Our very own Dan Epstein, CEO, ReSource Pro, was a recent guest on Monday Morning. Monday Morning is a mini-webinarseries hosted by insurance marketer George Nordhaus. On this episode Dan discussed two magic financial measurement concepts for use in increasing an agency’s profitability and growth: contribution per employee and premium-to-profit ratio.
Typically agencies look at revenue per employee to measure productivity, but Dan explains that this doesn’t tell you the true cost of servicing production. Dan contends that an agency can achieve more profitable growth by increasing each employee’s contribution through greater efficiencies and productivity.
Using the contribution-per-employee metric (Revenue/EE – Compensation/EE = Contribution/EE), you can see how much each employee is contributing to your agency’s growth. You can benchmark this number against top-performing agencies and set a target for increasing this per-employee contribution.
The premium-to-profit ratio represents how much premium you need to write to drop $1 to the bottom line. By looking at this equation and inserting the increase in per-employee contribution you will see how much additional revenue, commission and written premium will be generated.