STEP 1: The Groundwork

Establish a realistic timeline
Starting an agency will take time. How long it takes depends on your situation and how much time you have to work on it. It almost always takes more time than you think it will. Expect at least six months to arrange financing and two weeks to obtain E&O insurance.

Obtain qualified legal advice
This is necessary if you're in a current relationship that may involve non-compete or other contractual-related issues.

Get an overview of the Independent Agency System
If you have operated your own captive agency, you are ahead of the curve (especially if you were able to establish a book of business outside the captive market). You understand how an agency works and are versed in the technical aspects of insurance contracts; however, for as many similarities between owning a captive agency and owning an independent agency, there may be just as many differences.

Resources:

• List of Agency Management Consultants
• Overview of the Independent Agency System
• InsurBanc - The Bank of Independent Agencies
• Guide to Starting a Business in Maryland

STEP 2: Create a Business Plan

Just about every industry relationship will require a formal business plan. This includes carrier prospects for appointments and E&O insurance providers. The business plan consists of a narrative, resumes, and several financial worksheets. 

The five things every business plan should address are:

People
At its core, the fundamental value of any agency is in the capability of its people to execute its objectives. Therefore, your business plan should include information about the people who are responsible to execute it. At a minimum, include resumes on each of the key players that describe the professional and personal background relevant to the agency business as well as the knowledge, skills and abilities possessed by each. For start-ups, a lack of a demonstrated track record may inhibit your ability to attract prospective employees, customers and carriers. To mitigate this uncertainty, include an explanation of who you know and how you may be known in the community and/or industry.

The Opportunity
A key to agency success and of interest to all current and potential stakeholders is how the agency plans to acquire customers, including with what products and services and with what advantages over competitors. This section should demonstrate that you know who your customer is, what your products and services are and how you will position your products and services to be selected over those of your competitors.

The Business Environment 
Your business plan should demonstrate that you have a keen awareness of the external business environment in which you operate, that you understand its impact on your business prospects and how you will navigate and exploit it. The discussion should encompass regulation, the economy, labor supply, customer markets, suppliers, competitors and in what way the status of these factors is relevant to the operation of your agency.

The Risks 
Many business plans, especially those that will be used outside the agency to attract other stakeholders, often make the mistake of painting only a rosy picture; however, risk is inevitable. The best business plan readily identifies and confronts the risks to be faced. Potential stakeholders, especially prospective carriers, will develop confidence in those agencies that pose the risks and provide strategies to resolve them.

The Numbers 
You need to have realistic expectations of where revenues will come from and when and how cash will be used; furthermore, insurance carriers will be interested in growth projections. At a minimum, you should have a start-up budget, a cash flow forecast, and a production forecast.

Resources:

• Business Plan Outline for a Start-Up Agency
• Start-Up Budget Worksheet
• Cash Flow Budget Worksheet
• Annual Production Calculator 

STEP 3: Meet the Legal Criteria

Choose An Entity 
There are three broad categories to investigate when determining your business organization: sole proprietorship, partnerships, and corporations. While sole proprietorships are the least expensive and easiest to create, they carry a risk of personal liability for the owners. Partnerships and corporations can afford further protection for the owners but require more paperwork and cost.

Register with the County or State 
All businesses in Maryland operating under an assumed ‘trade’ name must file a Trade Name Certificate with the State. Partnerships and corporations must file a Trade Name Certificate with the Maryland Secretary of State.  Check with your city or county court clerks to determine if a filing is required there as well. 

Obtain Licenses
For a sole proprietorship, a property and casualty license is issued to the individual; however, the individual must file a form to register a trade name under which he or she will be operating. For partnerships and corporations, the entity must have a separate license filed with the Maryland Insurance Administration.  Application for Maryland licenses are through the National Insurance Producer Registry or NIPR.  Keep in mind, this information is for Maryland only.  If you plan to sell, solicit or negotiate insurance in another state, a non-resident license will be required for that state in addition to your resident Maryland license.

Obtain IRS ID 
The IRS requires a Taxpayer Identification Number for all entities. This number is used in the administration of tax laws. If your agency is organized as a sole proprietorship, your social security number is your tax identification number. If your agency is organized as a partnership or corporation, you are given a Federal Employer Identification Number (FEIN).

Apply For E&O Insurance
Prior to applying for an entity license with the Maryland Insurance Administration, you will need to get errors and omissions coverage.

Since this is a new independent agency, and professional liability policies are on claims-made policy forms, your new E&O policy will have a retroactive date of the policy inception. In addition, since your agency is new and there is no previous information to reference, the E&O carriers will essentially have to underwrite you, as the owner, and your goals for the agency. E&O carriers will require a business plan and resume with all new applications. Insurance Brokers Service Corporation, Big I MD’s for-profit insurance agency, is part of a national purchasing group providing E&O coverage to members through SwissRe/Westport and also part of a national program for Fireman’s Fund. For this reason, Big I MD membership is required before your E&O application can be processed.

Resources:

• How to Apply for a Business Entity Insurance License
• Applying Online for a Federal Employee ID Number 
• Start the E&O Application 
• Sample Policy Form

IRS Tax Forms and Filings Information:

• Sole Proprietorship 
• Partnerships
• Corporations 
• LLC

STEP 4: Secure Market Commitments

Direct appointments with a variety of established carriers that have broad, competitive insurance products to offer is the ideal situation; however, they are very hard to come by unless you have at least a three-year track record and a good size book of business that you will bring to the table right off the bat. For most start-ups, market commitments will have to come from a combination of a few possible direct appointments and/or a variety of indirect markets such as wholesalers, managing general agencies, and market aggregators.

Direct Appointments  
There are many carriers writing insurance in Maryland through the independent agency system; however, most will only appoint agents who have some sort of established track record and/or are located in selected marketing territories. As a Big I Maryland member, you also are a member of the Independent Insurance Agents & Brokers of America, giving you access to a number of markets it provides.

Big I Markets/MGA's/Wholesalers  
Big I Markets as well as many managing general agents and wholesalers are receptive to working with new agents. Many will have little or no volume commitments and are compensated per transaction through policy fees that are passed on to the customer.  It is important to work with an established and reputable E&S market, which can assist with placement through MGAs, etc.

Market Aggregators  
Market aggregators provide assistance to new agents in setting up their first agency office, access to otherwise unattainable markets and niche programs, the opportunity to obtain direct company appointments and a chance to share in the network's profitability. In return, these networks usually ask agents to pay a percentage of commission, a membership fee, or require them to give up a small stake in the value of the book of business built up through the aggregator. Be sure to review the contractual relationship with these entities carefully, especially as they relate to book ownership, commission or revenue sharing and exit costs.

What does it take to get a company appointment these days? Companies don't usually come looking for you, so you should approach company marketing departments in a way that will enhance your chance for a successful conclusion.

Resources:

• Big I Markets
• Big I Eagle Agency

STEP 5: Secure An Agency Management System

A fundamental building block for today's successful independent insurance agency is a good agency management system that can provide a framework for all the necessary business processes. The most effective independent agencies have maximized the ability to operate as digitally as possible, minimizing double entry and moving paper. Agency management software can range in cost from less than $1,000 to $5,000 for a start-up operation with monthly fees of $60 to $600, depending on the level of sophistication you desire. It is advised that a new agency should not skimp on agency management software since it will pay in the long run to operate as electronically as possible. When you join Big I Maryland, you also become a member of the Independent Agents & Brokers of America (IIABA). IIABA sponsors an organization made up of independent agencies, carriers and technology vendors called the Agents Council on Technology. The ACT website has numerous resources to help agencies harness technology to maximize productivity and profitability.

Resources:

• Agents Council for Technology (ACT)
• Virtual Risk Consultant

STEP 6: Brand Your Agency

Develop A Website  
Big I Maryland has preferred vendors and discounts for website development. Already have a website? Members receive a free digital review, which provides a detailed report on how to improve your existing website and social media channels.

Marketing  
Trusted Choice is the national marketing brand used exclusively by members to help consumers understand the value that an independent agent offers. Get help creating an advertising campaign, and content for your social media channels, or complete a digital review to see how you can optimize your website and social channels.

Referrals   
With TrustedChoice.com, consumers are able to search for a local agent or request an online rate quote. All members are listed on the agency locator on TrustedChoice.com as a member benefit and have the option to purchase an advanced subscription where they can receive enhanced benefits, making them more visible and attractive to online consumers.

Resources:

• TrustedChoice.com Services
• Member Marketing Resources
• Website Preferred Vendors

STEP 7: Continuing Education & Training

Depending on your level of industry experience or your level of expertise in the various lines of business you intend to offer, Big I Maryland offers a broad array of training resources to fit your needs.

• Big I Maryland Education Program
• Online Learning Resources
• Education & Training Calendar
• Designation Programs
• Insurance Licensing

STEP 8: Recruit The Right Staff

Whether you need staff right off the bat or down the road, recruiting the right talent for the right roles is not easy, especially if you're doing everything in the agency yourself. Big I Maryland has the resources you need to help you find, hire, assess, and engage your team.

Resources:

• Recruiting & Hiring Tools
• New Hire Training

STEP 9: Build Relationships

Big I Maryland offers a number of events throughout the year that help our members build relationships with mentors, carriers, and other Associate Partners. You can also get involved within the Association by joining one of our committees.

Resources:

• Meet Our Industry Partners 
• Big I Maryland Committees

STEP 10: Join Big I Maryland

We can help connect you with a community of insurance professionals and a suite of top-tier products and services that will allow you to focus on what is important – your agency.

Here are some of the many resources we offer to help independent agencies:

• Advocacy
• Discounted Education & Training
• Insurance for Your Agency (E&0, EPLI, Umbrella, Cyber and More)
• Insurance for Your Clients (Market Access to Carriers)
• Marketing & Branding
• Perpetuation Planning
• Recruiting & Hiring
• Tech Tools & Discounts
• Events & Networking
• And more!

Resources:

• Agency Membership Information
• APPLY FOR MEMBERSHIP