Regardless of the age and stage of an agency, appetite for acquisitions or to be acquired, or whether an owner wishes to perpetuate internally or externally, agencies that demonstrate consistent growth will attract the most eager buyers and the highest valuations. 

Though it may be impossible to control the external economic environment, it is possible to control whether or not your agency grows, and if that growth contributes to the top or bottom line. Importantly, that growth should be real growth, not merely inflation driven. In other words, if inflation is 8%, real 5% growth requires a top-line revenue increase of 13%.

So, how does an agency owner achieve a rate of growth to make their agency more appealing to buyers? Answer: Develop a workable sales plan. 

Here are four ways to do it:

1) Analyze client and policy retention. It's pointless to try to create growth with new business if existing customers are leaving at high rates.

The average retention rate for commercial lines is 84% and the average retention rate for commercial lines is 88%, according to the 2022 Agency Universe Study. Increasing retention to 90%, which can be simple to do, makes achieving modest growth of 5% per year 100% easier.

Also, develop a plan that calls for amplified and aggressive action in all areas, including client contact and communication, regular coverage reviews, team member involvement, account rounding and requoting every account every year. Then watch retention rates climb.

2) Set a goal for new business. The most desirable agencies are sales organizations, not service companies. Everyone should be doing their part to make your organization a sales organization, so set new business goals quarterly and annually and monitor your team's progress toward those goals on a weekly basis to create urgency and accountability.

Accountability can also be fostered with appropriate compensation. Carefully review your commission plan to ensure you are paying significantly more for new business than renewal. Plan to pay bonuses or commissions to everyone in the agency for creating growth. 

3) Define clear tactics for prospecting. Sales only happen with the right number of appropriate sales tactics and targets. Each team member should have planned targets for prospecting activity on a weekly basis. Team members can reach out with account rounding requests, referral requests, cold calls or through individual marketing activities designed to put more potential new business in their pipelines.

4) Hold your team members accountable. The key to success is accountability. A scorecard, particularly one that is on display, can motivate while fostering a culture of performance and friendly competition, all of which are critical to developing a strong sales culture.

Just picture it: Your retention rate was 85% and new business was 2%. You adopted a strong sales plan and that retention rate increased to 90% and new business to 5%. Now, the value of your agency has increased. When you look to perpetuate five years from now, your agency will be attractive to a buyer regardless of your EBITDA or book of business multiples. Your agency is now 37% bigger and the multiple you receive will be higher due to your impressive growth record.

Tony Caldwell is an author, speaker and mentor who has helped independent agents create over 250 independent insurance agencies.