lead time. They need to be trained, they need to understand insurance. I'm always worried or skeptical of situations where it's commission only because I feel like it's a bad incentive. It's Yes, of course, you want the sale now, but the most important thing is for that person to do the right things and develop the right relationships that can produce long term success versus just sell at any cost. Now, what how do you suggest handling compensation for new salespeople

Steve W
First is be realistic when I started in the business back in 88, I've had one job for 30 years. It was get your activity out and we had unreasonable goals. You know, 10 years ago, we want a new salesperson right out of college to sell $100,000 in new revenue. Now I'm working in San Francisco, California, our premiums are higher than other places in the country. But I think and we also want them to do it in three years. So I think to be realistic on your goals, it's going to take three to five years for a new producer, to really hit him in stride, hit those numbers, so you pay him a salary, not just commission because you're not going to get their full focus. So whether it's a 40/50/$75,000 salary, the first couple years guaranteed, then what you want them to do, and for you as an agency, how can you benefit by that $75,000 you're paying that new salesperson not only motivating and helping them sell, but give them some responsibilities to service, so maybe you're gonna have them service their first hundred thousand dollars in revenue. So you're getting a little bang for the buck, and it's not really holding them down from selling. It's teaching them how to appreciate account managers. Teaching them truly how to detail the system. So they could become better producers understanding how difficult it is to account management and manage. So it's really paying them a base, give them a realistic window three to five years and baby steps. It's not necessarily about how much they close today, but their activity and let them learn and mentor from others within the firm.

Nick
Yeah, so activity is crucial, right? And then in a pandemic, or post pandemic new normal, they may not have the opportunities as much to have that face to face. Events, conferences, the even for those that want to kind of focus on a niche market. They may not be able to go to trade association conferences anymore. So it's going to take a particular different mindset for folks. What are you hearing about what successful salespeople are doing to try to drum up activity, prospect, get in front of new business?

Steve W
So first of all deals are getting done. So tell yourself that we don't shelter in place, and we're not working to go back to work, not for the strong agencies that want to thrive. We are selling business today. If you can't go meet with someone, we have great technology and ways which you can do that. But let's start at the very beginning. You need to prospect right. So how are we going to prospect and even uncover those opportunities that gets back to being more laser focused and refining your targets? And so you may want to go after hospitality or nonprofits and whatever that industry is. They're still meeting, they're not meeting face to face, they're meeting online, they have newsletters, they are getting their messaging out to ways in which they've never done it before. So you need to be proactive, think about new ways in which you can reach those people to communicate your messaging. And then what we've done at Heffernan and what we strive for all of our Oli agents is yes, if you can Go out meet someone. The second best way for us to win new business is what I call a risk management audit. And that's off renewal date, get a prospect's current insurance coverages all their forms, evaluate them, analyze them, you will always find some gaps, some holes and how they've placed their coverage. All of this is done not face to face, but you're going to interview their managers, you're going to look at their coverages, you're going to understand what the owner's vision and goals are for not just their business, but the risk management, your philosophy. And so when you come back to that business owner in this COVID-19 environment, you now have expressed your expertise. You've shown them what you and your agency can do to be proactive in this environment. And then hopefully, you have relationships with insurance companies that will really improve their coverages because there's no question as we entered this hard market, there are going to be many insured's that will not get coverage from their current brokers capacity will dry up, coverage forms will be reduced. So this is really the time for brokers to thrive not really pull within

Nick
It's a great, awesome message to end on Oli Insurance Services, the greatest name in agencies, I have to admit. It always puts a smile on my face. Your reputation is really solid. I have several agents, agents that started with nothing, except for Oli insurance to kind of get them going. And they've made it right. So it's, I think there's something to that beyond the name. So, Steve, thanks so much for coming on sharing your wisdom. Appreciate it.

Steve W
My pleasure. Anything I could do to help you your your viewers are feel free to call me and email me and Nick. If you pass that information on, I'd be happy to take those calls.

Nick
So for everyone that's listening, you don't have to pull over. It's going to be in the show notes. Connection to Steve, Olie Heffernan, transcripts. Don't forget to be safe. Don't forget to wash your hands. Be a good citizen. I know a lot of states are easing up so that doesn't mean that you have to be we have to be sloppy again. Stay safe everyone and be kind and subscribe. Steve, thanks again.

Steve W
My pleasure. Enjoy.

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