18 August 2024

Planning for Success: How to Create a Business Plan When Starting Your Independent Insurance Agency

Launching an insurance company comes with a lot of twists and turns. Independent agents face many uncertainties, which means it’s important to stay organized and have a clear road map. That’s where a business plan comes in. Defined by the Investopedia team as a written document describing how a business will achieve its goals, a business plan lays the groundwork for you as you go from fledgling startup to thriving insurance agency. Below is a guide for creating your own business plan, including the specific steps to follow along the way.

Why Do You Need a Business Plan?

But first things first. What’s the point of taking the time to write a business plan? Simple: It positions you for success. Companies that create business plans are nearly twice as likely to succeed and obtain capital than those that don’t, explains business writer Rieva Lesonsky, citing research from Bplans.com founder Tim Berry. “Writing a plan can make the difference when it comes to realizing startup success,” agree business experts Francis J. Greene and Christian Hopp at Harvard Business Review. “Plans support the process of turning an entrepreneur’s vision into tangible actions by promoting the organization and direction of startup activities.” A business plan also allows you to better understand your market, strategize effectively and get the necessary funding.

The 7 Components of a Business Plan

There’s plenty of room for customization, but a well laid out business plan incorporates seven key components. Here’s a list of them in sequential order along with details about what each section should include.

1. Executive Summary

An executive summary acts as an overview and highlights the upcoming information that readers are about to digest. You can think of it as an introduction where it organizes things and serves as a point of reference. She adds that an executive summary typically includes:

The business opportunity.
How you plan to capitalize on the opportunity.
Your target market.
Who your competition is.
Owners and staff members.

2. Company Description

“This section outlines vital details and key aspects about your business such as what you do, your company’s location and what makes your business original,” explains Entrepreneur Insight. Keep the language simple so that the scope of your business idea is readily understood. You’ll want to start by highlighting your business structure (e.g. sole proprietorship, general partnership or limited partnership). Business writer Sammi Caramela sets out the different types of legal structures in an article at Business News Daily. “The key is to figure out which structure gives your business the most advantages to help you achieve your organizational and personal financial goals,” she says. Then outline a brief history of your business along with the demand you will be fulfilling. This will likely be limited if you’re new, but include as much relevant information as you can. Finally, discuss how you plan on making a profit.

3. Market Analysis

Here’s where you identify the shape and size of your industry with the purpose of demonstrating there’s enough demand to justify you launching your insurance agency and is your chance to prove that your business will be both profitable and sustainable. It also shows potential investors that you’ve done your research and truly understand the market. In terms of specifics, you’ll want to highlight your primary customer segments, their purchasing behavior, the current competitive climate and what the strengths and weaknesses of your competitors are. You’ll also want to provide details on what the industry outlook is and any relevant statistics that show where it’s heading. Visuals like charts and graphs can come in handy here.

4. Organizational Structure

This is where you talk about the people who are behind your company. For instance, who owns the company, their background, who makes critical decisions and the specific skills they bring to the table. Including a section on the organizational structure is important important because it lets readers know exactly who is involved and what their qualifications are. Even if it’s just you as a sole proprietor, you’ll still need to include this information.

5. Products and Services

This section is pretty straightforward: List the types of insurance you offer (home insurance, renters insurance, liability insurance, etc.) along with the costs and anticipated revenue. The goal here is to succinctly describe the coverage that customers can purchase and the value that’s being delivered. Be clear about the full range of insurance that will be offered, and describe the basics of how each one works so that the uninitiated can understand. Just don’t be overly complex or verbose about it. “Keep in mind that highly detailed or technical descriptions are not necessary and definitely not recommended,” Inc. editor Jeff Haden writes. “Use simple terms and avoid industry buzzwords so your readers can easily understand.”

6. Marketing and Sales Strategy

Small business finance writer Georgia McIntyre says your marketing and sales strategy boils down to asking yourself two key questions: How do you plan on reaching your customers? And what’s your strategy for selling insurance to them? Marketing falls under a massive umbrella these days, and companies have many different options. This part of your business plan is where you clarify which particular methods you will use to generate leads and nurture them until they’re ready to buy. Pinpoint precisely those channels you plan on using in order to reach your target audience. It could primarily be digital (email, social media, and content marketing), traditional offline (networking, speaking engagement and participating in local events) or a combination of the two. From the sales standpoint, elements to include are your unique value proposition, sales distribution plan (making face-to-face pitches, selling online, etc.) and pricing strategy.

7. Financials

Finally, there’s the issue of financials. Business Plan Hut explains that this is intended to show readers how potentially profitable your insurance agency will be as well as how much capital is needed to fund it. This information allows potential investors to determine how viable of an investment your company is and the likelihood of it providing a return. Accounting and finance expert Trevor Betenson points out that that if applicable this should include your profit and loss statement, cash flow statement, balance sheet and sales forecast. You may also want to add some business ratios and break-even analysis to be extra thorough. Due to the technical nature of this section, it’s ideal to write it with the help of a professional accountant.

8. An Appendix

While optional, an appendix can flesh everything out nicely. You can think of it as a place to provide supporting documentation that readers may want to look at to verify information. It typically includes things like legal documents, contracts and permits and resumes of owners and staff. Place this at the very end, and arrange the contents so that they correspond correctly with the various sections of your business plan.

Proper Length

Now that we have an understanding of what a business plan is and should contain, one question still looms. How long should it be? In most cases, you should be able to cover everything in 20 to 30 pages of text, with another 10 pages for extra details. However, it could certainly be shorter depending upon your needs. His advice is to summarize the information as much as possible and keep it fairly brief. Use short sentences, avoid industry jargon and use bullet points for lists.

Free Templates

If you’re looking for some examples, there are few different templates you can use to get started.

Susan Ward offers a simple yet comprehensive one on The Balance Small Business.
My Own Business Institute from Santa Clara University has one that’s a bit more robust and tells you in detail what information you should include under each section.
PlanBuildr also has a great tool that walks you step-by-step through the process.

Laying the Groundwork for Success

A career as an independent agent can be exciting and rewarding. But getting your business off the ground requires a considerable amount of planning. You need to have a clear understanding of where you’re trying to go and what it takes to get there. That’s why it’s so important to have a solid business plan. This essentially acts as a blueprint with instruction to turn your ideas into a profitable business. Following the steps in this guide should ensure that you cover all of the bases and help move you through the process more efficiently.

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