Chris Burand on Clean Data and Boosting the Value of Your Agency

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Grainger. For the ones who get it done. In a crude laboratory in the basement of his home. Hello, everyone, and welcome back to the show. It's great to have you here, and I have a guest today, one of the smartest guys in our industry, someone who thinks about our business in a way at a depth that I think many of us just are unable to go oftentimes because we're so busy running our agencies or doing whatever it is we do.

The fact that Chris Baran has the ability to deep dive into agencies, operations, valuations, E&O exposures, all the education he does around lines of business, coverages, obscure policy forms, it's incredible. And I wanted to have Chris on the show for a while, even before he was on Cass' show, which is a great episode, and you should check that out as well. And it was such a pleasure having him on because I love nerding out on this business. I just do. I think that there are so many nuances to the insurance game and all the different places that you can take it.

And when you can have an hour with someone like Chris who thinks so deeply about the business, there's just always going to be an incredible amount of value extracted and that's exactly what this episode is. So Chris, you can get him at baran-associates.com. Everything will be linked up in the show notes. If you go to ryanhandley.com, you can check it out as well. We also talk about his education, which is baraneducation.com.

And I highly recommend that you connect with Chris on LinkedIn. You subscribe to his newsletter, which is tremendous. And just have him in your ecosystem. Have him in your knowledge set. You will not be disappointed that you do.

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So finally, the last thing before we get to the actual episode, I want to give a shout out to today's sponsor, Agency VA. Agency VA is changing the game for me. We talk a little bit about VAs in this episode. I wanted to get Chris's take on VAs in general. He had some interesting thoughts.

But I'll tell you, so I have a VA who's helping me with two aspects of my business. One, helping me just clean up my accounting and getting some of the basic accounting processes taken care of, making sure that, you know, things starting to be coordinated. My commission's paid versus expenses going out, starting to itemize the expenses and so I can better understand what I'm actually spending money on. Because, as I've said on the show before, my accounting thus far has been, is there more in my checking account than there is on my credit card? And as long as there is, then I felt like I'm doing okay.

But Agency, Wes and Ben and their entire team, I have a VA, a part-time VA who's helping me with that. And then I have another individual who is helping me get my data squared away and getting my onboarding squared away and getting, making sure all the information is properly from my better agency and from different, you know, different quotes that I'm doing. And all of that is properly set up in my agency management system, along with some prospecting stuff. So, it's a game changer for me because it allows me to free up my time to prospect and sell, prospect and sell, prospect and sell. Put revenue on the books, that's the name of the game for me and Agency VA is helping me do that.

If you are struggling in that spot, if you're feeling overwhelmed by the day-to-day tasks of the business and not growing your business, then stop what you're doing, go to agencyva.com, reach out. Go to agencyva.com, reach out. Just talk to Wes, talk to Ben, talk to someone on their team, get a feel for what a VA can do. I promise you, you will not be disappointed. And if you set it up right and you commit to the process, you are going to move your business forward.

So, agencyva.com, tell them Hanley sent you. Let's get on to Chris. You know, the ruling just came out of Great Britain that a whole lot of COVID-19 related business income claims should have been paid and not denied. So, let's start there. What does that mean?

Like, what is, I, so it's Great Britain. So, does that actually mean anything to us other than just a judicial precedent? You know, is there any, what are the ramifications for us? Because that, if all these claims start getting paid, I mean, it is a game changer in so many ways. For sure.

Yeah. So, there's a couple of things that potentially could come out. So, the ruling was literally just announced 20 minutes ago. So, the details, I don't have the details of it yet or anything. But, one is it sets a precedent and causes people here maybe to look a little deeper and go, wow, should they be paid here?

But, depending on the scale of the claims that the court says should have been paid in Great Britain, it could affect the reinsurance markets here. Yeah. Without question. So, there's a direct, potentially a direct ramification to that ruling to the U.S. So, a lot of the, we'll just call them legacy carriers in the United States, you know, they have large sets of reserves of their own.

But, these insure tech carriers, the Lemonades, the Hippos, the Swifts, they are, they have very small reserves in relation to their, to how much they leverage reinsurance in their business. Could they be the most vulnerable to something like this if all of a sudden reinsurance rates are going through the roof or if reinsurers just simply start hopping off of different contracts they have? Yeah. It could definitely have a problem, create a problem for them, without question. What are the ramifications of that down to like a, you know, a retail agency like mine?

You know, is that, some of these conversations that I've had, I've had agents say this to me before, mostly in jest, but, you know, there's always a hint of seriousness. They're like, that's interesting, but, you know, if I'm writing a $1,500 bop, you know, what does that really mean to me? Like what, does it, does it trickle down that far to a main street retail agent where, where these almost like global ramifications and reinsurers and all this, you know, catastrophe losses, like at face value. I'm like, yeah, that sounds bad, but does it really impact us day to day? Yeah, it does.

It truly does. It's, um, um, I'll give you a great example of that on a, on a homeowner's policy. So I have a client who was complaining that a particular carrier wanted to get off these homeowners policies that had never, ever had any kind of a loss. So why? Well, one of the reasons why is because of the way the carrier's reinsurance contract needs.

So you'll see actions that are potentially, um, it, it, nonsensical. Yeah. On the surface, it's nonsensical to get off of a homeowner's policy that you've written for 10 or 15 or 20 years. That's never had a loss. And being able to bridge what's actually happening behind the scenes with what's causing that action is sometimes really difficult for the retail agent to see.

But this is what happens when re, when reinsurance, uh, markets change is you'll start seeing things like this. And if you think it through, or if you were lucky enough to have the data, you'd be able to see it all the way through and understand it. So for, so for retail agent, you know, again, just, we're talking main street retail, you're, my takeaway from that would be, I, we want, that's, this is where having flexibility in your markets, access to markets, being, being, having the ability to pivot, um, accounts from one market to another. When things like this come up, this is where this maybe is so valuable and, or maybe even plays into the valuation of an agency. If you are, you know, if, if all of a sudden a carrier starts non-renewing your accounts and you don't have the ability to, to, to get that, to communicate with that client and move that client to a new market, um, you're in trouble.

I mean, you're going to start to lose business that way. You are. It's, it's true. It's one of the funny things, you know, we haven't really had a hard market since 2002. 2003, um, AIG said today that it was, uh, 2010, but I think it was, I, I, I kind of disagree.

I'd say it's 2002, 2003. And, um, we've, that's a whole generation, Ryan, you know, that's 20 years, right? Yeah. And so people have lost the, the, the knowledge, the collective knowledge of how to use markets as you go through a market cycle. We haven't had one.

So historically, and, and now's a great example of that is this is why every agent in America, every independent agent in America should always have, represent one of the top, um, most highly rated carriers. Because those are the carriers that can bend and flex when times get tough. I have, I had the CEO of one of these really highly rated carriers asked me a couple of years ago. He said, does anybody even care about our rating anymore? Do they care the difference between an A plus plus and a B minus?

And, you know, in many cases, it had gotten to that point, but the market right now is such a phenomenal example. Like every independent agent in America should represent an A plus or multiple A plus rated carriers. Yeah. So why is that? Well, I mean, just cause so like, like I'm a fifth grader, why, why does that matter?

Cause, cause, cause if I'm sitting here and someone calls me right and in my mind, I'm going carriers don't give two flying craps about me that, you know what I mean? All that matters is that I put this business on the books that I get $250 so that I can keep the lights of this enterprise on or put money, food on my table or, you know, whatever. Like I'm, it doesn't matter to me, right? So that's, that's, and that's what you most likely have in your head. Most agents are scrambling.

It costs so much to get a piece of business in that. The last thing you're going to do is risk it by saying, Hey, pay $250 more, you know, if that were the case, obviously that's just because they're highly rated doesn't mean they're always more expensive. Pay $250 more because this carrier is a plus plus this one is B minus, uh, even though I pretty much you're guaranteed to have your claim paid because the state most likely has a fund that backs it up. Even if they go insolvent and if the rate goes up, I'm just going to move you to someone else anyways. So, you know, but you should pay $250 more for this carry over here.

Like, you know, how does that, why should I care if I'm a retail agent? Sure. Good question. One is, is that as a market hardens, those B minus carriers are less likely to be able to even write the account to begin with. So it's not a matter of $250 more.

It's, you will have an opportunity to write it or you won't. And a lot of the really highly rated carriers are less dependent on reinsurance. The really highly rated, it's kind of a, it's, it's almost a spinal taps. In ways that our ratings go because the differences can seem rather tiny. What's the difference between an A and A plus and an A plus plus, but, um, when, you know, an A and A plus, especially an A plus plus, the, quite often the quality of their capital is superior, not just the amount of capital.

So they have flexibility in these marketplaces like this to do things that the others won't have. And by the quality of the capital, you mean the institutions that, in which they're able to draw capital from or the plate where they have the capital, it is safe, secure, stable, um, easily accessible if needed. Is that, is that, is that what you mean by the, when you say that? Yeah. Story kind of, um, so quality of capital could be like one carrier has a whole bunch of their capital invested in junk bonds.

And another one has it in long-term U S bonds, which, what quality is better? Well, today, I don't know that that's an easy answer, but not an easy as easy today, but yeah, no, I hear what you're saying. And, and, and so, okay. So the ramifications of that, and I, I know we're kind of nerding out on this, but I love this topic. Cause this is all this stuff that like, you'll be at a conference and you'll hear a carrier come up and they'll talk about these things.

And I would rather the listeners of the show who are sitting at that conference or on that webinar, don't just gloss over these things. Cause I do actually believe that they're important because even though we can re-rate people, I think everyone that's listening knows when you constantly have to re-rate someone because the carrier is getting off the market or, you know, they come in super low. And then all of a sudden they're rake you, you know, once you can kind of blame that on the carrier, but if that's consistently happening because of the markets that you're putting your business with, you start to look like the schmuck. You start to look like you don't know what's doing because the, the, the, the, the, the, from, for most of the relationships that we have as independent agents, the carrier doesn't matter to the, the client. What matters is that the client believes that you think it's a good carrier.

So, so that relationship, if that carrier keeps jumping off, okay, I'm just, I'm trying to, to pair to, to everyone who may not be following exactly why these things are so important. So, um, okay, so they're in junk bonds and, um, which, which are highly volatile. So now what you're saying is they come in, you place the business with that carrier and then, uh, they're in, they're in this volatile, uh, market as a, as a way to, um, uh, someplace to place their capital and whether they're making investment income out of it or whatever. And if that all of a sudden bottoms, well, now they may have had a hundred million dollars on the books. That's just, that's half, half as valuable.

So now in order to equalize hit their quarterlies, if they're public or whatever, they need to adjust rates or get off risks that are risky to, to, to minimize downside, something like that. Is that, am I. Yeah. They'll have to get off risk and it won't matter if it's risky risk or just plain risk. They'll just have to give up, get off risk.

So for example, in the first, at the end of the first quarter, give or take, there's one carrier that literally lost a billion dollars in capital due to investments. And so that, that changes a billion dollars is a lot. Most anybody's, you know, so it makes a difference. The other reason it matters, Ryan, and again, we've lost the collective knowledge of why in many ways, is that historically, these really highly rated carriers wouldn't grow very much during a soft market. But during the end, you know, it used to be like a seven year cycle clockwork type of thing.

That during the hard market, they would grow hugely. And if an agent represented one of those carriers, they would grow hugely because they would have the only game in town writing new business. Yeah. And so that's another reason why it does matter. And I think it's going to matter in this marketplace today, the hardening of it.

So you believe that the market is hardening that you see, that's what you're seeing. By line of business, it's a weird, it's the weirdest hard market. I, I researched hard markets back to the forties. This is the weirdest hard market that I can find on the books. Um, because there's not a lack of capital, um, hard markets are almost historically driven, almost entirely by lack of capital.

This one's not being driven by lack of capital. Um, there's still plenty of surplus. Um, it's that there isn't surplus in very specific lines of business and there isn't adequate rate in very specific lines of business. So it's, it's very, um, um, it's very much by a line of business as to how hard the market is or what to come. Yeah.

Is that now what, what is the reason for seven year consistent cycles, almost on like clockwork? I remember when I first got in the business, uh, 2007, you know, we're a few years off of the 2002. Uh, my father-in-law would tell stories, you know, you guys don't, don't know what it was like, you know, when it, you know what I mean? Everything's easy for you. All you got to do is get someone's info and you're going to write the business, you know, cause they're going and he's just busting our chops.

But you know, that was kind of the way it was like rolling into 2006, 2007. All you had to do was get someone's information and you were writing the account. There was always somebody cheaper. And, um, and you know, so really that's changed a little, but not really. I mean, you can kind of always find someone cheaper.

And so it's been, I would believe it's really been 20 years. Cause even 2010, I mean, I was still selling at 2010. That didn't feel, I mean, after everything that went on leading into the crisis, maybe, but that felt more like a small correction than a hardening. Cause everything started going back down again. Um, what is caused seven, seven, seven.

Now we're looking at 20 years. What has been the reason for that? Oh, that's a, that's a great question. Uh, there's a lot of reasons for it. So one reason I think is that there's maybe, um, better regulatory, um, actions to keep carriers, maybe.

Uh, arguably, um, more conservative than they're reserving. Let's put it that way. Okay. So that's, that's helped some, but another reason that isn't being looked at very deeply is, is insurance is less important today than it used to be. And, um, I would, I'm encouraging, I've been trying to encourage carriers and brokers and everybody to wake up that it's not 1970s America, but our forms that we sell are based on 1970s.

They're not based on 2020. And I've got, I've got some diagrams based on AMBEST data that shows, that literally shows insurance is less important as a role, uh, a percentage of GDP and that losses are less significant relative to GDP than they were 20 years ago. The frequency of losses, um, one of the chain things that happened after 2010 was that the frequency of losses decreased precipitously and it's never increased back to its prior levels. Even though we have millions more people, millions, more cars, millions, more businesses, millions more of everything, the absolute number of claims, pure absolute number of claims didn't go back to what it was prior to 2010. We just don't have as many covered losses.

So insurance isn't as important. There's two reasons for that. Really important reasons. Yes. One is, is that the world's just a safer place, which is awesome.

The safer the world is, the less important insurance is. Number two is we insure the wrong things. And if we don't start insuring the right things, nobody's going to have a need for us. So that's like the best, uh, interview tee up statement that's possible. So what are the wrong things and what are the right things?

That's like the ultimate layup. Like you just put it like right over the cylinder and I just had to push it right in. Well, you know, there's an argument to be made that outside of, um, outside of major fires, there isn't a whole lot of need for fire insurance. Almost nothing really in the big scope of things burns down anymore. Um, you take arson out, you take wildfires out.

There's not a lot left, honestly, but who is insuring intellectual capital? Um, Aon did a study that showed that 87% of the S&P 500's total value is in non-tangible, intangible assets. I.e. intellectual capital. Where do you, who offers that policy? Who's selling that policy?

That's a really, so I, I, I'm sure that you have more. I just want to jump in real quick because I had, I had, I had an issue with this. Um, I had a company whose intellectual property was program was, was software that they had developed. Um, and I started re so my mind went to naively, they just need a techie, you know, policy, right? Techie, you know, the name says it all.

This is everything they could possibly need. It doesn't cover it. But because I'm a, I'm a nerd, uh, like any, like most of, I started reading through the form and I'm like, wait a minute. This is like basically a standard, you know, policy, except it has the word tech in bold letters on the top, which, you know, is more of a classification of business. Then it is an actual adjustment to the policy language and, you know, I, granted, I want to be fair.

There were a few, we'll call them schmuggy givebacks to, to, to the fact that what they were building was a, was a, um, a technology product, but it was more, it was more as it regards an intangible damage to a third party than it did to the intangible asset that they had created in terms of this actual software that they're selling. That if it goes poof or gets ripped or stolen, they are, they're out of business or are severely hindered. Yeah. I mean, somebody comes and steals the contractor's tools. You have a policy for that.

Someone comes and steals your software. What is your insurance policy for that? Yeah. And it happens all the time. Oh yeah.

So that's what we're missing. I'm a certified business appraiser, which is a, you know, a pretty tough designation to get. And in, in becoming a certified business appraiser for insurance agents, um, you have to be able to analyze the, the, uh, intangible assets. Because a book of business is an intangible asset. Someone steals your book of business, Ryan, where's your theft coverage?

Yeah. And that our world operates not on screwdrivers and someone's stealing tools and things. It operates on intellectual capital today. If the insurance industry wants to remain relevant, we've got to ensure what is important. Is there anybody that's doing it?

There are a couple of, um, of firms out there that do it. A couple of, um, brokers that specialize in it. Um, it's, you have to really understand what you're selling and, um, understand that there's probably not one single policy. It's usually going to be a combination of policies required to provide for all the coverage that someone needs. Yeah.

So we teach some classes on it. Um, but, um, a lot of people are selling cyber thinking that's where the coverage is, but most, yeah, that's not where it is. No. Um, tech, you know, most of those forms will throw in a little bit this way or that way, but almost all the forms, like you said, are based on if it damages someone else, it's a liability policy. It's not lack of a better term, a theft policy.

Yes. No, you know, I'll, you know, we, there's certain countries out there. They don't come to the United States to steal, um, screwdrivers. They come to the United States to steal intellectual capital. It happened to a neighbor of mine, um, a small businessman who made this really neat, unique little utensil.

Another country stole the design, sold it for half the price. What happened to his market? Right. He needed insurance for that. He didn't need insurance for, honestly, he didn't need insurance for the injuries it would cost somebody.

Yeah. No, you're a hundred percent right. That was, that was, when I was reading the tech language, when I was reading the language of that particular carrier's techie and O policy, which, um, you know, I sold the guy anyways. I mean, I mean, I made him aware of what was happening, but you know, I basically said to him, this is covering you for your product doing damage to someone else, not necessarily someone stealing it, but it was, there it was. It was just like in flashing lights.

This is, there was, I think it was $25,000 for intellectual property theft, which this is a bit, this is a seven figure business. So what is $25,000 that doesn't even, that doesn't even count for the lawyers to wrap the business up and shut the doors. Like, you know what I mean? That doesn't get you. I mean the retainer.

Yeah. And, you know, it's not like you can go in and say, Hey, I want this 25 turned into a million on a, on a, this is not even an option. They don't have any way to rate for it. So, um, I, I agree with you. It is, it is, it's almost why I've stayed away from the tech industry a little bit so far in my, in, in this part of my career, because you know, the techie, you know, policy, there's nothing special about it.

I mean, I know a lot of carriers like to write it because it's, there's not that much to it. I mean, you're basically the only thing they're really covering is your damage to someone else through the software that you've created or through the services that you've created. created, which is a relatively low risk item in, in treatment. So that's, I, this idea, is there any, what, what else, or maybe there isn't, but like this idea of, we're ensuring the wrong things is very interesting to me. Um, is there any other aspects of, of business in general that you feel like we're, we're kind of misaligned on for, for 2020? Yeah.

So I think business income, I think just traditional business income. Um, when we, so we have a, I do my regular consulting business, but we also have an educational company. We teach, I would argue the most in depth business income coverage is, um, available anywhere in the industry. And is this available to, uh, do people have to be part of a membership program or they can just come in and sign up and take the classes? They can sign up and take the classes.

Most of them are, are for, um, a whole department at a time, but we are, we've created one for individuals that just want to learn more than what their agency's offering too. And is that at brand, uh, dash associates.com? They can find it all there. You can find it at, uh, your end education. Gotcha.

Brand. Okay. And I will have, so you can either go directly also have it on the show notes for everyone listening. I'll have a link over because I am an enormous believer in education in general. I just got my CWCA, um, through, um, uh, Preston diamonds shop.

So I, you know, I'm, I'm an enormous believer in investing ourselves educationally into this industry. I really think it's a true differentiator. Um, yeah, so that's, that's great to know. And I'll have that all linked up and stuff. Okay.

So business income, but business in business interruption, most people take the class and I'm not denigrating because our, you know, their, their options have been limited, but there's three kinds of business interruption. And, and one of the reasons people don't have the right business interruption coverage is because we're not offering all three kinds and most businesses do need all three clients. So one is we need to understand just your basic business interruption and offer it. And in the right fashion. So one of the observations we've made in our classes and studying, polling people, taking the classes is there's this, um, centering around the worksheet, but not the time elements.

The worksheet without the time elements is kind of a pointless exercise. Yeah. So you have to be able to put the two together and we find that there's a real lack of understanding of the time elements. And then you have contingent business income. Contingent business income is beyond compare.

It's so critical. And it's rarely sold. Almost. It's rarely even offered. Um, when I do my E and O audits, I find probably a majority of people don't even know it exists.

And then the third kind is a specialty business interruption coverage. Usually that kind of coverage is available only through specialty brokers. Um, and it is by SIC code. So in other words, you have to find that kind of business interruption coverage. It's usually a contingent type that is specific to SIC code for manufacturers.

And then there'd be a different program for restaurants and a different program for hospitals or what have you. Or even if it might even be more segmented than that. But those particular programs, if you find the right one, for you, that SIC code, boy, do they make all the difference in the world for a client that has a business income problem related usually to regulation, which is a lot of what the COVID-19 business interruption issue is all about. So understanding that with the products already available can make a huge difference, very underserved part of the marketplace. And why don't most agents?

So I, I'll tell you, I mean, I've, I'll say, I won't say I have a master's education of, uh, of the, uh, business income with, with the contingent, but the, the, the SIC code specific I'll be honest with you. I didn't even know that that existed. I didn't even know that that was a possibility or that there were, there were specific, um, policies that, that broke down business, business interruption into, uh, a line of business to cover there. I didn't even know that was there. Why do you think that is that that's not widely known?

And why do you think agents don't focus on this? Just, it's tough to sell. Is that, is it as simple as that? Um, I don't, I think part of it is, is that most of the insurance, insurance industries, educational courses are based on industry standard forms rather than proprietary forms. And that's where most agents learn about products available.

Um, I think that's one of the shortcomings of the industry is this focus on standardized forms. Yeah. So, um, there's, if you don't know something exists, it's hard to go look for it. And if, if you're going to educational classes and people aren't talking about it, it's, it's really hard to figure out and find out. Yeah.

I think that's the number one reason. Say that again. I think that's the number one reason. Yeah. Yeah.

I, you know, starting this agency has been eyeopening for me in many, in many ways. And I said this to you when we did a pre-call last week or two weeks ago, whatever it was, um, in so much as, as a producer, I thought I got a good education from my father-in-law. I got, I got really, really solid producer education. And, um, when I went to trusted choice and built agency nation, I got to have so many conversations with so many amazing people like yourself. And I did the podcast there and man, I came out of that going, geez, I I've, I've, I've talked to people up, down, inside, left, right, you know, of the industry, every part from CEOs to marketing reps at carriers to underwriters, claims, adjusters, uh, you know, to every type of agency that I thought existed.

And then when I started the agency and I started getting smacked in the face day after day with the realities of, of having to think about all this stuff, which can be so heady and so high level, but at the same time, um, you know, keep the business actually operating, like actually do the, it's, it is a really difficult process to manage because you, you hear things, um, like what you're talking about, the depth of what you're talking about. And I think every agent, uh, worth their salt, here's that and says, I would love for all my clients who need a coverage that rich to have a coverage that rich at the same time, the idea of actually investing yourself, creating the brain cycles, implementing the process, get finding access, whether through a specialty broker or a carrier and actually implementing it into your, into your, your client base feels so overwhelming that you just don't do it. Right. I mean, it really is, um, that's a huge, like that one simple thing is such a huge process when you break down all the pieces, which is why I feel like we all default to standardized forms because it's just, it doesn't take me 40 brain cycles to wrap my head around a standard form where, you know, a business interruption class form specific to, you know, plumbers or whatever I'm like, how is it different than the one for electricians?

You know what I mean? Like, uh, you know, and, and it, it just feels like a lot of brain cycles. I just think that's a, that's a very tough aspect of our business is as much as a lot of this stuff feels like it can be straightforward, uh, very little in our industry actually is. Yeah, Ryan, you're right. And it is, it's, it can be really overwhelming, no choice about it.

Um, I've, I live that and see it daily. It is really overwhelming. You know, there's a lot of options though, to help make it more bite size. Um, one is to learn, um, about it. You know, one of the things, the reasons it takes, like you said, 40 brain cycles is because it's part of the learning curve.

So the more you learn, the faster you cycle through the process. So the key to it is learning. Like you said earlier, it is taking the time to learn it in depth and probably go a little further than industry standard. You know, I think CE is one of the worst things that ever happened to our industry. So what I recommend to people quite often anymore is go do your CE on one of those programs where you can get, you know, six hours and 45 minutes for a hundred dollars, right?

And then go spend your real money on real education elsewhere and not worry about CE. Um, do you, you know, I think that's really good advice. Um, it's the best way to get the education. So you don't have to think so hard about some of these things. And then if your book is big enough, start picking some kind of a specialty.

It'll make it a lot easier and a lot more rewarding. Um, I've got a buddy who built a multimillion dollar commission book on nothing but contingent business income for one SIC cook. So the, one of the ways to not have to worry about all these things is just that focus. Yeah. And I think most producers listening would be very happy with a multimillion dollar commission book.

I think they would too. I think they would. I think that, um, so I, I always try to put things in context to the struggles that I'm having personally, because I don't know if I'm struggling with it. I'm assuming others are as well. And I know unequivocally that finding some sort of niche or focus or specialty is the answer.

Um, I just, there's, there's no, there's not really a counter argument to it. I guess, um, what makes it legitimate is that there is a counter argument that just doesn't actually add more value. Right. So generalist would be the counter argument, but I feel like highly profitable generalist agencies are more of an edge case than a rule where highly profitable organizations with three to five specialties or somewhere in that range, maybe one to three, depending on what they are, they are more often pop. So that that's what kind of proves the case is you need to have a counter argument.

Otherwise it's a conspiracy theory. Um, so that being said, it is so difficult to say no to business that, you know what I mean? Like, you know, the answer, I know the answer is just pick something. It honestly doesn't matter. I should just put post-it notes up on my wall, have my kid take a dart, close his eyes, throw it at the wall and whichever one he hits, it's like, okay, I'm into, you know, barbershops run by women on the West coast.

Okay. There it is. Let's go. And, um, and you just fight it. You, you, I, I have a count that I'm going to write today.

That is a $986 Bob. And I don't know why that I'm doing it. I have no idea why I'm doing it. I literally have no idea why I'm writing this account. I don't want it.

I, I'm not interested in guys kind of annoying, but he called me. I rated him up while I was on the phone with him and I'm going to write the account. And I, I say that I don't, I don't want to belittle that because it's business and I should be happy. And the mechanism is working because he found me online and you know, it was kind of already sold because he'd watched a couple of videos. So I shouldn't complain, but at the same time, it's not, that's not the few.

There's no part of that is the future of where I'm going. Um, and I'm going to write it anyways. And no, I'm sitting here telling you that I should. So, so I just, I, I, I don't know that I have a point to this story other than to say, I, I found it very interesting that while logically it is, it makes so much sense to dial into a niche and emotionally, it is so incredibly difficult. It is hard.

No two ways about it. Um, you know, it's a fear driven, you know, it's fear driven, right? The fear is if I don't write this 986, where am I going to get the next 986? It's not ready. It's not right there.

Yeah. Especially when you're starting out, it's next to impossible to stay that discipline. So, you know, when you're just first starting out, it's best probably to write whatever you can write, but at some point in time, those that express the discipline in some form or another, they always win. Yeah. A hundred percent of the time.

So, uh, I want to dive into, um, I want to kind of pivot just a little bit, our conversation here as, as we continue to roll on, um, to, uh, agency valuations, as much as you're willing to talk about that topic. I know it's a big part of what you do and you're one of the best in the country at it. And, uh, I'm, I'm very interested in, um, we all, so, uh, a good, good buddy of mine. I don't know if you know him or not. His name is Chris Langell.

He runs advisory evolved. It's an insurance website business. And, um, he put out a tweet the other day that said simply, um, we don't sell insurance to sell insurance. And his point was, um, we sell insurance to feed our families, go on vacation, have a lifestyle that we want, you know, whatever. There's a reason why this just is the mechanism for, for, for many people.

This is the mechanism in which we've decided to make the income or build the lifestyle that allows us to do what we want. Okay. So starting an agency, even though I'm nowhere near selling, you kind of can't help, but at times think about the end, think about where we're going. So, um, you've talked about how, uh, we're ensuring the wrong things. So I, I, in that regard, or with that understanding, I think it's fair to say that there are probably aspects that would build agency value over the next 10, 20 years that maybe weren't as important to building agency value the previous 10, 20 years.

And if that's wrong, that's fine. So what, maybe what are some of those things or what are one of those things that if, if you are a, a young agency or a growing agency and, and, and you could step in right now, intervene into their agency and say, Hey, if you just focus on this one thing, it'll, it'll, it'll tick your trajectory up in value. This will really help long-term if I could interject right this moment and fix it for you. What, what's something like that? If that long-winded question makes any sense?

Yeah, no different, one of the biggest differences from 10 years ago or 20 years ago. And today is data, data, data, data, clean data, data makes scale possible. Lack of data prevents scale. If this were past his podcast, he'd be doing this thing where he acts like he's losing his mind. He'd be like, Oh, Chris, Oh, hold on.

Let me write that down. He'd be scratching it. I'm sorry. I can't help but make fun of Cassie's my favorite. So, um, that is, that is an answer that makes complete sense to me.

Um, but I think for a lot of agents that, that does not make sense to them, right? They don't, I think, uh, and I don't mean that in a belittling way for anyone that's listening. I think it's just the idea of data has been tossed at us and used both from a very deep, rich standpoint and at a very shallow kind of giving the word multiple meetings. So when you say clean data, what does that mean in a practical sense to an agency owner who's sitting and listening to this? Okay.

All right. So very, very succinctly, let's start with accounting. Having good accounting data is crucial. Really good accounting data is really crucial. Um, because if you don't have good accounting data, you don't know really what status your agency is in.

Um, a buyer comes in, they're going to discount it because they can't trust the numbers. Um, and it reduces your flexibility. So like when the pandemic hit, if the United States government hadn't stepped in and offered lots of loans with very little data required on the loan application, um, a whole lot of businesses in America would have gone, could put simply because they have bad accounting and a lot of agencies fall into that category. So very practically daily basis, good account on a, on a client basis, actually inputting correct data into your agency management system, including going back to earlier, the SIC codes, recording the SIC code of your individual client, business clients is unbelievably valuable on a go for basis, um, from so many different angles. So when I go into agencies and, and I'm looking at their files and I can't tell right from wrong what's happening or they say, oh yeah, we don't always put that information in or like on the prospect module of an AMS system.

They're not inputting any of their prospects in there. So it's like, so how can you ever re-solicit these people? You have to start from scratch. Whereas you save so much money having a, a lead list that's been built over the years from people that you already talked to now, that's worth a lot of money that lead list. So it's about very practical data being entered daily and accurately.

Does that help? Yeah, I think it does. I think that, um, one of the things that I found very interesting, uh, when I first joined my wife's family's agency, and I, I just use them as a barometer all the time, even though they're, they, it's an, uh, highly incredibly well-run agency. Um, one of the things that they, that we had to clean up over the years was that, um, they, there was a prior partner in the business and obviously employees come in and employees come out and they've been in business for 47 years and it's a testament to the work they do. But at the same time, you have employees who would use one field for phone number and another field.

They would just put, they would put information in random text boxes and, and all of a sudden you would go, we would try to pull information. Cause I, cause one of the things that I started to implement when I was there was Infusionsoft because we were on TAM and there was no real way to market out of TAM. So, so we said, okay, we'll, we'll take the data. We'll export it out of TAM. We'll put it into a few and we'll start to market there and then we'll just, yeah, we'll have dual entry, but at least we'll be able to communicate and connect.

And, um, we couldn't do it. We couldn't do it because the manual labor process, once we, once we were able to export the data out, just the differences and how people had used fields and how they had inputted things over the course of time was so, I mean, I mean today, I guess, yeah, you could hire a VA and have them clean it up, but, but it was too much work. It was literally too much work when we started to actually break it down for it to be valuable because it just was so, it had been used so many different ways for so long. So, I mean that, so, so that, so what you're saying is today or, or in the next 10 to 20 years, these are the kinds of things that are actually going to have an impact on value. Because when I bring up data to some agents today, they'll, they'll just say to me, yeah, Ryan, that's cool.

Except, you know how agents get valued. They take EBITDA, they put a, they times it by two and then someone writes a check for that. And I just can't believe that one, I don't actually believe that it's that simplistic though. I'm sure it does occasionally happen, but at the same time, I can't believe as we become more sophisticated and, and, and systems talking to each other becomes more just a given part of our business that this isn't going to, that people are going to pay the same when the data is not clean or whatever. Two points.

One is activity codes are the, are maybe the worst example of people using multiple activity codes for exactly the same thing. And those activity codes are really valuable pieces of data. So that's a great, like putting telephone numbers in different fields. That's a really just the same thing, but here's the other part. Let's say it is simple.

Let's say it is two times EBITDA, right? Let's just leave it down to six times EBITDA or 12 times EBITDA or whatever the number is. If you have good data, you'll have a big, bigger EBITDA. So even on a simple basis, your value increases, if you have good data and you use it constructively, you will have a bigger EBITDA, all else being equal. Yeah.

Um, and you can tell me if you do not have knowledge of this particular project or are interested, but you know, the, the neon project, are you familiar with Seth and some of the things he's doing and some of the ideas around how he's trying to, um, anonymize and then, uh, and then scale data over agencies so that we can be more efficient and what are your feelings on a project of that nature? It doesn't, you don't have to specifically reference in the end, just the idea as a whole. And, and do you think something like that actually is valuable to agents long-term if it can be pulled off, if it's possible? If it, if it can be pulled off, there's a possibility. The problem I think with any of these data projects, there's a number of these kinds of data projects.

Yeah. Is, is that there's no standardization of process in agencies, much less across agencies. Um, so use activity codes for an example. Um, until you have some consistency, it's next to impossible to do any kind of analysis of what, what it works best. Yeah.

Yeah. So I think that's one of the biggest, um, biggest issues that we have in those kinds of projects, conceptually, there's a lot of value, a whole lot of value. Um, yeah, the thing that I have been impressed with, and, um, I'll just, I'll just talk to the end because of all the data projects that I know there are many, that's just the one that I'm the most familiar with, um, was their ability to look at, uh, the second and third layer reasons for, for a particular high level action. So it takes four days to get a quote back from X carrier. Let's just say, bam, that's the data point.

Okay. So if we were to just to position that against five days for Y carrier, we could say, well, let's, you know, we need to stay away from Y carrier. It's taking us 24 more hours to get a quote back and we could be losing business. Okay. But when we're, when we're actually looking at this data at scale and we do have it and it is, uh, I'm going to do air quotes.

No one can see me clean, you know, then we can dive down and really start to dissect. Well, the reason it's five days is because John is actually the one who's submitting the business to that carrier. And John's submissions in general are twice as long as any other, uh, uh, uh, agency personnel. And, and, and, and if we can, now we can focus on what the real core issues are that are keeping our efficiency down. Now, um, I know some of what I just said made smoke come out of agency owners ears, but I think the idea here is for, for, for these agencies that really want to grow and that understand how important internal efficiency is to that growth, not just on renewals or retention, but on new business, this clean data, and then having the right system that can help you look at the second and third level.

It is, it is wild. I mean, it, you can see how, how powerful these systems can be over time. Yeah. I don't even know you have to have a system. Um, we've proven to a lot of different clients just within their own organization that there's an easy 20% operational efficiency to be gained from that kind of analysis.

Yeah. And even on a simplistic level set means one out of five people on a payroll is superfluous. Yeah. That's a big savings, right? Yeah.

The catch, one of the catches to it is, is that people that run agencies are salespeople by and large, they're not operational people. So even if you come up with all the solutions, which I, and I totally agree with you how important operations is, you have to have an agreement that there'll be emphasis placed on operations by the person who mostly can, is focused on sales. Yeah. Our industry never really achieved that. Um, very few agency owners, um, of any size, big, small, medium, whatever, um, have that appreciation of, of, uh, efficiencies in operations.

So one of the by-products I've, I've, I've, uh, this question and one more, I want to be respectful of your time. Um, one of the by-products of looking into, so I, I am trying to figure out what the, what the, um, personality of this agency is going to be, where we were going to go. I obviously have ideas, but I also am a firm believer that you, you follow your strength. You don't try to force it. So I've tried to both operate in the areas that I think there'll be opportunity, but also kept an open mind.

Okay. So one of the places that I will say explored was like high volume personal lines, leads business and, and, and getting to know some of those agency owners who, who are very successful in that game. If I had to, uh, kind of pull out one of the core similarities, it is that they have removed themselves from sales altogether and removed their overemphasis on sales as the primary thing they focus on and, and took more of a holistic approach to the agency. They've really taken the time to dive into even, even simple things like onboarding new clients, setting expectations, working on carrier contract. I mean, these types of, of, of operational and second level thinking that I think a lot of us who get stuck at plateaus get stuck there because we never want to leave the sales function and we only ever think about the sales function, you know, first, second, third in our business and not that sales is important.

Don't get me wrong. But at a certain point, I think we have to replace ourselves as the head of sales and start thinking holistically, or we have to pay somebody to do that because it has to be done. Right. Absolutely. You're right.

I think one of the, um, advantages, very, it's kind of interesting, the intersection of data and having, and accepting the reality of better operational management, they very closely connected, right? I would argue that there's a couple of the, of the networks, just a couple, maybe three, maybe four, uh, these networks where, you know, everybody signs on and gets access to the carriers. That's what I mean by networks. Yep. So the people running those particular networks have more insight specific to that than maybe anybody else I've seen in the industry.

Um, I think that they have something that maybe is pretty unique in that fashion. The networks for network's sake, I'm not so sure that about, but scale and operational efficiency. And because they have the scale already, they can bring both of those things. If they have the right mindsets and address what you're talking about, I think there's something there for a few, in a few instances. Yeah.

Yeah. I've talked about them before on the show. I'm part of Indian. And the reason I joined was not necessarily because they're the biggest or had the most bells and whistles, but because Chad and his team, this is where they're moving. Like this is their mantras, you know, they may not beat up, you know, fully up, you know, fully dispersed.

Everything's functioning exactly the way it should, but they are moving in this direction. They're using, I think, tools that allow them to be flexible and maneuver. And that's not just to pump them, but just in general, I agree with you. I do think, and again, when you can look at, when you can look at data as widespread and in a certain, once you hit a certain, um, uh, uh, uh, bar, once you get over a certain amount of data, you can really start to see trends and impact and how, and how changes have a widespread effect. I, I think there's a lot there.

So the last question I want to leave you with, um, and this, this could be shallow. You can go as deeper or, or, or as not as you want. I just, it's something that I, uh, is, is on the minds of a lot of main street agents today. And that is the idea of using VAs in your business and outsourcing, um, in general. And I'm just interested from your perspective, agency valuation, you know, operations, you know, like when you think about this trend towards VAs, what, where's your mind going?

Is it something you see as a very positive? Do you see it as a net neutral, you know, where, where are you coming down on VAs in general? So outsourcing is pretty interesting. Um, there's definitely some areas in which outsourcing is incredibly valuable, but it has to be very surgical in its use and in choosing which outsourcing firm to use. Um, you know, the new, there's some, quite a bit of new technology coming down the pipe.

Probably sooner rather than later. That's pretty much going to eliminate the need for mass outsourcing. Um, there's just, it replaces them. The technology just flat replaces that whole duty. Um, the other thing that I've noticed in doing agency valuations and efficiency studies is that it's really hard to find true cost savings with most mass outsourcing.

Um, it's hard to judge in a smaller agency, but in a larger agency, um, it's really hard to find the savings. Um, we've done some detailed studies on it for large clients who use outsourcing on a large scale and, um, one would think the savings would be there. One would think it'd be pretty easy to find, but, um, it's pretty hard to discover. Um, I don't really like revenue per person as any kind of a metric. I think it's a pretty lousy metric, except for if it's, if somebody is way less than normal revenue per person, that's a problem.

But, uh, connection, the correlation beyond that is, is pretty much zero. It's, uh, if you do regression analysis, the R squared value is nearly zero. So when we've tested revenue per person and whether it's affected by outsourcing, it doesn't seem to have much of an effect, especially if you build back the cost of the outsources, sometimes revenue per person actually decreases. So it's, I don't think it's usually used well, and I think new technology is going to replace it. That's interesting.

You know, I have a client who used to work for Facebook and, um, we were, I, I wrote, we wrote it, I wrote his insurance, he moved to New York and then we got into this geeky tech conversation and, you know, he was telling me all his ideas for disrupting the insurance space and, um, which were interesting. Uh, and then he basically said, um, there's a lot of, you know, I know the trend in insurance is, is VAs. He said, and I don't understand why he said, I think the technology can replace them. I I'm of two minds on it. I have, I just have brought in my first VA a couple of weeks ago into the agency.

I can say unequivocally the advantages, the cost versus the time that it is freed up in my day to do things that are allow me to produce more revenue and focus on the bigger, longer term projects that before I just could not get through that. I also could not hire an American to do that. I could not take the time to bring in technology to do. I, I, I couldn't, I mean, to me, it's, uh, uh, a hundred out of a hundred times. That being said, I, there may be a point at which you are of a size where you have the time, resources, capacity to backfill and replace those processes.

But setting up the prop, the technology is oftentimes just as much work or more than onboarding the VA, which is, which is an interesting dilemma, not, not right or wrong. I think it's an interesting dilemma. I think for smaller agencies, um, the VA is, can be a godsend. I really do. And I recommend it to a lot of my clients one way or another, but for larger ones, um, it's really a mixed bag.

Um, it truly, truly is. And, um, the, the, the technology is going to replace it. Yeah. There's no two ways about it. Chris, on a large scale, it's, especially on the large scale, the technology is inevitably going to replace it and it's going to replace it sooner rather than later.

And furthermore, the better the data is that an agency has, the more quickly the technology is going to be able to replace the human at a far lower cost. Well, I, this, and I'm, I'll, I just want to share this with you. This is, I just, to this point. So I'm testing a tool right now called canopy connect, but this tool does in, in, you may be aware of the audience at home. Um, and I want to give a shout out to he's sharing.

He's the one that, that turned me onto this. Your, your prospect logs into their current online platform and canopy connect pulls all the data out clean exactly as it should be. No. Oh, did you say seven or four or, you know, wait, you know what I mean? Like none of that.

It just log in. Boom. Now, again, we're not quite there. You know, there's also some cultural things. Do people want to do it?

Do they trust, you know, there's, so there's some, but man, it zaps that data out. 90 seconds later, you're staring at all the information you need to quote them. And all that person had to do was put their username and password into, into the system. And, uh, I look at that and I said, okay, you know, that's step one of four that gets us to where we never have to ask them any of the underwriting questions ever again. But that's really interesting.

I mean, to the client who's willing to use that, it's very, very powerful. There's another, a number of those systems in place that are one step away from a light switch being turned on and made active. Yeah. Um, they're game changers. I've tested, I've, I've tested them.

I've gone through the demos, um, and they're total game changers. And then there's another set of systems that come in and do another aspect of, of, um, the policy work and you put those two together, frankly, honestly, pretty much about 40%, 50% of all human processing is eliminated. Yeah. It's just gone and it's automated. And it's the tests that I've seen show that it's far more accurate than the units.

Well, you have, you know, and the other thing I'll say is you have these API driven systems like Tarmica that are going to be three question quote to binds because, because they're so dialed, because they're so dialed into all the systems, name, birthday, address, foomp, VIN numbers, all the information is pulled right in. It's all there. And now you're just now here's, here's what I hope everyone. And again, I want to be respectful of your time. Here's, here's what I actually believe these things do is it frees you up to actually be an advisor, actually think about sick code specific business interruption coverage.

Right. Yeah. So that's the way it should work. That's my goal. Yeah.

That's what I want to see happen. People become better advisors. Exactly. Hey, I, we're over. I, I apologize for that, but I appreciate your time so much, man.

This has been absolutely tremendous. And, uh, I'll have all the links up for everyone. Uh, check out, go to, um, go to Chris's website. I'll, I'll have everything set up there. But if you see Chris's name on a, on a podcast or a document or something that he's written somewhere, slow down, read it.

I promise you, you will not be disappointed. Chris, it's my great pleasure. My friend. Thank you, Ryan. Appreciate it.

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