Insurance Company Business Plan

The Business Plan for Your Insurance Agency Fourth Edition The Business Plan for Your Insurance Agency Other Titles of Interest from 125aday. com Publishing Company, Inc. Helping Small Business Do More Business! More Insurance Agency Related Products • Start Your Own Insurance Agency Top Business Books • New Customer Development Program • Customer Care Guide • Market Research: Surveys and Questionnaires • Human Resources: Independent Contractors Special Offers Business Talk™ Newsletter For more information, go to www. 125aday. om to sign up or e-mail us at [email protected] com ii The Business Plan for Your Insurance Agency The Business Plan for Your Insurance Agency Fourth Edition Starting, operating and managing an insurance agency is a complex task. A functional business plan is not only valuable when seeking investment funds, but in the day to day management of the insurance agency. This eleven step business plan will help you create your insurance agency business plan with confidence. This user friendly business plan was prepared with ProBP, the professional business plan software solution.
Be sure that you have all of the components; the workbook, the Excel spreadsheet and the Word Option document. Guy Miller 125aday. com Publishing Company, Inc. www. 125aday. com www. BusinessBookSource. com BusinessBookSource. com PO Box 50661 Denton, Texas 76206-0661 iii The Business Plan for Your Insurance Agency Publisher: 125aday. com Publishing Company, Inc. Cover Design: Rhonda Hawkins Photographs & Graphs Copyright © 2011 Melvin Houston This publication is designed to provide accurate and authoritative information in regard to the subject matter covered.
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Inclusion, exclusion, or definition of a word or term is not intended to affect, or to express judgment upon, the validity of legal status of any proprietary right which may be claimed for a specific word or term. This business plan contains illustrations and samples of various steps of the business plan. These illustrations and/or samples relate to an entity entitled Full Coverage Insurance. This is a fabricated business entity for the purposes of illustrations and/or samples. Any similarity to any person (living or dead), entity, company or business is merely coincidental. iv
The Business Plan for Your Insurance Agency The Business Plan for Your Insurance Agency Table of Contents Introduction ……………………………………………………………………………………. 1 Customizing the Business Plan ……………………………………………………….. 2 Changing the Page Setup……………………………………………………………….. 2 The Page Tab ………………………………………………………………………….. 2 Orientation ………………………………………………………………………….. Paper Size …………………………………………………………………………… 2 Print Preview ………………………………………………………………………… 2 The Margins Tab ………………………………………………………………………. 2 The Header/Footer Tab ………………………………………………………………. 2 Changing the Header………………………………………………………………. 2 Changing the Footer ……………………………………………………………….. The Sheet Tab …………………………………………………………………………. 3 Changing the Font and Font Size ……………………………………………………… 3 Changing the Color of the Text ………………………………………………………… 3 Adding or Removing Worksheets………………………………………………………. 3 Renaming the Pages in the Spreadsheet …………………………………………….. 4 Renaming the Pages in the Spreadsheet …………………………………………….. Adding or Removing Rows or Columns……………………………………………….. 5 Inserting Pictures ………………………………………………………………………… 5 Changing the Formulas………………………………………………………………….. 5 Excel Help …………………………………………………………………………………. 5 Word® Option………………………………………………………………………………. 5 Samples and Illustrations ………………………………………………………………. Changing Chart Information …………………………………………………………… 6 Mutual Non-Disclosure Agreement…………………………………………………… 8 Step One ………………………………………………………………………………………… 9 Your Personal Evaluation ……………………………………………………………….. 9 Your Net Worth …………………………………………………………………………… 9 Instructions on How to Complete in Excel ………………………………………… Your Personal Budget ……………………………………………………………………. 9 Why This Information Is Important …………………………………………………… 9 Step Two ………………………………………………………………………………………. 11 The Cover Sheet………………………………………………………………………….. 11 First Impression! ………………………………………………………………………… 11 Elements of the Cover Sheet ………………………………………………………….. 1 Complete the Cover Sheet Section …………………………………………………… 11 Saving Your Business Plan File………………………………………………………… 11 Cover Sheet Sample ……………………………………………………………………. 13 v The Business Plan for Your Insurance Agency Step Three…………………………………………………………………………………….. 14 The Executive Summary……………………………………………………………….. 4 The Basics of the Executive Summary ………………………………………………. 14 Applying for Loans or Investors ………………………………………………………. 14 Information That Should Be Included ……………………………………………….. 14 Mistakes to Avoid …………………………………………………………………….. 16 Mission Statement ………………………………………………………………………. 16 The Basics of the Mission Statement ……………………………………………… 7 Mistakes to Avoid …………………………………………………………………….. 17 Products and Services ………………………………………………………………….. 17 Personal Lines ………………………………………………………………………… 18 Commercial Lines …………………………………………………………………….. 18 Complete the Executive Summary……………………………………………………. 19 When You Have Completed the Executive Summary ……………………………… 9 Executive Summary Sample…………………………………………………………… 20 Personal Lines ………………………………………………………………………… 20 Commercial Lines …………………………………………………………………….. 21 Step Four ……………………………………………………………………………………… 23 General Company Description ……………………………………………………….. 23 Company Description: Business Plan Basics………………………………………… 3 Mistakes to Avoid ……………………………………………………………………….. 24 Company Goals and Objectives……………………………………………………….. 24 Business Philosophy…………………………………………………………………….. 24 Legal Form of Ownership ………………………………………………………………. 25 Complete the General Company Description Section ……………………………… 25 When You Have Completed the Company Goals and Objectives ………………… 5 General Company Description Sample ………………………………………………. 26 Step Five ………………………………………………………………………………………. 27 Products and Services Description …………………………………………………. 27 Personal Lines ………………………………………………………………………… 27 Commercial Lines …………………………………………………………………….. 27 Competitive Advantages or Disadvantages ………………………………………. 8 Pricing Structures…………………………………………………………………….. 28 Products and Services Description: Business Plan Basics ………………………… 28 Mistakes to Avoid ……………………………………………………………………….. 29 Complete the Products and Services Section……………………………………….. 29 When You Have Completed the Products and Services Description …………….. 29 Products and Services Description Sample …………………………………………. 0 Personal Lines ………………………………………………………………………… 30 Commercial Lines …………………………………………………………………….. 30 Step Six………………………………………………………………………………………… 32 Start-Up Costs and Capitalization ………………………………………………….. 32 Qualified and Non-Qualified Start-Up Costs ………………………………………… 32 Qualified Start-Up Costs …………………………………………………………….. 32 Non-Qualified Start-Up Costs ……………………………………………………… 32 Budget Allowances………………………………………………………………………. 32 Evaluating Start-Up Costs ……………………………………………………………… 33 Start-Up To Do List ……………………………………………………………………… 34 Start-Up Narrative ………………………………………………………………………. 35 vi The Business Plan for Your Insurance Agency Instructions on How to Complete in Excel ……………………………………….. 6 Complete the Start Up Costs Section ………………………………………………… 37 When You Have Completed the Start Up Costs and Capitalization Section ……. 37 Start-Up Narrative Sample…………………………………………………………….. 38 Step Seven ……………………………………………………………………………………. 41 The Marketing Plan ……………………………………………………………………… 41 Marketing & Sales: Business Plan Basics ……………………………………………. 1 Mistakes to Avoid ……………………………………………………………………….. 42 Target Market: Business Plan Basics…………………………………………………. 43 Mistakes to Avoid ……………………………………………………………………….. 44 Market Research Basics ………………………………………………………………… 44 Market Research – Why? ……………………………………………………………. 44 Market Research – How?…………………………………………………………….. 5 Primary Market Research ………………………………………………………… 45 Secondary Market Research …………………………………………………….. 45 Economics of the Industry …………………………………………………………….. 45 Product ……………………………………………………………………………………. 46 Features and Benefits ……………………………………………………………….. 46 Customers………………………………………………………………………………… 6 Competition………………………………………………………………………………. 47 Niche Market …………………………………………………………………………….. 47 Marketing Strategy ……………………………………………………………………… 48 Promotion ……………………………………………………………………………… 48 Promotional Budget ………………………………………………………………….. 48 Pricing ………………………………………………………………………………….. 9 Proposed Location ……………………………………………………………………. 49 Distribution Channels………………………………………………………………… 49 Complete the Marketing Plan………………………………………………………….. 50 When You Have Completed the Marketing Plan ……………………………………. 50 Marketing Plan Sample …………………………………………………………………. 51 Step Eight……………………………………………………………… ……………………… 5 Sales Forecast…………………………………………………………………………….. 55 Financial Projections: Business Plan Basics …………………………………………. 55 Sales Forecast …………………………………………………………………………… 56 The Excel Spreadsheet …………………………………………………………………. 56 Instructions on How to Complete in Excel ……………………………………….. 56 Complete the Sales Forecast Section ………………………………………………… 7 When You Have Completed the Sales Forecast…………………………………….. 57 Step Nine ……………………………………………………………………………………… 58 The Operational Plan …………………………………………………………………… 58 Operational Plan: Business Plan Basics ……………………………………………… 58 Mistakes to Avoid ……………………………………………………………………….. 58 The Operational Plan……………………………………………………………………. 9 Production ………………………………………………………………………………… 59 Location …………………………………………………………………………………… 60 Physical Requirements ………………………………………………………………. 60 Access ………………………………………………………………………………….. 60 Construction…………………………………………………………………………… 60 Cost …………………………………………………………………………………….. 0 Legal Environment………………………………………………………………………. 60 vii The Business Plan for Your Insurance Agency Personnel …………………………………………………………………………………. 60 Inventory …………………………………………………………………………………. 61 Suppliers………………………………………………………………………………….. 61 Managing your Accounts Receivable …………………………………………………. 1 Managing your Accounts Payable …………………………………………………….. 62 Complete the Operational Plan Section ……………………………………………… 62 When You Have Completed the Operational Plan ………………………………….. 63 Operational Plan Sample……………………………………………………………….. 64 Step Ten ……………………………………………………………………………………….. 67 Management and Organization ……………………………………………………… 7 Management Team: Business Plan Basics…………………………………………… 67 Specific Team Members ………………………………………………………………… 67 Board of Directors ………………………………………………………………………. 68 Board of Advisors ……………………………………………………………………….. 68 Consultants ………………………………………………………………………………. 68 Mistakes to Avoid ……………………………………………………………………….. 9 Professional and Advisory Support …………………………………………………… 69 Complete the Management and Organization Section…………………………….. 69 When You Have Completed the Management and Organization ………………… 69 Management and Organization Sample ……………………………………………… 70 Step Eleven …………………………………………………………………………………… 72 The Financial Plan……………………………………………………………………….. 2 Financial Projections: Business Plan Basics …………………………………………. 72 Mistakes to Avoid ……………………………………………………………………….. 73 The Financial Plan for Your Company ………………………………………………… 74 Instructions on How to Complete the Profit-Loss Narrative …………………… 74 Profit-Loss Projection …………………………………………………………………… 74 Instructions on How to Complete the Profit-Loss Statement………………….. 5 Projected Cash Flow…………………………………………………………………….. 75 Instructions on How to Complete the Projected Cash Flow……………………. 76 Opening Day Balance Sheet …………………………………………………………… 77 Instructions on How to Complete the Balance Sheet …………………………… 77 Break-Even Analysis ……………………………………………………………………. 77 Instructions on How to Complete the Break-Even Analysis …………………… 8 When You Have Completed the Financial Plan ……………………………………… 78 Financial Plan Sample ………………………………………………………………….. 79 Appendixes …………………………………………………………………………………… 82 Your Business Plan Now Complete and Ready for Printing ……………………. 83 In Conclusion ………………………………………………………………………………… 83 PowerPoint:Demonstrations …………………………………………………………. 3 Non-Disclosure Agreement………………………………………………………………. 85 Attachment One …………………………………………………………………………….. 88 A Discussion of the Basic Legal Forms of Ownership ………………………… 88 Proprietorship, Partnership or Incorporation? ………………………………………. 88 Advantages and Disadvantages of Proprietorship ………………………………. 88 Advantages…………………………………………………………………………. 8 Disadvantages……………………………………………………………………… 89 viii The Business Plan for Your Insurance Agency Advantages and Disadvantages of Partnership………………………………….. 89 Advantages…………………………………………………………………………. 89 Disadvantages……………………………………………………………………… 90 Advantages and Disadvantages of Incorporating ……………………………….. 90 Advantages…………………………………………………………………………. 0 Disadvantages……………………………………………………………………… 91 Registering a Proprietorship or Partnership ……………………………………… 91 Registering a Corporation …………………………………………………………… 91 Incorporating a Company in your State ………………………………………….. 91 Attachment Two …………………………………………………………………………….. 92 Information Resources ………………………………………………………………… 2 U. S. Small Business Administration (SBA) ………………………………………….. 92 Service Corps of Retired Executives (SCORE) ……………………………………… 93 Small Business Development Centers (SBDCs) ……………………………………. 93 Small Business Institutes (SBIs) ……………………………………………………… 93 SBA Business Development Programs……………………………………………….. 93 Other U. S. Government Resources …………………………………………………… 3 Federal Publications …………………………………………………………………….. 93 Consumer Information Center (CIC) …………………………………………………. 94 Consumer Product Safety Commission (CPSC) …………………………………….. 94 U. S. Department of Agriculture (USDA) …………………………………………….. 94 U. S. Department of Commerce (DOC) ………………………………………………. 94 U. S. Department of Health and Human Services (HHS) ………………………….. 94 U. S.
Department of Labor (DOL)……………………………………………………… 95 Internal Revenue Service (IRS) ………………………………………………………. 95 U. S. Environmental Protection Agency (EPA) ………………………………………. 95 U. S. Food and Drug Administration (FDA) ………………………………………….. 95 For More Information …………………………………………………………………… 95 Government and State Websites ………………………………………………………. 7 Index …………………………………………………………………………………………… 99 ix The Business Plan for Your Insurance Agency Introduction There are few very secrets and absolutely no short cuts to preparing a business plan for an insurance agency. Careful investigation, complete research, and a through thought process is required to complete an accurate business plan for an insurance agency. The real value of creating a business plan is not in having the finished product in your hand; rather, the value lies in the process of researching and thinking about your business in a systematic way.
The act of planning helps you to think of things thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later. This business plan is carefully structured to take you a step at a time. In order to complete this business plan accurately, you should take each step, in order, and then move on to the next step. You do not have to complete the entire business plan at once. We do suggest that you complete each step before leaving your work.
Important Notes and Tips Throughout this business plan, there will be important notes and tips about entering information into the business plan spreadsheet template, formatting the business plan spreadsheet template, Word option narratives, and printing suggestions and alerts. If you have any problem with these areas, check the Appendix on page 82 for trouble shooting information related to these important notes and tips. So when you see these, carefully read the information! Let’s get started. The Business Plan for Your Insurance Agency is divided into eleven (11) steps.
These steps are: Step One – Your Personal Evaluation on page 7 Step Two – The Business Plan Cover Sheet on page 11 Step Three – The Executive Summary on page 13 Step Four – General Company Description on page 23 Step Five – Products and Services on page 27 Step Six – Start Up Costs on page 32 Step Seven – The Marketing Plan on page 41 Step Eight – Sales Forecasts on page 55 Step Nine – The Operational Budget on page 58 Step Ten – Management and Organization on page 67 Step Eleven – The Financial Plan on page 72 Appendixes on page 82 Your business plan Is Now Complete and Ready for Printing on page 83 1
The Business Plan for Your Insurance Agency In Conclusion on page 83 Customizing the Business Plan You can customize the business plan and how it looks when viewed on the computer and when the business plan is printed. Here we explain some of the basics of customizing the Excel® spreadsheet. Changing the Page Setup The Page Tab Orientation Here you can select to view and print your business plan in portrait (vertical) or landscape (horizontal) format. The default setting is portrait. Paper Size Here you can select to and view print in letter, legal or custom paper sizes. The default setting is letter.
Print Preview Here you can select to print the business plan from the back to the front, or vice versa. The default setting is back to front. The Margins Tab Here you can select the margins for your business plan. The default settings are the recommended settings. The Header/Footer Tab Changing the Header Click on the Custom Header button and you can customize the header for your business plan. Also notice that you can select a print preview from this screen that allows you to see the entire page, with headers and footers. After changing the header, click OK to save your changes.
Changing the Footer Click on the Custom Footer button and you can customize the header for your business plan. After changing the footer, click OK to save your changes. 2 The Business Plan for Your Insurance Agency The Sheet Tab Here you can adjust and set the: Print Area Print Titles Print Instructions for: Gridlines Row & Column Headings Comments Page Order Changing the Font and Font Size You can select the entire worksheet or specific text to assign font and font size to in the workbook and make your changes on the toolbar. You can have different size fonts on the same page. The default font is Trebuchet MS and the font size varies.
You can select the Formatting Toolbar that will show the font and font size. It will look like this: Changing the Color of the Text You can select the entire worksheet or specific text to assign font and font size to in the workbook and make your changes on the toolbar. You can have many different colors on the same page. The default color is the color that is on the worksheets now. Adding or Removing Worksheets You can add worksheets by clicking on Insert, Worksheet. You will want to click on the tab next to the area where you want to insert the worksheet. You can delete a worksheet by clicking on Edit, Delete Sheet.
Spreadsheet Note Important Note Regarding Deleting a Worksheet WARNING: if you delete a sheet with formulas that extend to other pages in the spreadsheet, you will receive errors in the formulas. So be sure you want to delete the worksheet before doing so! 3 The Business Plan for Your Insurance Agency Viewing the Pages in the Spreadsheet The pages of the spreadsheet are shown at the bottom of the page as tabs. To view the different pages, the sheet tabs Sheet tab bar appears at the bottom of the screen with tab scrolling buttons displayed on the left side. If the Sheet Tabs are not there, you can restore them by the following: 1.
On the Tools menu, click Options. 2. On the View tab, under Window options, select or clear the Sheet tabs check box. You will notice that the columns are labeled with letters (A, B, C, etc) and the rows are numbered. As we go through spreadsheets, we will refer to the column letter and the row number. The column letter is across the top of the spreadsheet. The row number is along the left hand side of the spreadsheet. Each individual block in the spreadsheet is called a cell. Rows, Columns and Cells While we have attempted to include everything necessary in these spreadsheets, if you add rows to the spreadsheets, the totals may not add up!
You will need to adjust the formulas to add up the figures if you add rows. While this is not difficult, you will need to ensure that you can adjust the totals so the figures will be correct. You can also change the text colors, fonts, and sizes of the fonts as you work. 4 The Business Plan for Your Insurance Agency Renaming the Pages in the Spreadsheet Select the tab you want to rename. Right click on the tab and select Rename. Type the new name of the page, but there is a character limit. Adding or Removing Rows or Columns You can rows or columns by selecting where you want to add the row or column. Then select Insert, then row or column.
You can remove an entire row by clicking on the row number (far left) and selecting Edit, delete. You can remove an entire column by click on the column and selecting Edit, delete. Spreadsheet Note Important Note Regarding Deleting a Rows or Columns WARNING: if you delete a cell, row or column with formulas that extend to other pages in the spreadsheet, you will receive errors in the formulas. So be sure you want to delete the cell, row or column before doing so! Inserting Pictures You can insert pictures from your computer into the business plan by selecting the cell where you want the picture to be inserted.
Then select Insert, Picture and browse to the picture you want to insert. Double click the picture and then format the cell. Changing the Formulas Changing or adding formulas is not extremely difficult in Excel®. However, it does require a working knowledge of the formulas. You can search the Help section for information pertaining to the formula you want to change or add. Excel Help Depending on the version you are using, you can use the Help section in the application and later versions have online extend help resources. Just click on Help on the toolbar or you can hit F1.
Word® Option If you are not familiar with how to enter text into the Excel® spreadsheet, you might find it easier to enter all of the narrative information in the Word® Option document. If you use the Word® Option document, you will need to manually enter the page numbers onto each page of your business plan. 5 The Business Plan for Your Insurance Agency Samples and Illustrations In each step of the business plan, we provide you either a sample or an illustration of the information that you will need to provide in the step.
Sample Step Step Step Step Step Step Step Step Step Step Step Step Step Step Step Step 1 2 3 4 5 6 6 7 8 9 10 11 11 11 11 11 Net Worth Cover Sheet Executive Summary General Company Description Products and Services Description Start-Up Costs Narrative Start-Up Costs Marketing Plan Sales Forecast Operational Plan Management and Organization Financial Plan Narrative Profit-Loss Statement Projected Cash Flow Balance Sheet Break-Even Analysis v v v v v v v v v v v v v v v Illustration Excel v
Changing Chart Information We have provided charts in the Excel® spreadsheet for the information that bankers, investors, and other lenders want to see in your business plan. The charts are automatically produced from the information that you enter. Based on the information that you information on the axis of the chart. from Step One, Personal Net Worth. axis on the left is in the increments information needs to be changed to more visible. enter, you may need to change the For example, this Chart Example 1 is As you can see, the Income Needed of $100,000 and $200,000. The axis make the information look better and The Business Plan for Your Insurance Agency Chart Example 1 We have changed the axis information to increments of $10,000 up to $90,000. See the difference in Chart Example 2 below. Chart Example 2 How to change entries on the X-axis or Y-axis: 1. Right click on the Axis that you would like to change and then click the tab labeled Scale. 2. When you have determined what range of numbers you want to use insert them into the proper boxes to the minimum and maximum units that you want to use. 3. With this option you can also change the font, sizing of the font, the category and alignment. The Business Plan for Your Insurance Agency Mutual Non-Disclosure Agreement A non-disclosure agreement (NDA) can send up red flags to your intended audience. A seasoned banker or venture capitalist is bound by client confidentiality and may find a NDA insulting. Secondly, if the business needs to protect its ideas and concept at this stage of the game then there may not be any barriers to entry for others to enter the market. A simple confidentiality clause at the front of the plan should suffice. In some cases, such as setting up a strategic alliance a non-disclosure may be necessary.
If in doubt, consult with a lawyer. A sample agreement is shown on page 85. We have chosen to include a Confidentiality and Recognition of Risks statement on the Cover Sheet. You can view this statement on the Cover Sheet Sample on page 13. 8 The Business Plan for Your Insurance Agency Step One Your Personal Evaluation Your Net Worth Before starting your insurance agency, you need to have a firm grasp on your own personal financial situation. For that reason, the first step in preparing your business plan will be to determine your personal financial picture.
Instructions on How to Complete the Excel Spreadsheets Refer to your Excel® Spreadsheet. Net Worth. The first page is entitled Step 1 -Your In viewing the first page of the Excel® spreadsheet entitled Step 1 -Your Net Worth, you will find that this information is very straight forward and simple, so a detailed discussion is unnecessary. Just fill in the blanks. At the bottom of the page, you will see your Estimated Net Worth. The areas in the light blue color automatically fill themselves in, so do not enter any figures in these cells. Hopefully, this will be a positive number.
Your Personal Budget Refer to your Excel® Spreadsheet, Step 1 – Your Net Worth and scroll down to the section entitled Your Personal Budget. Again, this information is commonplace and you should know what dollar amounts to enter into the cells. For instance, in Column C, Row 56, this is monthly mortgage. If you monthly payments are $1,500. 00, enter 1500 in Column D, Row 56. You will see that this Personal Budget is for 1 month, 3 months, 6 months, and 1 year. You should also notice that as you enter your monthly mortgage payment, the spreadsheet automatically totals the rest of the row.
So you only need to enter the monthly amounts to get the 3 and 6 months totals and the yearly total. Why This Information Is Important In starting your insurance agency, you need to have your personal financial situation firmly planted on the ground. Starting a business is difficult enough without personal financial problems getting in the way of your success. If the Total Income Needed (Column D, Row 89) is greater than your Total Income (Column D, Row 87), you have some financial issues to fix before starting your insurance agency. We can’t tell you how to fix this problem, The Business Plan for Your Insurance Agency but we can tell you that your will be starting your insurance agency in financial trouble and that is no way to start a business! In the example below, the total income is $8,000 a month with monthly expenses of $4,355. Therefore, there is a surplus of funds monthly for savings, investment and/or starting a business. Figure 1-1. Income Differential Figure 1-2. Income Differential Now, assuming that your personal financial situation is acceptable, you are ready now to begin preparing The Business Plan for Your Insurance Agency. 0 The Business Plan for Your Insurance Agency Step Two The Cover Sheet First Impression! The Cover Sheet is the first page of your business plan. The cover of the document is often the “First Impression” of your agency for any interested parties or investors. The purpose of a cover is to tell the reader what the document is about. Your cover sheet should include: Name and business name Company logo Address Telephone number Fax number E-mail address Other contact information Tip Important Tip Cover Sheet The cover should be attractive and professional looking.
Fonts used should be easily read and color contrasts should be pleasant to the eye. Elements of the Cover Sheet The information is very basic. You can view an example of a Cover Sheet on page 13. Complete the Cover Sheet Section You can prepare the Cover Sheet in Excel® or Word®. To complete the Cover Sheet in Excel®, go to the Excel® spreadsheet to the tab labeled Step 2 – Cover Sheet. Fill in the information and save your work. To complete the Cover Sheet in Word®, go to the Word® options file and complete the information.
Saving Your Business Plan File As you complete the Steps in this business plan, be sure to save your work often. 11 The Business Plan for Your Insurance Agency Tip Important Tip Save Your Work Often Nothing is worse than working on your business plan for an hour and then having the computer shut down expectedly. Save your work often and you won’t lose your information! When you have completed the Cover Sheet, you are ready for the next step in the preparation of your business plan. So proceed to Step Three, the Executive Summary on page 13. 2 The Business Plan for Your Insurance Agency The Business Plan For Full Coverage Insurance Full Coverage Insurance 2738 Commerce Way Any Town, State, Zip Contact Person: Sharon Garden Telephone: 222-333-4444 Fax: 111-222-3333 Email: [email protected] com Confidentiality and Recognition of Risks Confidentiality Clause The information included in this business plan is strictly confidential and is provided on the understanding that it will not be disclosed to third parties without the expressed written consent of Sharon Garden.
Recognition of Risk This business plan represents management’s best estimate of the future potential of our business venture. It should be recognized that not all-major risks can be accurately predicted or otherwise avoided and that few business plans are free of errors of omission or commission. Therefore investors should be aware that this business has inherent risks that should be evaluated prior to any investment. 13 The Business Plan for Your Insurance Agency Step Three The Executive Summary The Basics of the Executive Summary The Executive Summary is a narrative and should be one to two pages in length.
We certainly suggest you make it two pages or less, especially if investors or bankers will be reviewing your business plan for loan or investment purposes. You should explain the fundamentals of your insurance agency: 1. 2. 3. 4. What will your insurance products and agency services be, Who will be your customers, Who are the owners of your insurance agency, and What you think the future holds for your insurance agency and the industry. You should make this narrative enthusiastic, professional, complete and concise without overstating the financial figures.
If You Will Be Applying For Loans or Investors If you will be applying for a loan or looking for investors, state clearly how much you want, precisely how you are going to use it, and how the loan or investment will make your insurance agency more profitable and successful, thereby ensuring repayment. Tip Important Tip Applying for Loans or Approaching Investors If you are going to use your business plan for applying for loans and especially if you are going to be looking for investors, make sure that your business plan meets any requirements as it can be construed as a Securities Offer.
You consult with your attorney regarding this matter. What Information Should Be Included in the Executive Summary? We have provided a sample Executive Summary to help give you an idea of the way the information can be formatted. See the sample Executive Summary on page 20. The following are commonly used sub-headings to cover the key points. Avoid general statements and be sure to clearly articulate key numbers. 14 The Business Plan for Your Insurance Agency • • • • • • • The Company Mission statement Management Products & Markets Sales and Profit Summary Funding Requirement Investment Proposal
Regardless of how you organize your Executive Summary, be sure to answer the following questions (note – due to the sensitive, confidential nature of what you might say in such a document, you might want to restrict your disclosure in certain areas and only reveal such information to others if you are assured of confidentiality). You should address these questions, and any others which you consider important, under headings such as those noted above. We have provided a sample of a simple Executive Summary to help give you an idea of the way the information can be formatted.
See the sample Executive Summary on page 20. Questions to Address: 1. What is the full, legal name (and jurisdiction of incorporation) of your insurance agency (if it exists) and a brief history (when incorporated, ownership and capital structure, track record, accomplishments to date if any, etc)? Don’t forget to include a complete address and contact details (email address, telephone numbers, etc). 2. What is the “Mission” of your insurance agency (i. e. what is it setting out to achieve or accomplish)? 3.
What is the market which your business is going after (who, where, size -in dollars) and what is the unique (i. e. proprietary advantage in the form of patents, trade secrets, trademarks) or new product or service which is being offered to this market? A comment on competition is useful. Also, identify and current and potential customers. Testimonials are helpful. 4. Who are the key people behind your insurance agency (i. e. why would someone entrust them with their money? ) and what are their credentials? Include all board members and key management people. . What does your insurance agency expect to achieve in sales and profit (before tax) (in $) in years 1, 2, 3 and beyond? 6. How much capital is needed (at various stages over the first 3 years)? And what are the uses to which these funds will be applied? 7. What has already been invested (# of years sweat equity, or seed investment amounts, i. e. #[email protected]$xx, and by whom)? 8. What is being offered for the investment (e. g. equity %, board seat, etc. ) 9. What kind of return might an investor expect? Over what time frame? And what is the “exit strategy”? 15
The Business Plan for Your Insurance Agency 10. What else is important to note? (that hasn’t been covered elsewhere) Executive Summary: Mistakes to Avoid Here are several common mistakes that can make your Executive Summary less effective: • • • • • • Lacking a specific focus Too long and wordy, and failing to get to the point Trying to be all inclusive (it should be a powerful summary) Failing to demonstrate a special or unique opportunity Failing to outline the terms of the investment sought Failing to generate enthusiasm in the reader Some suggestions to combat these problems: • • • • • • •
Limit your Executive Summary to a maximum of 3 pages (at the very most) If possible, attempt to present your Executive Summary on 1 or 2 pages Focus on the opportunity you are presenting your investor and explain why it is special Make certain that the opinions and claims in your Executive Summary are fully supported in the other sections of your business plan Attempt to use only concrete facts and figures that explain your business concept, market niche and financial projections Don’t forget to include the details of your investment (the amount you need, what you will spend it on, and the return you offer your investor) Keep your reader in mind – why are they reading the plan and what response/action to you hope to generate? Mission Statement Many companies have a brief mission statement, usually in thirty words or less, explaining their reason for being in business and their guiding principles. Some are very complex. You should carefully think through your own personal Mission Statement for your insurance agency, also referred to as Mission and Vision Statements.
You might write down whatever comes to mind now. The good news is that you can change, revised, and detail your Mission Statement later on, as you should with your entire business plan over the years. 16 The Business Plan for Your Insurance Agency The Basics of the Mission Statement The Mission and Vision Statements set the tone for not only your business plan, but also for your company. They define the path your company will follow and act as a guiding principle by which your company functions. Your Mission and Vision Statements tell your reader what you and your business are all about – what your company stands for, what you believe in, and what you intend to achieve.
Economy of words is critical. This doesn’t necessarily mean that they should be short at the expense of effectiveness, but that each word should be powerful and meaningful. Be clear and concise and make it obvious what your company is attempting to do. Is there a difference between a mission and vision statement? Yes, the differences are: Your VISION defines your long-term dream. It should not be achievable. That may sound ridiculous, but the objective is for your vision to always be just slightly out of your reach. It’s what you constantly strive to attain, and it becomes your reason for being. Your MISSION is what you intend to become or accomplish.
It should be challenging but achievable. A well-written mission statement demonstrates that you understand your business, have defined your unique focus, and can articulate your objectives concisely to yourself and others. Mission & Vision: Mistakes to Avoid Here are some of the “don’ts” to avoid when writing your Mission Statement or Vision Statement: • • • • • • • Don’t regurgitate a description of your business. Don’t make it boring. Don’t make it the length of a Ph. D. thesis. Don’t fake emotion. If you don’t believe it, don’t include it. Don’t lie or claim to be something you aren’t (i. e. intend to do exactly what you say you are going to do in your mission statement).
Don’t forget to get the input of everyone on your team. Products and Services This is a SUMMARY of the insurance products and agency services that you will offer in your agency. The detailed products and services section is in Step 5 of the business plan. 17 The Business Plan for Your Insurance Agency For now, you might have a good idea of the insurance products and agency services that you will offer. Some might include the following: Personal Lines Auto Insurance Annuities Cancer Policy Dental Insurance Flood Insurance Homeowner Insurance Life Insurance Mobile Home Insurance Motorhome Insurance Renters Insurance Vision Care Commercial Lines 401(k), 403(b)
Apartment Insurance Artisan Contractors Liability Builders Risk Insurance Auto Repair Insurance Bars & Taverns Business Life Insurance Car Wash Church Policy Condominium Associations Commercial Trucks Deferred Compensation Dental Insurance Disability Insurance Executive Bonus Franchise Business Insurance Group Health Insurance In Home Business Insurance IRA/Rollover, RothLight Manufacturing Office Insurance Restaurants Retail Business Insurance Service Business Insurance Service Station Special Events Travel Insurance Vision Care Warehouse / Storage Wholesale Business Insurance Other Business Insurance Describe each of the insurance products and agency services you will offer in your insurance agency.
Go into as much detail as necessary for the reader to get an understanding for what the enterprise will be. Make it interesting. It is important to point out how your insurance agency is different from other insurance agencies. Just saying “It is better” is not enough. You must tell how it is better. Every business claims to be “high quality, better service”. While a business must have quality and good service, it is no real selling point, since the consumer is bombarded with that claim at every turn. One can not bore a reader into buying their proposal! One must convince them about their product or service. If it can not be done here, it won’t be done in the market place when your business starts.
Accident Policy Boat Insurance Condominium Insurance Disability Insurance Health Insurance IRA/Rollover, Roth Long Term Care Mortgage Protection Motorcycle Insurance Retirement Planning Travel Insurance 18 The Business Plan for Your Insurance Agency Complete the Executive Summary To complete the Executive Summary in Excel®, go to the Excel® Spreadsheet to the tab labeled Step 3 – Executive Summary. Fill in the information and save your work. To complete the Executive Summary in Word®, go to the Word® options file and complete the information. When You Have Completed the Executive Summary Now you are ready to proceed to the next step in the preparation of your business plan, so proceed to Step Four, General Company Description. 19 The Business Plan for Your Insurance Agency The Business Plan For Full Coverage Insurance
Executive Summary The Company Full Coverage Insurance is incorporated in the state of Washington. It is equally owned and managed by its two partners. The company intends to hire four full-time agents and three part-time workers/agents to handle customer service and day to day operations. Mission Statement Full Coverage Insurance aims to offer competitive rates and great coverage at a competitive price to meet the demand of the insurance needs for local area residents and businesses. Management Sharon Garden has extensive experience in sales, marketing, and management. Mrs. Garden was manager of Insurance for Your Home. David Harris brings experience in the area of finance and administration. Mr. Harris was co-owner of Paulson Inc.
Products & Markets The Company will provide the following products and services: Personal Lines Auto Insurance Annuities Cancer Policy Dental Insurance Flood Insurance Homeowner Insurance Life Insurance Mobile Home Insurance Motorhome Insurance Renters Insurance Accident Policy Boat Insurance Condominium Insurance Disability Insurance Health Insurance IRA/Rollover, Roth Long Term Care Mortgage Protection Motorcycle Insurance Retirement Planning 20 The Business Plan for Your Insurance Agency Vision Care Commercial Lines 401(k), 403(b) Artisan Contractors Liability Auto Repair Insurance Business Life Insurance Church Policy Commercial Trucks Dental Insurance Executive Bonus Group Health Insurance IRA/Rollover, Roth Office Insurance Retail Business Insurance Service Station Travel Insurance Warehouse / Storage Other Business Insurance Travel Insurance Apartment Insurance Builders Risk Insurance Bars & Taverns Car Wash Condominium Associations Deferred Compensation Disability Insurance Franchise Business Insurance In Home Business Insurance Light
Manufacturing Restaurants Service Business Insurance Special Events Vision Care Wholesale Business Insurance The Company will target the following market: insurance needs for local area residents and businesses. Sales and Profit Summary Full Coverage Insurance is a start-up company. Financing will come from the partners’ capital and a ten-year SBA loan. The following chart and table illustrate the company’s projected initial start-up costs. Start-up 21 The Business Plan for Your Insurance Agency Funding Requirement Full Coverage Insurance expects to raise $110,000 of its own capital and to borrow $100,000 guaranteed by the SBA as a ten-year loan. This provides the bulk of the current financing required.
Full Coverage Insurance anticipates sales of about $389,000 in the first year, $443,000 in the second year, and $590,000 in the third year of the plan. The company should break even by the fourth month of its operation as it steadily increases its sales. Profits for this time period are expected to be approximately $33,000 in year 1, $56,000 by year 2, and $76,000 by year 3. The company does not anticipate any cash flow problems. Investment Proposal The company is currently seeking total capital in the amount of $110,000 to be repaid as follows: Interest only for five (5) years at a negotiated rate (APR). Principal payments of $10,000 per year plus interest payable as negotiated, but quarterly payments are preferred.
Stock, equity or ownership is available as negotiated. 22 The Business Plan for Your Insurance Agency Step Four General Company Description The General Company Description is made up of the following: Company Goals and Objectives on page 24 Business Philosophy on page 24 Legal Form of Ownership on page 25 Company Description: Business Plan Basics The Company Description section of your business plan should outline your insurance agency basic background information and business concept. Explain in general terms who you are and what you do. It should also cover the history of your company, how you reached this point, and where you intend to go in the future.
Consider covering the following in your company description section: Legal Description Include details about where and when the company was formed, where and when it was incorporated, a one line description of what business you are in, and a brief overview of what your agency offers. If the location of your agency is important, explain the advantages and benefits to your reader. History of the Company Provide a general overview of the history of your company. Organize details of your company into a timeline or narrative format, and include your achievements and significant milestones. Explain why you started the agency, the driving force behind its inception, and how your insurance agency product/service mix has changed over time.
Include historical data on sales, profits, individual insurance products and agency services, number of employees, and other important facts to build a case for your company. Current Status Provide a snapshot of where your company is today. Are you in one location, what do you offer to your customers now, how many employees do you have, and how successful are you? Point out your current strengths, but also honestly and frankly address your weaknesses. Investors know all businesses have weak points. You demonstrate business maturity by acknowledging your weaknesses and outlining steps to combat them. Future Goals This section gives your reader an idea of where your company is heading. What are looking to accomplish over the next 1, 3, 5 and 10 years?
Relate these goals to the investment you seek so an investor understands why you need their money and what you intend to do with it. Explain the overall approach for reaching growth and profit goals in optimistic language, but 23 The Business Plan for Your Insurance Agency make sure it’s realistic. It’s easy to make rosy projections about the future of your insurance agency, but it’s harder to make them believable. Company Description: Mistakes to Avoid The company description should clearly explain your agency and the products and services you offer. This section could be considered the who, what, why, where, when and how of your company, with the focus on significant highlights of your business.
Here are some of the most common mistakes that we find in the company section: • Including far too much detailed information about your business • Providing information that an investor would consider your “personal opinion” • Appearing as though you have no business history or business purpose • Leaving out important business and legal particulars • Writing the section in an unorganized or confusing manner Company Goals and Objectives for Your Insurance Agency Your goals and objectives for your agency are destinations; where you want your agency now and in the future. Objectives are progress markers along the way to measure goal achievement. For example, a goal might be to have a healthy, successful agency that is a leader in competitive rates and great coverage. Objectives might be annual sales targets and some specific measures of customer satisfaction. Tip Important Tip Goals & Objectives This particular area of the business plan may be difficult to completely fill out at this time. You might need additional financial data to reasonable determine your goals and objectives. Nevertheless, you should make some notes in on the page and then proceed.
Business Philosophy This is a description of what is important to you in your business as the owner and operator of an insurance agency. You will need to address, in some detail, the following: 1) To whom will you market your products and services. 2) Describe who your target market is. 3) Describe the insurance agency industry with some emphasis on the following items: 4) Is the agency in a growth industry? 5) What changes do you foresee in your industry, short term and long term? 24 The Business Plan for Your Insurance Agency 6) How will your company be poised to take advantage of the changes mentioned above? 7) Your most important company strengths and core competencies. 8) What factors will make your agency succeed? ) What do you think your major competitive strengths will be? 10) What background experience, skills, and strengths do you personally bring to this new venture? Legal Form of Ownership Describe what legal form of ownership you have decided to form for your insurance agency; Sole Proprietor, Partnership, Corporation, Limited Liability Corporation (LLC) and describe why you have selected this form. Tip Important Tip Legal Form If you haven’t determined the legal form of ownership, you certainly need to discuss with your attorney and/or accountant. We will provide you some information here about this, but in no way is this information to be assumed to be legal advice.
Only your professional legal and accounting team can correctly advice you what you should do in this regard as to the legal form of ownership of your insurance agency. For a general discussion on the legal forms of business ownership, please see Attachment One – A General Discussion on page 85. We have provided a sample General Company Description to help give you an idea of the way the information can be formatted. See the sample General Company Description on page 26. Complete the General Company Description Section To complete the General Company Description in Excel®, go to the Excel® Spreadsheet to the tab labeled Step 4 – Gen Co Description. Fill in the information and save your work. To complete the General Company Description in Word®, go to the Word® options file and complete the information.
When You Have Completed the Company Goals And Objectives Now you are ready to proceed to the next step in the preparation of your business plan, so proceed to Step Five, Products and Services on page 27. 25 The Business Plan for Your Insurance Agency The Business Plan For Full Coverage Insurance General Company Description Company Goals and Objectives The initial goal of the Company will be to gain enough customers in the first six (6) months of operation to reach a break even point between expenses and revenue. In the following twelve months of operation, the Company will strive to increase the total base increase