Things were just fine at The HDH Group Inc. in 2000.
“We were on a roll of 25 conservative years of growth, and certainly you couldn’t quarrel with our results,” says Frank G. Mikan, who became president of the company in the same year.
Yet, Mikan knew the insurance broker could be better, and he was going to find out how by doing a deep analysis of cost.
While looking at the number of prospective clients HDH pursued and the number of those that became actual clients, he noticed a gap at the company, which has approximately $300 million per year of premium volume for property casualty and benefits.
“To me, it indicated that we were looking at perspective clients but not to a level that was allowing us to succeed at a percentage that I would like,” he says. “So, we were looking at opportunities that weren’t really opportunities as much as they were just exchanges of information that led to nowhere. That becomes an expensive item.”
He realized that while there were some big scores, a lot of time and money was spent chasing clients who weren’t the best fit for the company
“You tend to think, ‘Hey, look at this. We wrote a $50,000 revenue account.’ But if you chased four others unsuccessfully and it ran you $35,000 in that unsuccessful chase, you really won $15,000, not $50,000,” he says.
“If you’re looking at a lot of clients for which there’s no mutual future for you and the client, why would you even start down that road? Why would you not try to identify better opportunities with better fits and have a much higher degree of success?”
Mikan realizes it is a crazy thought to turn down possible revenue from possible clients, especially if you want to grow. But, you have to remember that the more you pursue new clients, the less time you have to devote to your current clients.
“I think you have to be realistic in what you do and how you do it,” he says. “Not only from the standpoint of prospective clients but from the standpoint of our existing clients.
“If we are chasing down things we’ll never catch, that means that we are diverting attention to a prospective client that will go nowhere and maybe a client who we’ve had for a while is not reaching the person they need to reach here.”
You have to be honest with yourself and the client and evaluate if the client really needs your help. While on the surface the increase in revenue seems great, it comes with a stigma.
“There is merit to bringing in every revenue dollar you can because it just increases the numbers on your balance sheet,” he says. “That’s one way to look at it. But the truth of the matter is, if you aren’t doing anything impactful for that client, then you are, to a degree, commoditizing yourself. Commodities are very, very replaceable.”
If you aren’t delivering a service that a client values, the likelihood of you retaining that client for a long time is slim.
“Once you start out there writing every dollar you can for the sake of writing it, those dollars churn,” he says. “You don’t develop a relationship, you’re not really solving a problem, you do not have a long-term client base. You are going to force yourself every year into having to bring in mountains of new dollars to replace the clients who see you as a commodity and very replaceable.”
Mikan wanted to make a change and lead a company that is more focused on the client and only pursue possibilities that could result in mutual relationships. That meant listening to the clients and finding out how HDH could help them — or if HDH could help them at all.
“At the end of the day, what’s it about for the client? They need to live to fight another day, do it profitably, and we need to know how that happens for them,” he says. “Because, if it doesn’t happen, insurance discussions can become secondary very quickly. So, that was key in what we did and why we did it.”
