According to a recent study cited in Small Business Trends, 99.6 of all businesses in Ohio are considered small businesses. There are currently 949,479 small businesses in Ohio. Furthermore, 45.8% of all employees in Ohio which represent 2.1M people are employed by these small businesses. It is estimated that 21% of all small businesses will close as a result of the economic impact of COVID. These statistics hold true across the country with the overall percentage of businesses classified as small at 99.9% and the percentage of overall employees in small businesses being 47.3%
As the economic impact of the pandemic continues, there is no question independent agencies should expect to see an impact to both their personal lines and commercial lines business as a result of this pandemic. Proactively analyzing the potential impact inside your agency will help you determine how to adjust your business plan to both mitigate your risk, reallocate your resources and adjust to meet the changing needs of your customers in this new environment.
Estimate the impact
The absolute best thing any agency owner can do now is understand the potential impact to your agency. Analyze the risk to your agency by using the data that you have about your current polices and policyholders. In your commercial lines book there are some industries that are much more at risk than others, so knowing how much of your book is concentrated in these higher risk industries like hotels, restaurants, and other industries that struggle to adjust their business model to accommodate social distancing requirements and other challenges that are a result of this pandemic. In addition, you need to assess the risk inside your personal lines book. This process may be much more challenging than your commercial lines risks and will be dependent on the data that you capture on your insureds. For instance, a home and auto policy for a person at the beginning of their career that is employed by an airline is much more at risk than a person who is newly retired. The age of your insured is one way to estimate the impact on your personal lines book. There is no crystal ball that will accurately predict the overall impact this may have on your agency, but there are definite steps you can take to determine an educated estimate.
Mitigate the Risk
One of the best ways to reduce the risk inside your agency is to reduce all unnecessary spending. This can be determined by evaluating all expenditures that do not directly help create new business, retain your current business. Taking a critical look at all of your expenditures and reducing costs, extending payment terms or restructuring debt are several ways to mitigate your risk. Wherever it is possible, reach out to your vendors and partners proactively to renegotiate your terms is a step that all agency owners should take. In addition, communicating and reaching out to all of your clients will also help you determine their needs, the impact this is having on their lives and also their businesses. Many of us crave human interaction during this time of uncertainty, so now more than ever is the time to reach out to your customers.
Determining where your focus and resources should be placed is also a critical step in your adjusted business plan for your agency. The talents and focus of every agency vary, and therefore your strategy should also be aligned with your overall strengths and vary as well. As you anticipate the needs of your customers as well the opportunity to serve new customers you can then decide where to focus your efforts and resources. Stay abreast of the new policy or coverage options available through your company partners as well as any policy changes and take a proactive approach to communicating the relief that is available as well as coverage that is specific to this new environment.
According to a recent study in Small Business Trends, over 86% of consumers are willing to pay more to support local businesses in the wake of COVID-19. While 77.1% of consumers report that they are intentional about shopping locally, and it is influenced by several factors including the quality of the products, accessibility, and online reviews and research. Over 71% of consumers do research including visiting websites, reading blog posts, reading reviews and the businesses responses to reviews. Many also consider the charity work that a business is engaged in and their involvement in the local community in their buying decisions. This is all great news for independent agents as long as your customers are able to find you can learn about you, your commitment to the community. Be sure to update your online presence to highlight your expertise, seek out customer reviews and remind your customers that you are a local business. Be sure to also highlight the many ways that you are active in the community and how your support other local businesses.
Historically independent agents have remained strong and consistent in the face of economic crisis and many other epidemics. This resilience has in some ways muted the need for innovation and change. I am confident that the agencies that are nimble, smart and willing to plan and adjust will continue to flourish as we navigate this pandemic and the economic impact it has created. In an industry like ours, having the ability to recognize the need for innovation is key to keeping the independent agency channel strong.