AGENCYBUDGET

Contingency/Bonus: This category includes all contingency income received from carriers, and any bonus income received from a cluster/network/aggregator/alliance. It differs from Commission & Fees income from a budgeting standpoint, because, although it is an indirect result of sales, it is contingent upon your performance and the guidelines set by each carrier for new business production, retention, loss ratios and other factors. It can also be impacted by the performance of a network/aggregator/alliance that the agency is a member of. As you know, contingencies can vary and are not guaranteed. We strongly recommend that agencies do not include contingencies in their operating budget.

Fee Income: Any fee income can be estimated based on the previous year performance as well as the goals for the upcoming year.

Other Income: Oftentimes, Agencies will have revenue streams resulting from activities not related to the sale of insurance. For example, if the Agency owns their office building, they may have rental income.

Expenses are categorized into four categories: Payroll & Benefits, Selling Expenses, Operating Expenses, and Administration Expenses:

Payroll & Benefits:

Payroll: This category should contain any wages, commissions, salaries, and bonuses paid to the Agency’s owners/employees and any amounts paid to 1099 Employees (outside contractors). It should not contain any dividends paid to shareholders, which are considered administrative expenses.

Benefits: This category contains any expenses associated with employee benefits. It can include items such as retirement plans, employee insurance, and the employer portion of payroll tax expense (This does not include employee withholdings, which should not appear on the income statement.)

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Selling Expenses: Selling expenses are expenses that result from efforts to make sales or retain customers. The most common categories in this section include marketing, promotions, advertising, travel, meals, and automobile expenses. It should not include expenses that are necessary for the day-to-day operations of the Agency. For example, although an office renovation may increase sales by improving customer experience, the main result of the renovation is not increased sales but providing a safe and effective work environment. A customer referral program, by contrast, increases sales directly. For this reason, the entertainment, meals, travel, and automobile expenses that should appear in this section are expenses directly associated with sales activities, not personal meals, travel, or vehicles.

Operating Expenses: Operating expenses are expenses incurred to ensure that the Agency can continue to operate effectively. Some common