Whether to set out on your own is a question that crosses the mind of every insurance broker at some point.
But there are pluses and minuses that must be considered when it comes to starting your own firm. Yes, you get to run your own show but it’s also a lot more responsibility than working for someone else. We spoke to brokers who have decided to be their own boss to find out about the pros and cons.
Plenty of advantages
Tamika Skeates is a director of Insurance Assist. As an authorised representative (AR) of Assurity, she has her own company and portfolio but uses Assurity’s AFS licence. She says the benefits of her arrangement include independence, a better work/life balance, higher income in the long term and ownership of her portfolio, which will be able to be sold in the future.
However, it’s not all upside when you’re on your own. Skeates says having sole responsibility for the portfolio and no back up support when you first start is something to consider.
“Initially, your income is likely to be low and you may have to work additional hours until the portfolio grows and you develop trust and recognition in the market. There is also a risk of competition given the increasing number of ARs,” Skeates says.
“There can also be a client perception that as a one-man band you may not be able to achieve the same level of price competitiveness as a well-established broker,” she adds.
Adam Hines recently started Aether Insurance Brokers. He says before going it alone it’s essential to have enough cash flow to cover your personal debts while building your business given that initially you may not have much income. “I’m operating from home in the short-term, but an option I’ll consider down the track is to rent space in a shared office with other businesses,” he says.
Initially, your income is likely to be low and you may have to work additional hours until the portfolio grows.
Compliance is a major factor aspiring business owners need to consider. Hub Wealth Solutions Director Gavin Murray says, over the past few years increasing legislation has been the main driver behind heightened pressure on small practices and this is likely to remain the case. “It is easy to move straight into a negative mindset with these changes but there is merit in sitting back and thinking about how to take advantage of them.”
It’s also important to consider when is the right time to set up on your own. Murray says it’s a good idea to go through a period of mentoring – between three and five years – before establishing your own firm.
“The individual needs to identify their strengths and weaknesses before making this
decision. Some brokers may be technically sound but may lack the soft skills required in selling their services. If you lack skills in a particular area, or have identified skills that don’t come naturally, there is an opportunity to work on this before taking the leap,” he advises.
For Hines, who has only gone out on his own this year, a desire to capitalise on his growing profile in the industry was the catalyst for him to set up his own firm.
In 2014, he was named as NIBA’s NSW/ACT YP Broker of the Year and he also sits on NIBA’s YP Committee for NSW. “I thought it was an opportune time for me to take avantage of that and set up my own business,” he says.
Hines says it’s also important to have the confidence that your personal profile is solid enough to be able to win new clients without having a big-name broking house behind you.
“You need to be prepared to take a risk and back yourself, and have a passion to run your own business,” he says.
Making it happen
Hines says the first step is to talk to as many people as possible to work out which is the right business model for you. “Having enough set-up capital is also a major factor. You can keep your costs low by working from home initially, so your major set-up costs will be your computer and telco expenses. It’s possible to crowdsource things like logos pretty cheaply,” he says.
Hub Wealth Solutions’ Gavin Murray says it can be quite easy to get caught up in the moment and not focus enough on income-generating activities when you first start out. “If you haven’t bought a client base you will need a few years of income as starting capital. You also need to keep your outgoings as low as possible, focus on business development and spend time educating referral partners on the types of clients you’re looking for.”
From Hines’ perspective, it’s essential to engage third parties like telcos and other service providers early on in the process, because often simple things like setting up an internet connection take longer than expected.
“Then once you’ve made the decision, don’t look back. Commit fully to the process and don’t dwell on any mistakes you make early on because that will cost you time.
“Running your own business is very rewarding, but it’s not for everyone. So do your homework so you go into the process fully informed.”