As someone whose education and work experience is deeply rooted in accounting and finance, I’m inherently wary of business fads. It’s not that I think new ideas are a bad thing — it’s that too many business owners and managers tend to embrace the latest concepts without taking the time to carefully analyze their costs and benefits.
These days, everyone is jumping to get on the social media bandwagon. It’s easy to set up a Facebook page or a LinkedIn profile, and it can be fun to connect with people you know well and others you barely know. It’s also a less stressful way to generate leads than picking up the phone and making cold calls.
Best of all, it’s free! Or is it? That question may puzzle you. You may not have paid anything to set up your site in Facebook, LinkedIn, or any of those other social-media platforms, but if you think using them to promote your business is free, you need to think again.
Time carries a cost
Most agency owners are like hawks when it comes to cost control. They buy copy paper when it goes on sale, keep the office thermostat at a level that won’t mean big bills, and track every single trip to maximize their tax deduction for mileage. Unfortunately, far too many of them never consider one of their biggest cost items: the value of their own time.
Suppose you run a one-person agency, and you earn $100,000 annually. If you work 40 hours a week and take a two-week vacation, that’s roughly 2,000 work hours per year. A simple calculation says that every hour of your time is worth about $50 in revenue. So when it comes time to buy copy paper, if you decide to buy from that office-supply store that’s a half-hour away to save $20, the round trip costs you $50 in revenue. You’ve effectively lost $30.
Now let’s say you’ve decided to make a strong commitment to social media. You participate on Facebook and LinkedIn, and if you’re honest with your timekeeping, you probably spend a combined average of 60 minutes a day checking on those sites. Given 300 workdays in a year, that means you’ll devote about 300 hours to social media, and at that $50/hour figure, that creates an effective cost of $15,000.
What’s your ROI?
We can say that $15,000 is an investment in growing your business, and we judge the success of our other investments by the return they provide. So if your social media activities generated more than $15,000 in new business, you’ll have a positive ROI. But do you really know how much business they generated? Can you confidently state that X hours on Facebook brings you Y dollars in commissions? Maybe, but I doubt it.
Now, instead of devoting those 300 hours to Facebook posts, what if you used them to call prospects, check in with current clients to make sure they’re still satisfied, networked in your community, or took additional training to sharpen your knowledge and skills? What kind of ROI would you be likely to achieve that way?
Doing it right
You may already be active in social media, and you may even find it a worthwhile use of your time. Just be sure you’re making appropriate and effective use of all that time. There are a lot of myths and misconceptions about social media, and you don’t want to be misled by advice that isn’t correct or isn’t right for insurance agencies.
There are three primary rules insurance agents who are serious about communicating through social media should keep in mind:
- It’s not a place for the hard sell. People use social media to connect, to be entertained, and to be informed. Strong sales pitches turn most users off, and then they’ll subsequently turn you off by blocking or “unfriending” your posts. Instead of trying a hard sell to gain auto insurance business, post some interesting facts about your favorite vehicles, or repost an article on vehicle safety ratings or which car is most likely to be stolen.
- Don’t get too personal. Many social media users are very eager to share intimate details of their lives. Because your personal reputation is so important to the success of your agency, you’ll want to be much more discreet. Even if you find something hilariously funny or fascinating, before you publicly attach it to your name, ask yourself what it might say to a prospective client who doesn’t know you. You might enjoy an article about the ten best bars in New Orleans, but posting that might be taken as a signal that you spend a little too much time in bars. If you have a personal page, keep it separate from your agency’s page.
- Don’t delay. Today’s consumers are impatient, and online services such as social media have only accelerated that need for speed. If someone posts a comment or question to you, they’ll expect a quick response — and they won’t consider “within 24 hours” to be quick. Set your page to notify you immediately when someone posts, and get back to them as soon as possible. Other visitors to the site will see the comment or question, and will interpret any lack of response as a lack of interest.
Choose the right channel
It seems that new social media channels pop up every month. Be sure to choose the ones that best fit your agency and your client base. For example, if your primary focus is commercial lines, you’ll probably do better on LinkedIn, which is used primarily as a business networking tool. A post on Pinterest, with its emphasis on things like decorating and recipes, is probably going to be ignored.
Finally, should you decide to jump into the social media pool, be sure to track the results. Learn whether clients came to you because of posts, and see how many existing client relationships were strengthened. That way, you’ll have a better idea of the real ROI of your efforts.
About the author
Rick Dennen is president and CEO of Oak Street Funding, which provides commission-based lending for insurance agents that need capital to buy, build or sell their agency. Dennen is a licensed agent in the state of Indiana for Life, Accident & Health products and a licensed Certified Public Accountant in the state of Indiana. In addition, he holds an MBA in finance and is an instructor of venture capital and entrepreneurial finance at the Indiana University Kelley School of Business. He can be reached at email@example.com.