Case Study

Broker Case Study

1. Situation

We were approached by a broker who had been working for a small brokerage in the $30 million range. He was not the principal broker and only had a small ownership stake. Essentially, he was a producer building their book of business. He knew the head of the brokerage well and could see the benefits of owning a brokerage both in terms of legacy and income. He had also built up a decent book of business and was fairly confident that he could replicate on his own what he had achieved with the brokerage. The question was, could this individual not only continue to be a top producer but also manage a business?

2. What were the barriers to making a move on his own?

The broker had initially considered going it alone. He had some capital and he was confident that he could quickly hire some producers and build up the book. His challenge was getting contracts with the markets. They were sensitive to their relationship with his previous employer. Secondly, the new broker was bringing an $8 million book of business with him but that wouldn’t be sufficient volume to be attractive to the big markets. The feedback he received from the markets was that they would feel much better if he was connected to a broker organization like PBNet because of the screening, oversight and support they would give him.

3. How did we help?

Initially this broker was considering signing with a competitor of PBNet. They offered him access to multiple markets and 100% equity stake in his brokerage. But they wouldn’t offer him direct access to the markets and that was a sticking point. He wanted to have true independence to chart his own path and be able to control the future of his brokerage.

When we sat down with the broker, our biggest challenge was to make sure he had the right DNA to be a great manager as well a great producer.. He had built up a nice size business and was making good money but he wasn’t facing the managerial challenges that go with operating a business. So we needed to walk him through a process that would give us both the confidence that he could do the job.

We liked the fact that this broker was prepared to start lean and keep his expenses down. He had some savings, but we connected him with BMO for a line of credit. Then we helped to transition his old book of business to his new brokerage so he was able to retain the value of that book. We also connected him directly to the markets allowing him to develop a personal relationship, which ultimately led to higher commissions than he could have obtained on his own.

4. Lesson Learned

The biggest thing the broker had to learn was to look where his business was going to be in 3 to 5 years and not try to achieve everything in the first year. This meant that he had to adjust his approach to the business and accept the fact that he couldn’t be doing everything all the time. He needed to think in terms of building a business, creating a team and managing it. From tracking the performance of his employees, to providing coaching, to motivating and retaining staff, he needed to consider every aspect of the business so that ultimately he would have a real business and not just a one man show. This was an important shift in mindset. Having been a successful producer he was used to focusing entirely on one dimension: the sales process and writing premiums, regardless of whether it made sense for the business or not. Now he had to consider the macro picture of what kind of business he wanted to pursue for the long-term health of his business.