HOW TO MAKE A MILLION DOLLARS A YEAR SELLING INSURANCE

Have you ever wondered what it would take to make $1,000,000 a year in commissions? Or maybe you’ve thought about running an agency where you’re making $10,000,000 a year?

When I was in the biz I remember agents at my office clearing 300-400k and I thought that was impressive. The issue for me was that the way these agents built their books of business did not align with my timeline or lifestyle.
The reality is, most of them got there one of three ways.

Scenario 1:Old and Wise
These agents are in their ’60s or ‘70s and had spent decades building up their clientele slowly but surely. They’ll have dozens of small to mid-sized accounts with maybe a whale or two. These are the guys that tell you to keep your head down and just keep going.

Scenario 2: The Whale Hunter

This agent is typically a bit more polished. They’re networking at the hottest events and dining at the finest venues. They land whale accounts by breaking into high-end social circles and making a name for themselves.

Scenario 3:Manic Manny
This is the agent that you are almost certain doesn’t have a home. He’s the first one there and the last to leave EVERY day. You respect the work ethic but question his tactics. He’s not necessarily smooth with clients but is willing to do absolutely whatever it takes to sell more accounts.
As a young insurance agent, I remember seeing this and thinking to myself, “I want to clear a million a year in commission but I don’t want to wait decades to build up my social circles and clientele to do so”.

Spoiler alert:
I didn’t find the answer to that question until years after I left the insurance industry. Here’s the good news, today I’m going to show you our marketing process and highlight exactly what the math looks like to earn $1,000,000 per year in commissions as an insurance agent.

WHAT’S YOUR COST PER CUSTOMER ACQUISITION (CPA)?

Arguably one of the most important metrics for any business to know, is how much does it cost you to acquire a new customer. Not the cost of lead lists, not flyers, not event ticket’s, SALES.

To find this out we need to understand what the different levels of a marketing system are and find the costs associated with them all the way up to a sale.

Above is a simplified version of our 6-step marketing system. As you can see at the top, we are driving traffic from paid campaigns, to our website, to watch a sales video, then to book a sales call using a live calendar, they need to fill out a questionaire.

Below those graphics you’ll see a split between dollar amounts and percentages. The percentages signify what percentage of the people moved on to the next step. The more people that fall off, the more traffic you need to send to get conversions. The more traffic you need to send, the more it costs you to acquire a customer. In short, you want to drive good traffic, to good relevant content, so you can get tons of new clients with a massive ROI.

Step 5). Calendar Booking
After a prospect submits an application, they will be prompted to schedule a time for a call with you. We do this by using “live” calendars that sync with your existing calendar and look for time availabilities. You can customize and adjust these settings however you’d like but its a great way to lock in a call without having to go back and forth to confirm a time.

In this example, if they were spending $1,000/mo on ads, they would get 33 sales calls, and close 25% of those sales totaling 8 new sales per month.

For a $30 CPA, you’re likely looking at something along the lines of a personal lines account. Let’s say on average you sell these clients a home, auto, & umbrella policy for a total of $5,000 in premium or $1,000 in commission. That’s a $970 ROI on your $30 investment.

Let’s even factor a 30% overhead/commission split. That’s still a $670 ROI. So for every $30 you spend you get $670 back.

Pretty wild huh? That’s not even the best part.

CUSTOMER LIFETIME VALUE (LTV)

Businesses or commission structures that have reoccurring revenue streams are the best in my opinion. Depending on what kind of insurance you’re selling, your policies could have renewals. If your clients stick around you get paid on them again, and again, and again.

Just how many times do you get paid on them? Well, that’s a really important statistic to know. Let’s say for this example, you keep those personal lines clients on average for 5 years. If the average client pays you $700 per year after commission splits, that means that your Average Customer Lifetime Value (LTV) is $3,500.

NET RETURN ON INVESTMENT (ROI)

So that $30 investment you made in ad’s actually gave you a $3,470 ROI over 5 years. Have you heard of any stock, bond, or real estate that gave you an 11,466% ROI over 5 years?

This simple formula is the very way security & solar companies can take such massive losses upfront to acquire a customer. Do you know how much it costs a security company to market their product, set up 10 cameras, mount an iPad on your wall, then pay an installer and a salesman? Probably between 2-5k. Let’s use 5k for the sake of this example. Let’s also say you pay $150/mo for these security services.

That means the security company paid $5,000 to acquire you as a customer and knows you are going to pay them $1,800 per year and stay for at least 3-years. Companies take losses all the time to acquire new customers when they know they will make the money on the backend. With the software and systems we have available at the consumer level, there’s no reason why you shouldn’t run your business with the same understanding.

LET’S MAKE A MILLION DOLLARS A YEAR

Let’s recap on our numbers.

Our cost to acquire a customer (CPA) is $30
The average annual commission on this account after splits is $700 a year

Let’s say you split your day up between new sales and managing your existing clients. This allows you to take 4 new sales calls per day. At the CPA listed above you would have to spend $130 per day to book 4 calls or $2,400 per month (20 days).

CPA: $30
Annual Commission: $700
Years retained: 5
LTV: $3,500
ROI: $3.470
Calculating Results *Beep-Boop-Boop-Beep*

LYou could do just fine selling personal lines if you’re able to keep up with 4 sales calls a day. If you have the backend support such as processors, CSR’s, and account execs, that should be a very achievable goal. I have clients setup on 10 calls per day with LTV’s much higher than what’s displayed in this example.

If you saw the numbers for agencies who hire virtual agents every month and get their monthly sales calls in the hundreds… You wouldn’t believe me if I told you. That’s why I have to use the most conservative numbers possible for this example. Even then, I’m sure I’ll get emails from people saying, “there’s no way you could make 3.5 mil in 6 years selling personal lines!”. Well, you can, and people do…

You can also go after any kind of account you’d like. You could go after accounts that pay 100k per year in premium. The CPA on those may be thousands of dollars but the ROI is on a totally different scale. It’s no surprise that the low hanging fruit will always be easier to acquire. That doesn’t mean you shouldn’t test other markets. The purpose of these systems isn’t just to scale but also to understand what your true margins are and most importantly what’s working and not working for you.

It’s important to look to these numbers for guidance on your business. What happens if you deploy a customer development strategy and increase the average time you keep a customer from 5 years to 7 years? Your LTV shoots up and you make millions of dollars more. What if you bring on one new agent or hire an account executive so you can take on 4 more calls per day? The possibilities are endless and when you know exactly where you stand, it makes making decisions so easy.

I hope this blog was informative and If you want to run these numbers yourself, shoot us an email and we’ll send you our financial model excel sheet.