Roundtable: Better beginnings

How many enquiries do you get from potential start-ups?

▶ Graham: Two or three a month. But we turn down an awful lot of them because they don’t make business sense. 

▶ Bob: We had 110 enquiries for a franchise last year and opened two. Some 60% don’t even make the grade and probably only 10 get as far as the interview. We want people who want to build a business.

▶ John S: We’ve had well over 100 enquiries since we started [in January 2017] and we’re just about to sign up our eighth. We’re very choosy for a number of reasons. It’s our reputation that’s on the line. We’ve seen some good ideas but they just haven’t thought about where the clients are going to come from. We’d never want to set somebody up to fail.

▶ James: Over the years, we’ve taken people with qualifications and years and years of experience, and they’ve failed. Generally speaking, ex-insurers don’t work. Sorry. People who come from a broker with a book of business, they’re going to get it.

▶ John W: We normally talk to people three or four times before we make the offer. You’ve got to make a financial plan and get an activity plan really nailed for the first six months. Sometimes, especially when people have been in employment, they’ve got this entrepreneurial instinct, but they don’t have the structure.

▶ Alistair: You’ve got to work in partnership. It’s really prudent to take time upfront and invest and understand exactly what drives both businesses. If the fit’s not right there’s no point entering into a world of pain.

It’s really prudent to take time upfront and invest and understand exactly what drives both businesses. If the fit’s not right there’s no point entering into a world of pain

Alistair Body

So why would anyone want to start up a broker in the first place?

▶ Graham: People want to regain control of their own lives and don’t like where they’ve ended up. They might have sold out to one of the big boys and don’t like the regime. They’re still young enough to start another business and have the expertise because they’ve already been there.

▶ James: We’re also now seeing the glass ceiling type, the ones who are still working for a small broker and were promised directorship, shareholding, and then the owner brings in the idiot son who’s never been in insurance before to take over the business. 

▶ Bob: It’s about creating a legacy, isn’t it? It’s about creating wealth and value for yourself. That’s a great thing to do. 

▶ John W: We talk about boss tax. You’ve got to think rationally – is the brand, my boss’s inspirational leadership and the facilities they give me worth 70%? The other frustration is cultural. If you’re told that you’ve got to re-engineer your book into one or two markets that’s really challenging. And inside some broking firms there’s quite poor management behaviours as well. Put all that together and you’ve got a combustible mix.

▶ Bob: A really good entrepreneur is not running away from their boss, they are running towards their future. I think that’s really important.

▶ John W: That’s fair, but the heart of what a broker is about is really deep engagement with their clients. And what they’re running towards is fair reward and a much better proposition for themselves.

You can all help in your own specific way with crucial FCA authorisation. But what other barriers are there to starting up alone?

▶ Graham: Insurers don’t want to give agencies to a new start-up. They want a guarantee of say £100,000 GWP and the start-up can’t promise that. It’s very difficult to set somebody up from scratch where they have no relationships with the insurers because the insurers don’t know what they’re letting in.

▶ Alistair: Whereas with the appointed representative model the agencies are in place. So, all those barriers are removed. Depending on the model you take, there is nothing really stopping you from being up and running in a month.

▶ Graham: One of our advantages is that we can put them into our underwriting agency straight away and they’ve got access to the London market.

▶ John W: Premises are not as big an issue as they used to be. You can rent a desk for a few hundred quid a month anywhere. You just need the internet. The real challenge is getting self-organisation of people and collaboration and accountability. We’re creating peer-to-peer interactions in a structured way that gives people exactly all the positive momentum they would have had if they were working in a traditional firm. There is this sense of a bit of isolation. It’s the difference between lone wolf and hunting in packs.

▶ James: About one a year leave us to join a local broker based on loneliness.

A really good entrepreneur is not running away from their boss, they are running towards their future. I think that’s really important

Bob Darling

What social media support does a start-up need?

▶ Bob: The internet’s created the biggest village in the world. It’s given small brands the opportunity to be on page one. Social media and the internet in general have changed what you need out of a brand.

▶ Alistair: A lot of individuals starting up brokers are relationship people. They are focused on their clients, but sometimes lack the knowledge and understanding of how to get social media to work for them. We strive to help them create the relevant accounts and content. And support them with what they want to invest in from a search engine optimisation or pay per click point of view.

▶ Graham: You find the younger generation are very into it. Our problem is driving the older broker into that media. 

What level of GWP can a start-up reasonably expect to achieve in the first 12 months? 

▶ John S: Not a lot if they’re restricted. They’ve got to take that into account.

▶ John W: It’s nice if they can wash their face.

▶ Bob: I would expect an absolute minimum of a quarter of a million of GWP in the first year.

▶ James: Most of them have been commercial account executives for years and years. They will get their clients, but they’ve become deskilled at new business over the years. But nevertheless, they’ll get £150,000.

▶ Alistair: It comes down to the model and what the business plan is. You really should be talking half a million pounds in the first three years minimum, probably to around a million over five years.

▶ Graham: It depends what agreements they have when they leave their existing business. Some people walk away with a good agreement, where they take their accounts with them. Those people get there much quicker for obvious reasons. 

▶ James: Garden leave is a good thing because you get paid for those months. 

▶ Graham: But it is amazing what the [holding] broker can do to keep the accounts in that time. If they’ve got half a brain, they’re out there very quickly cajoling people.

▶ Bob: Why wouldn’t they? At the end of the day, it’s their business.

▶ John S: It’s great when they leave a consolidator because consolidators have got no chance as they’ve got so many other things going on.

Is it easier or harder to set up on your own now than ever before?

▶ James: It’s substantially easier.

▶ John S: When you choose a model that doesn’t involve the FCA.

▶ Alistair: The governance and control hasn’t changed. You’ve still got the responsibility of working under the framework, but the ease of getting in has.

▶ Bob: We have six people around the table here making it easier. Is it easier to start completely on your own than it was 20 years ago? Most definitely not. But I’d say it’s a great time to start a business and there’s a lot of support. But to completely do it on your own, I think that’s really tough. 

We look at an individual and we say, if you can make your staff a millionaire in five years, you’re right for us. That’s sort of the benchmark

John Sims

What will the next three years hold for the level of start-ups?

▶ John S: Lots and lots of people is probably not where I see it. We’re all pretty picky about who we work with because of the inherent risks involved. In our minds, we look at an individual and we say, if you can make your staff a millionaire in five years, you’re right for us. That’s sort of the benchmark.

▶ Graham: A lot of people are scared of the options. They don’t think they’re going to be independent. They think we’re going to take over rather than assisting them and their business in getting going. 

▶ James: The numbers have been pretty steady ever since we started. It’s much better that there are more of us banging the same drum now because far more people are going to do it.

▶ John W: I can’t see why the majority of the account execs in the market couldn’t be attracted to one or other of our models. And if the structure that supports them is making them sufficiently accountable and giving them extra help, then why not that it becomes the majority? 

Really?

▶ John W: Our benchmark should be how many accounts execs are there? Some 10-15,000 is my estimate. How many of those are going to be working for somebody who treats them in a particular way, the traditional way, shall we say, and how many of them are going to be seeking an alternative way of doing it? I can’t see why that couldn’t be the majority.

▶ James: The number of brokers has shot up before. In 1991, there were 12,500. But if you go back 20 years before that, there weren’t as many. In the 1960s and 1970s, everybody was working for insurers as direct insurance people and then they closed the branches.