How Much Money Does YouTube Pay?

Many people see YouTube as a way to generate supplemental income; the perfect side hustle that pays you while you sleep. The reality is that you need to put in some serious work and be covering a topic people are interested in, before you can expect to generate any income at all.

With that being said, we got our answer by listening to an actual small, mildly successful part-time YouTuber with around 13,000 subscribers, Don from Affordable Desert Living, describes his YouTube income journey. After all, before we aim to be the next billion dollar YouTube brand like Mr. Beast or Dude Perfect, we should understand what ordinary but successful YouTubers can expect to make.

Total Income

Affordable Desert Living started generating income in October 2020 and between that time and November 2022, his YouTube videos generated $6892.75. That works out to $6.40 per 1000 views (or 6/10 of 1 cent for each view). This is also called RPM.

The first year income was $1770.89 or $4.15 RPM.

The second year income was $4945.93 or $7.83 RPM.

His best month ever was June 2022 where he made $1220.33. That month he received almost 180,000 views. It was driven by posting his most popular video that month.

You Need an Interesting Topic

Affordable Desert Living is all about low cost, off-grid living and various projects that you can do yourself to improve your property. Examples include installing solar panels, rainwater harvesting, building a driveway, dealing with monsoon storms. So he is sharing really interesting things that he is already involved with, and that are appealing to not only retirees but young people who are seeking to live like this.

You need to ask yourself before you get started, whether your topic is interesting and whether it will be able to attract attention in a sea of other videos out there. You can’t advertise your way to success, either. Your topic and your videos need to have organic appeal where people will find them and subscribe to you on their own.

Number of Videos Per Month

Affordable Desert Living puts out about 4 videos per month. Some make very little money while others are big successes. Sometimes it is unpredictable which videos will succeed.

Minimum Number of Views and Subscribers

You have to have 1000 subscribers to get monetized. So you will not see any income on any of your videos until you have crossed that threshold. There is also a minimum of 4000 watch hours, although the easier thing to shoot for is just getting up to 1000 subscribers.

If you don’t have 1000 subscribers, ads will still come up periodically on your videos, you just won’t be getting any money from them.

Don’t Forget the Equipment

Affordable Desert Living points out that people will click away if the sound quality is bad or if the camera is not stabilized and moving around on the video.

For these reasons, a good YouTube video is typically not recorded on someone’s phone.

Many people use a professional camera, such as the Panasonic FZ 300 with a Takstar shotgun mic. Additionally, they use an editing software like Sony Vegas or Final Cut Pro.

Other Income Opportunities

If you start building a fan base, you might find other ways to make money from your YouTube channel. For instance, fans of Affordable Desert Living pointed out that you can have an Amazon Wish List. Don put a wish list together, and he actually received $1800 worth of tools as gifts from his subscribers.

How Much Money do Drive-Through Coffee Franchises Make?

America’s appetite for coffee is huge. And while it seems like Starbucks is everywhere, there are still an enormous number of competitors out there. The fact that Starbucks sometimes builds locations practically on top of each other is testament that they can’t count on people to go out of their way to get a coffee.

Someone offering good quality coffee in a good location is still going to pull in revenue as many people aren’t going to drive an extra mile or make a U-turn just so they can get a Starbucks.

This would include a traditional fast food company like McDonald’s, or someone offering a convenient drive-through coffee kiosk.

Which Companies are Offering Drive-Through Coffee Franchises?

Starbucks does not franchise their stores although they do have some agreements with companies to operate Starbucks’ in other venues like airports and stadiums. The most popular drive-through franchise coffee companies include: Scooters, The Human Bean, PJ’s, and Biggby.

Dunkin Donuts is another great franchise option, however, it’s known first and foremost for its doughnuts and has vastly different real estate and capital requirements from the coffee franchises mentioned above.

How Much Does it Cost to Get Started?

We spoke with a Scooters operator that had recently developed 2 stores in a mid-sized market. Your biggest cost is real estate. You need to find a lot that is typically around half an acre and has a lot of traffic. It needs to be on the “going to work” side of the road. He spent between $250,000 and $450,000 for each lot. In some higher cost markets like Coastal California, for instance, the real estate could be much more expensive.

On top of that, the cost to build the drive-through building, including site costs like engineering and paving, was between $500,000 and $600,000.

Finally each store required $250,000 to $300,000 in equipment and other costs. This included a $40,000 franchise fee on the first store.

So the total cost if you own your real estate is around $1,000,000 to $1,300,000. Keep in mind you can often finance a large portion of this, so in this example, the owner only had to invest about $300,000 per store and the rest was financed with a bank loan.

What if You do a Ground Lease Instead of Buying the Land?

Many store owners just do a ground lease instead of buying the land. Even though you can finance a land purchase, you typically need 20%-25% down. So even a $500,000 lot might require over $100,000 in extra liquid capital.

And many owners of shopping center pad sites and other high traffic locations would prefer to lease land rather than sell it. Many would refuse to sell.

However, you don’t own the land, and if your site is a good one and your lease is only for 10 or 15 years, you can count on a large ground rent increase once the term is up.

You are generally better off owning the land if you can pull it off.

How Much Net Profit Does One Store Throw Off?

The net profits of a well-run, well-located drive-through coffee franchise is around 25%. So a store doing $1 million in revenue, should produce around $250,000 in net income for the owner.

Keep in mind that unlike fast food restaurants where the cost of food might be 30% or more of each sale, coffee itself is a very high margin item to sell. The high gross margin helps cover the labor cost and real estate cost, while leaving an acceptable profit for the owner.

Also, most store owners that are successful will quickly open 1 or 2 more stores. Once you have opened one store, opening a second or third store is much less complicated. If you have a great manager, it also provides an opportunity to keep them around long-term by making them the general manager of multiple stores.

 

 

 

An Unbiased Review of Nomad’s Guaranteed Rent Offer

 

If you own a residential rental property, you have surely contemplated what will happen if your tenant does not pay rent.

You will have to remind the tenant that the rent is due, they will come up with excuses, and at some point if the rent is still unpaid, you will need to begin the eviction process.

Depending on the state, that will involve sending out or serving notice to the tenant, and then some type of court hearing, and possibly a follow up visit from a constable or sheriff’s deputy.

While the process is not impossible to navigate, it presents several problems for the landlord. It wastes your time, it costs money to get an eviction attorney involved, and even if the best case scenario, you typically lose a couple of months of rental income (while still having to pay your mortgage on the house). This can eat away at your cash reserves very quickly.

What is Nomad?

Nomad is a rental real estate company that offers 3 primary services: marketing and leasing whereby they find a tenant for your property, full-service property management, and a rental guarantee where they step in and pay the rent if the tenants stops paying.

You can choose whether you want Nomad to just guarantee the rental income or if you want that plus the additional services they offer. While there are typically dozens if not hundreds of companies in any major market that can find you a tenant or manage your property, the rental guarantee is Nomad’s unique selling proposition.

Because of the way the fees work, your best bet is probably to pay the $1000 one time fee plus 4% monthly fee for marketing and leasing plus the rent guarantee. If you happen to already have a tenant identified, you can save $500 off the upfront fee by just using Nomad to guarantee the tenant. However, the tenant must pass Nomad’s screening criteria.

How Does the Process Work?

Let’s assume you want the rental guarantee but none of the other property management services (you feel confident you can find your own tenant or you already have one lined up). You go to the nomadlease.com website and input information about your rental property. Typically within 24-48 hours, they come back with a guaranteed rent offer. This offer includes their estimate of the average market rent, the initial list price, and the guaranteed minimum rent.

 

 

 

 

 

If everything looks acceptable and you sign up with Nomad, they will then guarantee that the rent is paid on-time each (on the 1st of the month) and every month for the duration of the lease. But not until after they pre-screen the tenant to make sure they are worth the risk that Nomad is taking on.

With the marketing and leasing service, Nomad guarantees you that THEY will find a tenant within 60 days. If for some reason they do not have a tenant by the, on day 61, the property will be considered leased and Nomad will be on the hook to pay you the monthly rent while they continue to market the property.

How Much Does it Cost?

The cost for the rental guarantee only service is 4% of the rental income plus a $500 upfront fee. Adding in marketing and leasing increases the upfront fee to $1000, but the monthly 4% fee stays the same.

For instance, if a property rents for $2500 per month, Nomad will deduct $100 as their fee, then pass along the remaining $2400 each month.

But Other Property Managers Have Made the Same Guarantee and Gone Out of Business…

This is a very valid question. If Nomad or any other property management company guarantees you something, but then goes out of business, the guarantee may end up worthless. There have been other property managers that have made various guarantees, only to involuntarily or voluntarily exit the business.

While I wouldn’t consider Nomad to be a risk-free proposition, they aren’t your typically mom-and-pop local property management company. From 2020-2022, they raised around $25M from major venture capital firms and prominent angel investors. So they do have capital in place that very few others have in the property management niche.

What Happens in an Eviction

Because of their strict screening process, evictions of Nomad tenants are very rare. However, they can happen. If the tenant needs to be evicted, Nomad will continue to pay the rent as if nothing happened. Nomad will be on the hook for the attorneys fees and the lost rent.

Nomad will take control of the eviction process so you won’t have to waste your time and emotional energy getting involved.

Who Can Benefit From Nomad’s Rent Guarantee

The rent guarantee is not free; it costs you at least 4% of your rental income or more. And at the end of the day, if you just sign up for the rental guarantee and not full property management, then you still have to find a renter and manage the property yourself. You are basically making an “insurance”-like fee to avoid the worst case scenario of an eviction and the lost income that it will entail.

So who could really benefit from Nomad? While all kinds of landlords could benefit from Nomad, a few different types of people come to mind.

One is military homeowners. Frequently military homeowners don’t build up a lot of equity in the 2-3 years they live somewhere. If they buy a house, they often have to rent it rather than sell when they move. Because they aren’t high income earners that can afford to bring in zero rent for 2+ months, coupled with the fact that they are hundreds or thousands of miles away, an eviction can be potentially devastating. A rental guarantee makes a lot of sense.

Another group that comes to mind is people whose time is extremely valuable. If even a few hours spent dealing with an eviction could cost them hundreds or thousands of dollars in missed income, having the rental guarantee forces Nomad (and not you) to deal with evicting and re-tenanting the property.

Even if they have deep enough pockets to afford a missed month of rent collection, some landlords cannot stomach the drama of a tenant that doesn’t pay or is habitually late. Having the rent guarantee mitigates this risk. You still will get the same tenant tales about medical bills, their checking account being compromised, lost income, late child support payments, an unforeseen layoff, a raise or new source of money being right around the corner, etc., but will have your rent from Nomad so you don’t have to deal with the tenant’s emotional roller coaster.

Nomad also offers a 6 month cash advance program where they front you several months worth of rent (minus a fee). If you don’t have a mortgage to worry about paying the next 6 months, and simply want to raise cash fast for some other opportunity, that would be another benefit of using Nomad. Of course there are a number of other ways to raise $25,000 or more in 7 days.

 

 

 

If You Received PPP, You Should Check to See if You are Eligible for ERC

 

Even though the PPP program ended in 2021, there is still a way for business owners to receive money if there business was negatively affected by the pandemic. It’s called called ERC, and even if you received PPP money in 2020 or 2021, you should check to see if you are eligible for ERC.

What is this program?

Employee Retention Credit [ERC] is a payroll tax refund born out of the same COVID Relief Bill (2020) as PPP, which incentivizes businesses that kept employees on payroll during the pandemic. Back in 2020, you had to choose either PPP or ERC but you couldn’t choose both. However, through the Consolidated Appropriations Act (2021), the rules have changed and PPP recipients are now eligible for ERC! ERC is a reimbursement of payroll taxes paid AND wages paid to employees, which allows for up to $26,000 per full-time W-2 employee (excluding owners and family members).

What is different about this program compared to PPP?

There are two major differences between PPP and ERC:

1. ERC is NOT a loan. It is considered income, which means that you will have to pay taxes on it.

2. ERC has NO restrictions, which means that the owner(s) of the company can use these funds for personal or business purposes.

How do I qualify for this program?

There are two ways to qualify for this program:

1. “Gross receipts test” – Back in 2020, the gross receipts test required that you experienced at least a 50% decline in revenue or gross receipts in order to qualify for this program. That may explain why your accountant may not have brought this to your attention or you were told that you did not qualify for this program. In addition, if you had already received PPP you were disqualified. However in early 2021, a second qualification, known as Limited Commerce, was added to the program.

2. “Limited Commerce” – Limited Commerce is strictly based on how your operations were affected and has nothing to do with revenue decline. Due to its complexity, we use tax attorneys, who specialize in tax credits, to qualify over 90% of our clients under “Limited Commerce.” Tax attorneys will take your written testimony or narrative, which explains how Covid has affected you.

What are the next steps and what are your fees?

A company called Innovation Refunds will handle almost everything for you. You want to [click the link] to put in some very basic information about your company to see if you are eligible. It usually takes less than 5 minutes to have a decision. If you are deemed eligible, then the next steps are as follows:

1. You upload the required documents by clicking the upload link.

2. Once you start uploading documents, you are assigned a processor, who will be your point person.

3. After your assigned processor has reviewed all of your documents, he/she will package the documents and send it to our quality control for one final review. After the final review, your documents are sent Innovation Refunds’ tax attorneys and the tax attorneys take about 6 weeks to do the analysis.

4. Once the analysis is complete, you will receive a call informing you on the exact total cash refunds owed to you from the IRS. After the phone call, you will receive a contractual agreement via DocuSign, within 24-48 hours. The contractual agreement states that you agree to have Innovation Refunds complete this work on your behalf and in return, you agree to pay their fee after you have received your cash refund checks. Their is fee is 25%, which is all “back-end” meaning 0% of the total refund amount is paid upfront. Two things to note about their fee: 1) You can write us off as a consulting fee, which means you’ll only pay taxes on the net refund amount. 2) Innovation Refunds provide a $2 million end-to-end audit protection, given that the work is being prepared by their tax attorneys.

5. After you sign their contractual agreement, they mail the amended tax documents via Form 941-X on your behalf. They amend those tax documents because the ERC refund is a reimbursement of your payroll taxes AND wages paid to employees, which is reflected in the Form 941. Since the 941 Forms are quarterly, you will receive quarterly checks, not a lump sum check, from the US Treasury.

6. After your documents are mailed to the IRS, you sit and wait. The IRS assumes a 9-12 month standardized time frame to pay all of the refunds.

How Much Money do Trash Bin Cleaning Companies Make?

 

Most people don’t even know that trash bin cleaning companies exist.  However, this won’t be the case for long as these companies are growing quickly and becoming much more popular with consumers.

People aren’t necessarily looking to add a new monthly bill to their list of things to pay along with electric, gas, trash, water, Netflix, cell phone, cable, Internet, etc.  However, once people realize that trash bin cleanup companies exist, many are glad to pay someone else to come clean them.

You just can’t get past the fact that trash and recycling bins are disgusting and they smell.  And if your HOA requires you to store them out of view in your garage, it makes the matter worse.

What Are Trash Bin Cleaning Companies?

Virtually every homeowner in the U.S. has trash bins and many have recycling bins as well.  Because they hold trash prior to a weekly pickup, the bins themselves get filthy.  Trash companies such as Republic Services, Waste Management, or the local city utility never clean the bins.

So the bins just sit there and get dirtier and dirtier until you move and they take them away.  Even someone who proactively wants to make an effort to clean the bin probably does not have the right equipment like a high temperature pressure washer.

This has created an opening for entrepreneurs all over the country that are attempting to fill this niche.  It has also creating an opening for manufacturers to design and sell equipment that typically is towed from a pickup truck or sits in the truck bed.  The goal of trash bin cleaning companies is to build a base of users who subscribe to a monthly recurring cleaning.

 

How Does Trash Bin Cleaning Work?

The process is pretty simple.  The key ingredients are a power washing system that is hooked to a trailer or the bed of a truck, a power washing hose that can be manually sprayed by the operator, and disinfectant spray.

The cans are lifted into the washing bin and using extremely hot water, they are power washed.  The high intensity loosens up any debris and the water washes any solids or liquids out.  It also kills bacteria and viruses.

The cleaning is typically done the day after trash day when there are no bags in the bin yet.

The hose and the disinfectant spray can also be used to clean the outside of the bin as well as the lid and top of the bin.  In some cases, the bin may be power washed more than once.

Why Are these Companies Growing So Fast?

This niche is very new.  The size of the market is enormous; there are over 80 million homes in the U.S. and most of them have the same type of trash bins.

Most people aren’t even aware that this service is available, so it is not hypercompetitive compared to something like auto insurance, for instance, where people know they need to have it and mega corporations are spending billions advertising their product and trying to undercut each other on price.

It is more about getting your name out there and getting people to subscribe, or at least try the service once.  Trash bin cleaning companies need to grow to have a critical mass of subscribers in their service area.  If they are unable to grow large enough, fast enough, then they will likely just sell their route and/or equipment to a competitor or a newbie that wants to enter the market.

How Much Money Can You Make?

Obviously you need to line up a lot of subscribers that will use your company on a regular interval, such as every month or bi-monthly.  Typically, the minimum cost per can is $20 per month for 2 cans (effectively $10 per can).  Some companies charge a decent amount more ($25-$30), but $20 seems to be about the minimum.

An 8 hour work day has 480 minutes, and each stop lasts 3-5 minutes, so if you can average 5 minutes of drive time between cans, you can make about 50 stops per day.  Obviously a more compact route could mean more stops, perhaps 100.

Compare this to the trash company itself that can make each stop last less than a minute and has very little drive time between stops if they have every house on the street.  It’s possible for them to make 1000 stops per day in an urban area.

Of course it is going to take a lot of subscriber growth to get to the level where one truck is doing 50 stops per day every weekday of the month (approximately 22 days).  That would be 1100 households signed up for monthly service.

This would yield $22,000 in revenue at a $20 monthly fee.  That is obviously a pretty solid recurring revenue stream for a company with one truck and one person working.

What About Expenses?

To get started, you need either a truck with a built-in cleaning system or a trailer or truck bed unit (that you use with your own pickup truck).  Trucks with built-in cleaning system are typically priced used at $60,000 and up, and new ones can be $150,000 or more.  An individual bin cleaner typically sells used for at least $20,000 and goes up from there.

There are several companies that sell the units brand new, and there are Facebook groups and other online resources where you can buy and sell used equipment.  There do appear to be a lot of people who decide to get into trash bin cleaning, but then for whatever reason, they decide to move on and sell their equipment.

You also want to invest some money upfront in a great logo and website, including video, that captures your potential customers’ attention.

Beyond the up front costs like equipment, obviously gas is a big expense.  If you had 50 customers a day for 22 days a month, you could go through a tank of gas a day ($2200 per month or more).

Insurance will likely run at least $300 per month.

A merchant account will cost 2-3% of your revenue or (~$500 a month).

While your truck itself is a great marketing tool, you will likely need to budget at least $500 to $1000 per month on Google AdWords in order to generate online customer traffic.

Finally, dealing with customer service and billing issues for 1100 customers is at least a part-time job in and of itself.  Many people just starting out are a husband and wife team, and one person will deal with these issues at no cost.  However, at some point you will likely need to hire someone full-time to handle onboarding and customer service issues.

Other things to budget for include filling up the tanks daily with water and regular truck maintenance.

All in all, $5000 a month would probably be about the bare minimum in costs for someone without employees that is running the business as an owner-operator.

 

Should I Invest in an Allstate Insurance Agency? [2023]

 

We’ve previously covered the small business opportunity to purchase or start an Allstate insurance agency.  Unlike other national brands such as McDonald’s, UPS Store, Ace Hardware, 7-Eleven, etc., you don’t actually have to pay a franchise fee.  You just need to be approved, show adequate amounts of liquid reserves (typically $100,000), and complete a training process.

Buying a Book of Business

If you are buying a book of business (BOB) rather than starting from scratch, you need to buy the economic interest in the book of business from the existing Allstate agent. (Comment: starting from scratch is almost always a mistake and the failure rate is high.  It generally only works if you have some extremely lucrative resource for generating new business or are owned and operated by a car dealership)

An Allstate BOB typically sells for around 2X annual commission revenue, although that number has come down in recent years.  The AllstateForSale.com website has a quarterly newsletter that list recent sale multiples.

One thing to note is that independent agency BOBs generally sell for higher multiples, are much easier to sell, and generally don’t require the strict approval process of an exclusive agency such as Allstate.  However, they are much harder to find and many of them sell “off market” before they even need to be listed for sale.

Generate Commissions and Get Paid Upon Exit

Once you own an Allstate agency, you receive commissions on new business and renewals.  If you can consistently sell more than you lose in non-renewals, then you can increase your revenue from the business each year.

When you are ready to exit, you can sell your economic interest in the book of business to a new or existing agent, or turn it over to Allstate Insurance Company in exchange for a buyout called the Termination Payment Provision (TPP).  The TPP is around 1.5 times annual commission.

Because of this, you don’t really ever see sales of an agency below 1.5X, because the agent can just take the TPP instead of sell.  The exception would be for a BOB that was less than 5 years old from initial scratch date and wasn’t fully “vested” due to being part of a special incentive program.

Changed Perception of this Opportunity

So you have a national recognizable brand name that spends billions of dollars in marketing, no franchise fee, and a recurring revenue stream….what’s not to like?  Seems like people would be lining up to invest, but that is not the case.  In fact there are far more Allstate agency owners looking to exit than there are buyers.

If you look at the AllstateForSale.com website, as recently as 2015, the number of Allstate agencies listed for sale in the State of California was 5.  In 2022, the number was a whopping 49.  Additionally, according to Allstate’s 10-K filings with the SEC, the number of agents dropped from 10,400 to 9,300 between 12-31-2020 and 12-31-2021.

Factors Increasing the Number of Agents Wanting to Exit

The discrepancy between agents want to leave and outside people wanting to become agents is somewhat complicated.  However, there are several factors at play that have made the Allstate agency opportunity less attractive than in the past.  These include:

❌ A major shift in agency compensation.  One publication described it as “Allstate slashing base pay for its agents beginning in 2023.”  Renewals used to be paid out at 10%.  Then they went down to 9% but you could keep it at 10% if you met certain qualifiers.  Then 9%.  Now it is being dropped to 7% starting in 2023 (with some monoline renewals going all the way down to 4%).  New business compensation is being increased but you have to meet some somewhat challenging qualifier numbers to take advantage.  This is a sea change for many Allstate agents.  They bought their books or invested in leads and marketing based on getting a consistent renewal stream over time.  Cutting that stream from 10% down to 7% is a 30% drop.  That’s huge.  A $2M premium book that once generated $200,000 in annual revenue will now only generate $140,000.

❌ Allstate’s Direct channel.  Allstate has decided to compete directly against its agents and much of its marketing directs consumers to visit Allstate.com or call 1-800 ALLSTATE to deal directly with the company.  Allstate also decided to offer 5-9% lower prices to consumers who go direct instead of those that buy a policy through agents.  That change is obviously quite problematic for agents.

❌ Allstate Insurance is not a low cost provider.  In many cases they are one of the more expensive insurance carriers in the marketplace.  The mantra to focus on growth doesn’t seem to jive with the product pricing when compared to other carriers like GEICO and Progressive.

❌ Allstate’s technology is performing poorly.  The quoting system called AdvisorPro has been rolled out prematurely and has frequent outages.  The mandatory phone system called Allstate Agency Voice has also received significant negative feedback from the agency force.  Both of these problems are fixable but they’ve caused current agents a lot of problems.

❌ Allstate’s management team of Tom Wilson and Glenn Shapiro is unpopular with many Allstate agents and is seen as anti-Exclusive Agent.  Management would argue they are just trying to grow sales through direct sales and independent agencies, and are not anti-Exclusive Agent.

Positive Factors for the Potential Agency Buyer

On the other hand,

✅ Mergers are being allowed for the first time in years.  Current Allstate agents ranked in the top 5%-10% are allowed to buy other agencies to quickly increase their book of business and the resulting renewal revenue.

✅ The values of Allstate BOBs have dropped significantly.  You aren’t buying based on a 10% renewal and 2.5X – 3X revenue like the olden days.  You could be getting a much better price and you could be bringing in much more revenue than your monthly loan payment.

✅ If you are skilled at generating new business and can meet the minimum thresholds in order to receive the enhanced variable compensation, you will generate very large new business commissions at the new 20-25% compensation levels for new business.

✅ High inflation like we are experiencing today actually benefits someone who buys an insurance agency (or any growing business) with a fixed-rate loan.  That is because if every insurance company raises rates, many customers will stay even though their rates are much higher.  The size of the book of business increases but the loan payment stays the same.

So who should invest in an Allstate Insurance Agency in 2022?

It is impossible to tell someone authoritatively whether they should or should not invest in an Allstate insurance agency.  Since you are not just buying a passive investment like a stock or bond, your financial success is going to be dependent on you — the agency owner — and your active ownership of the agency.  In some sense, you are buying a job.

However, there are certain people that might want to consider investing, and others that generally should walk away because the odds are stacked against them.

There are generally two types of people that should consider investing in an Allstate insurance agency.

1.) The first type is an existing Allstate agency owner.  The opportunity to buy other books and merge them into yours is probably temporary and may be closed soon.  In many cases, buying another book is a complete no-brainer.

Let’s say you are able to buy a $2M book to add to your existing book.

You negotiate a $300,000 purchase price based on a 9% renewal rate for pre-2023 business and a 1.7 multiplier.  That’s a $306,000 purchase price.  If you can leverage the equity in your existing book and finance the entire purchase, the monthly payment at a 7% interest rate and a 5 year term would be around $6000.  However, the book would bring in around $15,000 a month the first year and then decline at a mild pace over time if you kept renewals in check.

2.) The second type of person is someone who has already operated an insurance agency as an agency employee or manager at Allstate or a direct competitor like State Farm or Farmers, or who has operated a call center type of sales business outside of insurance.

Preferably not a company or product that is sold based on being the low cost provider, but a premium or middle level product sold based on value for the price; Allstate is generally on the higher end when it comes to price, at least for auto insurance.

This type of person would be completely aware of the minimum targets they need to hit in order to earn variable compensation, AND be convinced because of their previous experience that they could exceed these without a doubt by at least 25% each month.  This person should have experience in hiring, training, and supervising successful salespeople.

Someone needs to be all-in on growth and willing to exit the business quickly if their new business growth process ever falters.

The Days of Passive Owners Just “Milking” Renewals are Probably Over

Allstate previously recruited agency owners that were looking for an annuity type of investment that continued to pay them year-after-year regardless of effort level.  The 10% annual renewals were rightly seen as a cash cow.

A lot of agency owners owned other businesses in fields like real estate or tax preparation, and bought an agency to supplement their income.  Small town agency owners didn’t spend any money buying Internet leads or doing telemarketing, but kept retention high and sold enough new business to walk-ins and local people calling in for a quote.

If the agency had $2M in premiums, many agencies would look to just maintain that size and try to keep the retention levels high by having a service-focused employee.

With renewals being cut to 7% with new business rates being increased to as high as 20-25%, the Allstate agency ownership opportunity is looking more like a sales job than an annuity.

For those that want the traditional high renewal income / low sales requirement business model, buying or opening an independent insurance agency is a better way to go.

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