Sample State Farm Agency

Table of Contents

• Cover Page
• Legal Page
• Table of Contents
• 1.0 Executive Summary
• Highlights
• 1.1 Objectives & Business Acumen
• 1.2 Mission
• 1.3 Initiative & Keys to Success
• 2.0 Company Summary
• 2.1 Company Ownership
• 2.2 Start-up Summary
• Start-up
• Start-up
• 3.0 Services
• 4.0 Market Analysis Summary
• 4.1 Market Segmentation
• Market Analysis
• Market Analysis (Pie)
• 5.0 Strategy and Implementation Summary
• 5.1 Competitive Edge
• 5.2 Marketing Strategy & Action Plan
• 5.3 Sales Strategy
• 5.3.1 Sales Forecast
• Sales Forecast
• Sales Monthly
• Sales by Year
• 5.4 Business Goals & Milestones
• Milestones
• Milestones & Business Goals
• 6.0 Management Summary
• 6.1 Personnel Plan
• Personnel
• 7.0 Financial Plan
• 7.1 Start-up Funding
• Start-up Funding
• 7.2 Important Assumptions
• General Assumptions
• 7.3 Break-even Analysis
• Break-even Analysis
• Break-even Analysis
• 7.4 Projected Profit and Loss
• Profit and Loss
• Profit Monthly
• Profit Yearly
• Gross Margin Monthly
• Gross Margin Yearly
• 7.5 Projected Cash Flow
• Cash
• Cash Flow
• 7.6 Projected Balance Sheet
• Balance Sheet
• 7.7 Business Ratios
• Ratios
• Appendix
• Sales Forecast
• Personnel
• Profit and Loss
• Cash Flow
• Balance Sheet
• General Assumptions

State Farm/Sample Agency is in the process of being formed as an insurance agency owned and operated by State Farm. This plan is written as a guide for financing, start-up and management of this new agency and will also serve as the basis for measurement. The following is a summary of the main points of this plan.

• The objectives of State Farm/ Sample Agency  are to generate a profit, grow at a challenging and manageable rate, and to be a good citizen in the community.
• The mission of State Farm/ Sample Agency  is to provide products and services with high quality, protection and value pricing.
• The keys to success for State Farm/Sample Agency  are variety of business services and products, personal contact, timely and accurate service, development of one-to-one relationships, and a reputation of honesty and integrity. 
• The primary products offered will be from State Farm Insurance Company, and the added value to small businesses will be the investment, savings and other financial services offered.
• The local market for this business is wide open. State Farm Insurance Company has captured 23% of the market share and is considered the second largest insurance company in Stark County. 
• In the first year of operation, a customer base is being established. Over 85% of the new and established insurance business will renew each year creating compounding growth in sales of over 20% with limited increase in operational expense.

In conclusion, as shown in the highlights chart below, this plan projects rapid growth over the next three years with a profit forecasted in the second year of operation and continuing into future years of operation. Implementing this plan, will ensure that State Farm/ Sample Agency  becomes a profitable venture.

The main objectives of State Farm/Sample Agency are:

• Profit - to create enough prosperity for the agency and employees to have a secure and profitable career with State Farm.
• Growth - to grow the business at a rate that is both challenging and manageable.
• Citizenship - to be a social asset to the community and contribute to others who are less fortunate.

State Farm/ Sample Agency is dedicated to providing insurance products and business services that provide high quality, protection, and value pricing. We wish to establish a successful partnership with our clients that respects their interests and goals.

Success will be measured by our clients choosing us because of their belief in our ability to meet or exceed their expectations of price, service, and expertise.  

The keys to the success for State Farm/Sample Agency are:

Business Analysis

Strengths

Competition

• Well recognized community events
• Educational Institutions- several high schools, Stark Tech, Walsh
• Healthcare Institutions- hospitals, long-term care facilities, adult daycare
• 73% of focus population own their own home

State Farm/Sample Agency is located in Canton, OH providing insurance, investment, banking and retirement products to individuals, families, and small businesses.

State Farm/Sample Agency will operate as an Independent Contractor the first 12 months under the ownership of State Farm Insurance Company. Born and raised in Massillon, OH, the agent is closely familiar with Stark County and Northeast Ohio. 

She has over 20 years of experience in Sales, Healthcare, Management, and Consulting and is recently pursuing her  insurance agent license for Life, Health, Property and Casualty insurance.

State Farm/Sample Agency start-up costs include:

Start-up costs come to $21,600 of which $18,000 is being financed by State Farm's Signing Bonus. In the first six months of operation:

State Farm/Sample Agency provides insurance, banking, savings and retirement products to individuals, families, and small businesses.

As an agent of State Farm Insurance Company the following product and services are offered:

• Personal Lines - auto, renters, home, motorcycle, boat/yacht, snowmobile, jet ski etc.
• Commercial Lines - businesses, workers compensation, surety bonds
• Life & Disability Products - term, whole, universal group and variable life and annuities
• Health Insurance - long-term care, disability, supplemental medical insurance, Medicare supplemental
• Retirement Products - fixed, equity indexed, and variable annuities, mutual funds
• Retirement Plans - IRA, Roth IRA, pension plans, SEP plans, SIMPLE plans, 401K, Profit Sharing
• Life Planning Concepts - Education Savings Accounts, College Savings Plan
• Deposit Products - CDs, Money Markets, Savings Accounts, Checking Accounts, HSAs, IRAs
• Loan Products - Vehicle Loans, Mortgage Loans, Home Equity Loans & Lines of Credit, Credit Cards

The market area for State Farm/Sample Agency will be focused on Stark County. Stark County is experiencing an average growth in population over the 2000 census of .06%.

As of 2007, the State Farm Insurance Company is the largest insurance company in Stark County with 23% of the market share. The overall market for State Farm/Sample Agency is wide open. This business plan has identified over 380,575 individuals and business as potential clients in the market area.

State Farm/Sample Agency has targeted the following market segments:

The available market share of 77% represents the estimated market that State Farm Insurance has not captured at this time. Although, the entire state is an available marketing area, the Stark County area will be the focus marketing area at this time.

The first and most important market segment is population broken down by age groups. This can be used for determining the market for personal lines of insurance such as auto and various recreational vehicles, life and life planning products.

Note that the population of 18 to 24 year olds has been separated from the available population as a market segment in itself for determining the possibility of high risk auto insurance policies.

The second market segment is housing units broken down by owner occupied and renters. This can be used for determining the market for personal lines of insurance such as home, town homes, condominium, renters and mortgage protection.

The third market segment is businesses with less than 20 employees. This can be used for determining the market for accounting and bookkeeping services and commercial lines of insurance including property and casualty, retirement and workers compensation.

	Ohio		Stark County		Available market Share 77%
YR 2007 Estimate-Total Population	11,478,006		380,575		293,043
YR 2007 Estimate-18 to 24 years old			31,379		24,162
YR 2007 Estimate-25 to 44 years old			105,259		81,049
YR 2007 Estimate-45 to 64 years old			90,512		69,694
YR 2007 Estimate-65 years and more			57,200		44,044
YR 2007 Estimate-Total Housing Units			148,000		113,960
Housing Units-Owner Occupied			107,397		82,696
Housing Units-Renters			40,919		31,508
YR 2007 Estimate- Businesses			9,277		7,143
2007 Major City Population Estimates
Canton			79,905		61,527
Jackson			39,798		30,644
Plain			34,607		26,647
Massillon			32,055		24,682
Perry			28,700		22,099
Lake			23,558		18,140
Alliance			23,210		17,872
North Canton			16,796		12,933
Louisville			9,294		7,156

The Top Employers in the area are:

Aultman Hospital

Canton City Bd of Ed

General Electric Co

Mercy Medical Center

Precision Castparts Corp

Republic Engineered Products

Timken Co

Wal-Mart Stores Inc

• Emphasize value instead of price. State Farm/Sample Agency is dedicated to working closely with each client and educating them on the importance of value over price.
• Build long term relationships. State Farm/Sample Agency is dedicated to establishing a successful partnership with each client, respecting their interests and goals by cultivating a long term relationship to enhance client retention.
• Focus on increasing market share. State Farm/Sample Agency will focus on personal and business clients that have been identified in the targeted markets.

State Farm/Sample Agency's competitive edge is our positioning as strategic ally with our clients, who are clients more than customers. By building a business based on long-standing relationships with satisfied clients, we simultaneously build defenses against competition. The longer the relationship stands, the more we help our clients understand what we offer them and why they need it.

The marketing strategy is the core of State Farm/Sample Agency's main strategy:

• Emphasize, and educate the client on, the importance of value over price
• Build a relationship business that fosters client retention
• Develop specific programs for each target market segment

Production Goals

Agency & Team Production & Marketing Strategy

One line searches without auto or without fire monthly

• See multi-line discount program

Small Business Prospecting

• Identify and visit 5 business owners per month
• Follow up calls
• Add at least 1 new small business per month

Renters Prospecting

• Identify and visit 3 rental complexes per month
• Mail rental brochure to occupants and/or leave with rental office managers

Referrals

• Best way to access prospective clients. Always ask current policy holders and develop key centers of influence.  $10 gift card for referrals

Door Hangers in Targeted Subdivisions

Advertise in Subdivision Newsletters

Term Conversions

• Life Policy must be one year old before it can be converted
• Send Postcard
• Follow up call one week later
• Explain why they should convert:  Permanent is like ownership... Permanent builds cash value
• Goal to convert at least 40%

Auto Loan Program

• Quote:  You may not be aware of this but we can provide competitive Auto Financing
• Change:  What car financing rate are you currently paying? May I share our great rates with you?
• Total Loss:  Before you buy or look for a replacement vehicle, remember we offer competitive rates for auto financing
• Adding:  We provide very competitive auto financing rates. May I share our great rates with you?

Used Vehicle Loan Brochures

• Hand one to everyone who enters the office with rates attached.
• Include with outgoing mail

Purchased Leads- Sales Genie, Choicepoint, MANTA

• Identify, mail postcards and follow up on 4000 leads per month

Multi-Line Discount Program

• Mail multi-line postcards to all one-line policy holders
• 2 weeks later follow up with additional multi-line postcards
• Call a minimum of 5 policy holders from auto only list each day
• Send out letter annual premiums before calling giving differences without an additional line
• Notate all policy holders for recalls
• If calling clients within our book of business, we should be able to convert one line to two or more lines 50% of the time.

Agency & Team Retention Marketing Strategy 

State Farm/Sample Agency's sales strategy will be based on systematic person-to-person contacts through referrals, direct mail, telemarketing and the Internet. A list of potential prospects has already been compiled and will serve as a launching pad for marketing the products and services.

The important elements of the sales forecasts are summarized on two line items, Insurance Sales, and Miscellaneous Revenue. The summary of the initial sales forecast indicates a first year revenue of $193,996 increasing to $233,350
by the end of the second year, then $277,427 by the end of the third year. It should be noted that although sales increase each year, all revenue has been forecasted very conservatively for the three year forecast.  Actual sales growth for the second year is 20% due to adding a producer for continued sales growth and exponential growth of insurance renewals. The third year of sales reflects an actual growth of 19% due mostly to the increase in insurance renewals. Each element will be discussed separately and in its entirety below: 

What makes insurance sales different from other sales are the assigned sales and renewals. In most cases, without an increase in monthly production, the monthly income will almost double due to renewals. It has been determined by industry averages, State Farm customer loyalty in the first year is 80%, second year is 85% and third year is 89%. Other than auto, which renews every six months, all other insurance products renew on an annual basis. Because of renewals, it is possible to almost double sales revenue without increasing production costs. The following is the monthly forecast:

Sales Forecast
	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr
Sales
Assigned Auto	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792	$4,792
Assigned Fire	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750	$1,750
Produced Auto	$348	$348	$522	$522	$870	$870	$1,740	$1,740	$2,609	$2,609	$2,609	$2,609
Produced Fire	$162	$162	$243	$243	$405	$405	$810	$810	$1,215	$1,215	$1,215	$1,215
Produced Life	$376	$376	$563	$563	$939	$939	$1,878	$1,878	$2,817	$2,817	$2,817	$2,817
Produced Health	$56	$56	$84	$84	$141	$141	$281	$281	$422	$422	$422	$422
Produced Bank Loans & CC	$100	$100	$150	$150	$250	$250	$500	$500	$750	$750	$750	$750
Produced Bank Deposits	$20	$20	$30	$30	$50	$50	$100	$100	$150	$150	$150	$150
Mutual Funds	$56	$56	$84	$84	$140	$140	$280	$280	$420	$420	$420	$420
Semi-Monthly Auto	$982	$982	$982	$982	$982	$982	$982	$982	$982	$982	$982	$982
Semi-Monthly Fire	$328	$328	$328	$328	$328	$328	$328	$328	$328	$328	$328	$328
Semi-Monthly Life & BD	$783	$783	$783	$783	$783	$783	$783	$783	$783	$783	$783	$783
Total Agent Scorecard Bonus												$34,500
Totals	$9,752	$9,752	$10,311	$10,311	$11,428	$11,428	$14,223	$14,223	$17,017	$17,017	$17,017	$17,017

The following is the yearly forecast:

Sales Forecast
	FY 2009	FY 2010	FY 2011
Sales
Assigned Auto	$57,501	$74,896	$94,379
Assigned Fire	$21,000	$29,100	$38,172
Produced Auto	$17,395	$19,483	$21,821
Produced Fire	$8,100	$9,072	$10,161
Produced Life	$18,780	$21,034	$23,558
Produced Health	$2,814	$3,152	$3,530
Produced Bank Loans & CC	$5,000	$5,600	$6,272
Produced Bank Deposits	$1,000	$1,120	$1,254
Mutual Funds	$2,800	$3,136	$3,512
Semi-Monthly Auto	$11,778	$13,191	$14,774
Semi-Monthly Fire	$3,938	$4,410	$4,939
Semi-Monthly Life & BD	$9,390	$10,517	$11,779
Total Agent Scorecard Bonus	$34,500	$38,640	$43,277
Totals	$193,996	$233,350	$277,427

The management philosophy of State Farm/Sample Agency is based on respect for every client, and individual responsibility. For the first year the employee base will be the agent, Cindy Scott plus an office manager and sales agent assistant.  In May of 2007 the financial forecast supports the hiring of an insurance agent assistant to help increase the growth of the business. 

State Farm/Sample Agency's intention is to hire only those who demonstrate the qualities necessary for working in a professional environment, and the willingness to move forward in continuing education. We will be hiring the ultimate "people persons" to provide world class service.

The Personnel Plan reflects the staffing levels required to create, and establish the customer base needed to achieve the revenues projected and reach profitability.

All insurance sales and business service personnel salaries are considered a direct cost of sales.

• Office Manager (Full-time) paid $17 an hour.
• Sales Agent Assistant (Full-time) paid $8 an hour plus commissions.

Personnel Hiring Process

Recruiting

• Actively seek new team members at every opportunity so as to have qualified candidates on hand at all times
• Hand out "I liked your service cards"
• Analyze and review strengths & weaknesses of current team members periodically

Locating Candidates

• Centers of Influence
• Job Fairs
• Advertise in newspapers & internet
• Career Placement Centers

Telephone Screening

• Narrow down pool of candidates
• Consider phone skills, articulation, rapport, personality and job related experience
• Consider sales and technical skills

Preliminary Interview

• Complete Application
• Administer testing
• Explain the position and licensing requirements
• Inform each candidate of mandatory background check
• Send declination letters to those not invited back for structured interview

Structured Interview

• Sample questions available in Structured Interview Guide
• Ask the same questions to each candidate

Job Offer

• After offer acceptance, send declination letters to other candidates
• Notify ASR for the following information:
• New team member alias
• Federal Crime Bill Staff of Certificate Form
• Request to License Agent Staff/Background Check Form

Education & Development

• Every Team member will obtain and maintain P&C and L/H licenses.
• Every team member will draft an individual development plan. Progress will be reviewed and monitored on a quarterly basis.
• Every team member is expected to attend AFO/State Farm sponsored training and other learning opportunities with the agent's approval.
• Specialists will be on a 3 month trainee status
• Will need to obtain and exceed all production goals.

State Farm/Sample Agency financial plan is based on obtaining a signing bonus by May of 2008 of $18,000 to cover the start-up expenses. In May of 2008 an additional $3,500 in financing will be required to ensure business operations, marketing and stability during the first year of operation. For financial forecasting the $7,000 in additional financing will be acquired by the personal savings account of Cindy Scott.  State Farm/Sample Agency will achieve 28.2% profitability in second year and a 46.7% profitability in the third year.

The fiscal year is a calendar year, January through December.

Start-up costs come to $21,600 of which $18,000 is being financed by State Farm's signing bonus. Before the first six months of operation, $10,600 financing is being sought for the start-up costs. In May of 2008 an additional $11,000 in financing will be required to ensure business operations, marketing and stability during the first year of operation.

The key underlying assumptions of State Farm/Sample Agency financial plan shown in the following general assumption table are:

1. We assume access to financing of $21,600 to support our financial plan.
2. We assume our financial progress is based on a very conservative sales forecast supported by data received and reviewed by State Farm Insurance.
3. We assume that all sales milestones have been achieved.

The first year due to start-up costs and expenses will not be included in the break-even analysis.

For determining the average cost of sales for this break-even analysis the last two years are used, 2008 and 2009,  yielding a 59.54% variable cost rate. Cost of sales is the direct labor and payroll taxes of those individuals responsible for producing sales and services.

Fixed costs for this break-even analysis is an average of the two year operating costs resulting in a monthly cost of $4600. Not included in this number is interest and income tax expense.

In order for State Farm/Sample Agency to break-even on a monthly basis, it must produce $11,370 in sales resulting in a cost of sales of $4,600 and 59.54% variable costs. 

Based on the realistic sales projections and efficient cost control measures in place, State Farm/Sample Agency will achieve minimal profitability in the first year of operation. Monthly profitability is first achieved in November 2009, but due to developing a customer base, the first months of operations reflect a loss. The total net profit for the first year operations, (after interest & taxes) is $44,368 or 23%.

In the second year of operation, sales increased $39,355 or 20.3%, resulting in a net profit, (after tax and interest), of $71,464. This is an increase on the bottom line of $27,096 or 61% over the prior year.

In the third year of operation, sales increased $44,077 or 19%, resulting in a net profit, (after tax and interest), of $101,229 or 37%. This yields an increase on the bottom line of $56,861 or 128% increase in profits over the first year of operations.  There are no significant changes in the third year of operations.

Due the fact that State Farm/Sample Agency is a new independent contractor agency of State Farm for the first 12 months, the cash flow for FY2009 is somewhat exaggerated by the instant influx of new capital. Subsequent years however show a healthy growth in cash flow, mainly due to the 20% projected annual increase of insurance, banking and mutual fund products sold. 

The table below presents the balance sheet for State Farm/Sample Agency. This table reflects a positive cash position throughout the period of this financial plan. The minimal net worth is created in the first year due to the start-up costs showing as a small retained earnings. As the balance sheet shows, State Farm/Sample Agency will not have any difficulty meeting their debt obligations as long as the conservative revenue projections are met.

The table below presents common business ratios as a reference. Industry Profile comparisons are for Standard Industrial Classification code 6411.0000, Insurance Agents, Brokers and Service as the majority of our revenue comes from insurance sales.