FEATURE
The industry has its answer , and the news is not just good - it ' s historically good . This past year will be remembered as a high watermark for our industry . In the Best Practices Study ' s 30 + year history , we have never seen operating and financial results across all revenue categories that matched those achieved in this year ’ s Study . This is a testament to our industry ' s resilience , adaptability , and commitment to a Best Practices mindset . Let ’ s look at the 2024 Best Practices results for a handful of the most critical benchmarks .
ORGANIC GROWTH
Organic Growth is total growth , net of any acquisition activity . It is a function of four factors : new business , account attrition , rate , and exposure . Organic growth is the typical agency ' s most important operating metric and best indicator of overall health . Without consistent and positive organic growth , agencies will struggle to remain viable over time and to achieve adequate investment returns .
All but two Best Practices revenue categories showed improved growth results compared to last year . Only the smallest revenue category delivered modest growth results ( 5.4 %). The advantages of scaled ( large ) brokers are well known . In most cases , larger brokers enjoy a significant competitive advantage in the marketplace , given the tools and resources they wield . 2023 ’ s modest growth results from smaller agencies in the study should remind all independent brokers , especially smaller firms , of the need to make significant and ongoing investments in their growth engines ( producer hiring and development , training , specialization , technology , etc .). Publicly traded and Private Equity-fueled mega-brokers will continue to gobble up independent brokers who fail to do so .
NET INVESTMENT IN UNVALIDATED PRODUCER PAYROLL
Overall , the 2024 Study ’ s organic growth results were excellent . Although many factors contributed to these results , P & C rate played a considerable role . The P & C market is now in a seventh straight hard year and shows no signs of cooling anytime soon . It would be challenging not to grow in this rate environment .
The U . S . economy , which had been red hot after the worst of the COVID-19 pandemic , settled into a more regular rhythm , with GDP increasing by 2.5 % versus 2022 . New business results were solid . Overall , the industry scored an A- for organic growth in 2023 .
As crucial as Organic Growth and Sales Velocity are , an agency playing the long game must also focus on investments in future growth . Although these investments take many forms ( sales training and development , technology , support staff hiring , strategic planning , etc .), perhaps none rivals an agency ' s investment in next-gen sales talent .
Reagan Consulting developed the NUPP metric ( Net investment in Unvalidated Producer Payroll ) to capture an agency ' s investment in future sales talent . Expressed as a percentage of net revenue , NUPP is the difference between what an agency pays its unvalidated producers ( producers-in training ) and what the unvalidated producers would earn under the agency ' s regular commission schedule .
SEPTEMBER / OCTOBER 2024
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